Hiring remote developers in India vs. Mexico— What’s the better option? Latin America has now seized the disruption and is not looking back. So, why outsource to Mexico instead of India.
As remote work implants itself in the 21st century, work models of the past are being restructured, improved, and enhanced. A few years ago, if you asked somebody about IT outsourcing, they would likely talk about countries like India and China. Today, the term outsourcing has been replaced with more specific terms like offshoring and nearshoring.
Outsourcing is still very much utilized, of course, but when it comes to companies looking for more integrated and committed teams, the past few years have been a game changer. Nearshoring to Mexico has become a more viable option. The BPO model (Business Process Outsourcing) and the outsourcing of massive call centers or non-essential tasks to third parties is waning some. That model, however, does not cover the gamut of solutions different companies need in order to grow in this fast-paced environment.
Companies in all sectors require engaged and creative IT specialists that work with their technology systems and languages and are committed to a specific vision or development of a certain product or service.
Let’s look at the bigger picture.
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History of Outsourcing to India and the Changing Tides
The story of outsourcing is complex and one that has shape-shifted as technology and geopolitics evolved. In the 90s, India’s outsourcing boom turned the country into a BPO behemoth, attracting large companies from the U.S and the developed world.
Companies like General Electric, American Express, British Airways, and other corporations worldwide seeking low-cost overseas talent birthed the outsourcing revolution that defined a large part of the Indian economy for at least two decades. In 2005, India was still earning $17 billion from these foreign corporations setting up centers in the country. As late as 2020, American services suppliers in India enjoyed $50 billion in sales.
The boom did not just include call centers. Companies outsourced a wide spectrum of services and products in manufacturing ranging from jet engines to refrigerators to ultrasound machines, as well as emerging innovative technologies. The cost efficiencies were undeniable, but as markets evolved, other concerns and challenges emerged with the model.
Slowly, the outsourcing picture has shifted and turned the focus onto other regions of the world. While there are still plenty of American companies with some presence in India, covid and the digital transformation skyrocketed demand and pushed companies in all sectors towards some degree of digitization or software development.
So, a startup or mid-size company might be looking for one (or a small team of) remote software engineers that can commit to the company, its vision, and take the time to integrate into their larger operation. Going across the world to search for the perfect candidates implies a hefty amount of logistical heavy lifting and makes a lot less sense. At the same time, bigger companies wanting to expand their tech teams by establishing a presence in another country see Mexico as exciting new territory that’s just one flight away.
Several factors contributed to companies moving away from regions like India.
- Political rifts in the U.S.: The concept of outsourcing massive call centers to faraway countries managed to wrap itself in some political controversy in the early 2000s. In the case of GE, for example, a company poll revealed that customers preferred to work with U.S.-based customer services at which point GE began making the shift to bring their call centers to the U.S.
- Rising wages: In the mid-2000s, rising wages in India shaved off some of the initial cost advantages that attracted companies to go so far away. The wages increased enough that the hassles involved in outsourcing to India became a questionable business decision. From 2012 to 2016, for example, the wage for a software programmer in India went up from about $25,000 to $45,000 per year. Those wage numbers continue to increase today, and the increased cost calls into question the validity of the business decision.
- Disappearing jobs. Many of the jobs outsourced to India in the late 90s and early 2000s are now automated more easily handled in-office thanks to advanced tools and automation software. At the same time, many suggest that India may have lagged on cloud technology and therefore lost some competitive edge. At the same time, India is having its own difficulties filling high-skilled jobs and training the new generation of software engineers.
- Communication challenges: One of the most difficult challenges companies face is efficient and effective communication. As technology-driven solutions improve and develop, companies and startups lean heavily on productivity and time to market. High-performing remote tech teams are pillars of success. This can be difficult with a workforce that has a 12-hour time zone difference.
So while hiring remote developers in India is still an option, other regions have stepped up to the spotlight. LATAM regions offer top talent that remains cost-effective in this market. In 2021, for example, a software engineer in India made up to $6,066/month. The average salary for an IT worker in Mexico’s most expensive city (as outlined in our Tech Salaries report) is about $4,240.
3 Reasons Why LATAM is a Better Place to Source Tech Talent
In the last few years, the LATAM tech ecosystem has come out of left field and positioned itself as a top contender in the world of remote tech talent. Not only do some of these countries like Mexico and Brazil have a growing talent pool, but they train in some of the most in-demand positions in the tech sector. This is a young and English-speaking population embracing the opportunity of working with exciting tech.
One recent study published from VC firm Atlantico points out that the internet penetration rate of Latin America has surpassed that of India and China. The smartphone adoption rate has also risen in LATAM. Along with other interesting socioeconomic markers, this indicates there is a growing interest and demand for tech in the region. With the growing local demand and investment, the tech ecosystem in LATAM became a viable competitor.
The Battle for Tech Talent Continues in the U.S.
As we see from our end, there is a need for full stack, front end, and back end developers. According to our Tech Salaries Report 2022, Mexico houses a large pool of active and experienced full stack developers. Job positions in the data management, software engineering, platform design, customer experience design, and cybersecurity categories are also highly sought after.
Nearshoring to Mexico has certain inherent advantages:
#1 Proximity. If you speak with anyone who has handled international companies or teams, time differences can make or break a workflow. When teams are in the same time zones, communication is more immediate and therefore conducive to higher productivity rates. Production teams face many challenges when members work across time zones and struggle to stay on task or hand over deliverables on the same day.
#2 Quality candidates. LATAM countries like Mexico have not built their tech talent pool overnight. The emphasis on tech education and training began in Mexico as early as the late 90s and the early 2000s. When several large U.S companies like HP set up centers in Mexico, they left a trail of tech enthusiasts; a younger generation interested in the tech industry and where it was heading. This sparked interest among policymakers and educational institutions, which moved to encourage an entire generation of young people to focus on STEM fields and the tech industry in particular. Mexico, for example, has a long list of respected technology institutes including Tec de Monterrey and the University of Guadalajara, located in what is often called Mexico’s Silicon Valley.
#3 Cultural overlap and similarities. One of the drawbacks often cited when outsourcing to India involved cultural differences. As some reports suggest, India and the U.S. don’t always see eye to eye on IP protections, taxations, and other types of regulations. The culture in Mexico, for example, has considerable overlap with that of the United States, given the geographic proximity and strong social and trade connections between the two nations. The trade agreements between Mexico and the U.S. facilitate job opportunities and increase protections for Intellectual Property.
Hiring Remote Developers: India vs. Mexico – Build a Committed Team in Your Backyard
Companies have changed how they see outsourcing. Considerations go beyond cost reduction; today, it’s about finding the best talent. Plus, lost productivity from disintegrated teams costs companies more in the long run and often at the expense of innovation and development.
Outsourcing is an international business and companies have options of where to take their companies. Mexico remains one of the top destinations because of its proximity and cultural similarities but also due to the business relations between the two countries—which are strong and amicable. This gives company owners confidence in setting up a team or hiring remote developers.
Want to learn more? Connect with our team and learn how we mitigate the risks of hiring remote employees and help companies grow their team.