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The Growing Significance of Mexico as a Sourcing Destination

Accent and cultural gap of offshore locations are fast decreasing the appeal of outsourcing to countries half a globe away. Despite training, many offshore suppliers have been unsuccessful to overcome the language accent barrier, resulting in complaints of communication difficulties from customers. The accent barrier comes as a problem mostly with consumer products and when customers are directed to an agent that is unconnected to their language and culture, a verbal and emotional clash is impending, leading to a bad customer service. It becomes hard to win customer loyalty in such cases.

There is also the distance problem, which makes it is highly difficult for buyers to manage offshore locations. Factors such as quality and security of offshore locations also concern buyers. Adding to the problems are the time zone difficulties. Companies are becoming increasingly reluctant to consider outsourcing to offshore locations and the number of such companies is increasing.

A key trend on the rise is the increasing appeal of buyers toward nearshoring locations. A number of reasons are conducive to the growth in this trend. Geographical proximity, language familiarity, cultural affinity, time zone shrinkage and lower costs are the major reasons driving the growth of the rise in nearshoring. While outsourcing to offshore locations such as India and Philippines brings in cost savings, shifting or expanding call center locations to such far away locations is not something buyers are comfortable with. With nearshore options to low-wage locations, buyers can visit their facilities and train employees easily.

Mexico, Colombia, Chile and Argentina are some of the forefront countries enjoying nearshore buyer preference. U.S. buyers are particularly keen on Mexico and Latin American countries to cater to their increasing Hispanic market. According to a 2004 census bureau report, the Hispanic population is expected to increase to 100 million by the year 2050. In such a case, the Spanish-speaking population would constitute the largest minority in America, forming nearly one-fourth of the U.S. population.

A Glimpse of Mexico’s Near shore Outsourcing Growth

The call center market in Mexico is Latin America’s second biggest call center market and is greater than that of Colombia, Chile and Argentina combined. IT outsourcing including business process outsourcing and outsourcing of Application Development and Maintenance has been a contributor to Mexico’s recent growth in nearshore outsourcing. Six major software firms – Stefanini, ABS-IBM, Softtek, Itera, Hildebrando, Sigma Tao-EIDON – have already established resident facilities in Mexico. There are more than 2000 IT firms, 5,50,000 trained software professionals and an increasing labor force. The wages for labor in Mexico is over 50 percent lower than in U.S.  The workforce here is well-educated with bi-lingual capabilities. There are 121 technology-oriented universities in Mexico, which is the largest in Latin America, which produce over 64,000 IT graduates every year. Mexico nearshoring option is fast becoming an attractive strategy for many companies.