Case study Mexico

Mexico’s Public Policy to Develop the IT-ITES Sector

  CLAUDIA IVETTE GARCÍA ROMERO
  Director General for Domestic Commerce and Digital Economy
  Ivette.garcia@economia.gob.mx
  Tel. 52296100 Ext 34100
  SUBSECRETARIA DE INDUSTRIA Y COMERCIO May 19 2011
Subsecretaría de Industria y Comercio

Agenda

1.  Diagnosis of Mexican economy
2.  Fostering the development of the IT-ITES
Sector
3.  Main National Initiatives
4.  PROSOFT Grants Found
5.  Conclusions


Mexico is the 14 largest economy in the world

Nowadays Mexico is the 14 largest Economy in the world. According to recent
forecasts from PricewaterhouseCoopers and HSBC Global Research, it is estimated
that towards 2050 Mexico will be ranked as the 7th or 8th Economy, over countries
such as France, Italy, Canada, Spain and Australia.

Gross Domestic Product 2010 (billons of usd)


Mexico is in an expansion phase, the GDP reached a growth of 5.5%

Overachieving all expectations, the Mexican economy grew in a rate of 5.5% during
2010 showing the greatest dynamism over the last 10 years, fostered mainly by
commerce which registered a growth rate of 13.3% and manufacture industry with a
rate of 9.9%.

GDP of Mexico (anual growth %)


Mexico shows an increase of 77% in infrastructure investment

From 2010 to 2011, the investment of infrastructure in Mexico shows a growth of
77%, thanks to this, more than 15 thousand kilometers of highways have been
modernized.

Infrastructure investment
(thousands of millions of pesos 2011)


Why fostering  the development of the IT‐ITES 
sector? 

GDP1  IT’s is capable of raising GDP up to 5% 

Country compe33veness2  There is a posi8ve correla8on of 92% between the adop8on 
of IT‐ITES and the compe88veness of na8ons 

Enterprise produc3vity3  The use of IT‐ITES along with high level business  prac8ces can 
increase up to 20% enterprise produc8vity  

Knowledge economy  Knowledge economy oﬀers the opportunity of compensa8ng 
the disadvantages in costs, migra8ng to value added services 

Salaries and economic shed  IT sector salaries are 3 to  5 8mes higher  than manufacturing 
salaries 

1. The Economist Industria y Comercio 2 IMCO; 3. McKinsey y London School of Economics) ; 4: Gartner
Subsecretaría de Intelligence Unit),

¿Why thinking about Information Technologies?

At international level we can observe a positive correlation between the
information technologies and the economic performance of economies.

Corelation between the use of IT and the
competitiveness of economies
7.00

Suiza
Switzerland

6.00
Competitiveness index

5.00

4.00

3.00

México

2.00
3 3.5 4 4.5 5 5.5 6 6.5 7

Use of IT
Source: World Economic Forum. Networked Readiness Index 2010 y Global Competitiveness Index 2010.

Size of the global IT market

The ICT global market for 2011 it’s estimated to be 3.6 TUSD
•  Approximately 25% of that total is produced through outsourcing
•  IT services and software represent 50% of the total expense

4.5 Global IT outsourcing market
4 United States Rest of the world
3.5
3
2.5 36%
2 2009
1.5 2014 64%
1
0.5
0
Global IT market

Source: Gartner 2011, A.T. Kearney Global Location Index, 2011


IT services are considered an strategic sector for
Mexico

High competitiveness and Develop of entrepreneurs
Development of local market
impact sectors and professionals
(Continue to promote it’s
(Attract investment and (Promotion for the creation of
sane development)
industry development) new enterprises)
•  Manufacture of transport •  Commerce •  Agriculture, fruits and
equipment. •  Housing flowers.
Environmental Sustainability

•  Manufacture of machinery •  Financial services •  Physical devices, Software
and equipment. •  Investigation and
(Clean technologies)

•  Manufacture of electric and development services (I +
electronic devises. D)
•  Miner (excluding petroleum •  Architecture, engineering
and gas). and design services
•  Business Process •  Music, movies, radio and
Outsourcing. television
•  Food industry.
•  Health services
•  Tourism.

Development platforms
(Assure the development of platforms through the adequate regulation, bigger competition and investment)

1.Infrastructure 2.Telecomunications 3.Educational services


Mexcio´s IT Sector - SWOT

Positive •  Human Capital volume Positive •  Local market potential growth
•  Geographical location •  Trade Agreements

o
• 

S
Government support •  Entrepreneurial culture
local

• 

Foreign
Software industry •  Development of high
maturity expertise services supply
•  Alignment of efforts

Negative •  Local market Negative
Negativos •  New players
articulation •  Foreign financial crisis
•  Quality of Human •  Human Capital leeks

W Foreign T
capital •  Mexico’s international image
Interno
local

•  Industry – academic •  Commercial policy in
links •  Protectionist commertial policy
•  Financing for in international market sectors
industries •  Continuity of strategies


10 Year Vision

PROSOFT Deployment PROSOFT World
Launch: platform 2.0 class
Public policy player

2002 2004 2006 2008 2010 2012

PROSOFT Productive Innovation
Grants Fund chain and
consolidation technology
development


Long Term National Public Policy - PROSOFT 2.0

Exports and
investment Production level

Human Capital •  15,000 MUSD

IT Market
Legal framework
•  2.3% TI/PIB
IT use diffusion
Awareness
Productivity &
Innovation •  Latin American
Leader
Standards and
Marturity (Quality) Employment

Funding access •  625,000


PROSOFT 2.0: Strategies and impact tools

Investments and Productivity & Maturity and
Human Capital
exports Innovation Quality
•  Mexico FIRST •  Mexico IT •  Clusters •  MoProSoft
•  IT Talent •  IT Link •  Innovation •  PSP/TSP
•  Labor standards •  IT Technology initiative
Roadmap
•  Technology
parks

Financing IT use diffusion Legal framework

•  PROSOFT •  IT user projects •  Personal data
fund •  Government Protection Law
•  Warranty fund purchase •  Homologation
•  Risk Capital power framework
•  Trust seal for •  NOM 151 –
electronic Data messages
commerce safeguard


Mexico’s IT Industry Profile

2,785 90,000 annual
27 IT Clusters
enterprises graduates

600,000 303 centers with
24 IT parks
employees quality levels

5% annual IT/GDP expense 4.15 BUSD
rotation =1.7 exports


IT services exports

•  In 2010, Mexico’s IT exports were 38% of it’s production, with an
estimated growth rate of 16.6% for 2011.

Local market and IT + BPO exports (BUSD)
12
13%
1%
10 14%
19% 4.15
8 3.16 3.72
2.51
6 1.99

4
6.34 6.72
5.82 5.90
5.00
2

0
2006 2007 2008 2009 2010

Mercado Interno Exportaciones

Subsecretaría (1) Gartner, (2)Comercio
Fuentes: de Industria y Estimación, Elaboración propia con datos de Atkearney y Select

Achievements (1/2)

States IT Companies Growth Rate IT-BPO Exports
35 3000 14% 4500

12% 4000
30 2500
10% 3500
25
2000 3000
8%

20 2500
1500 6%

15 4% 2000

1000
2% 1500
10

500 0% 1000

5
-2% 500
0 200 201
0 2002 2011 2 1 0
2002 2011 Compa
2002 2011
2095 2785 Growth IT-BPO
States 4 32 nies Rate -1% 13% 200 4,150
Exports


Achievements (2/2)

IT Clusters IT Parks Quality Cience&Tech
30 30 Certified Graduates
Centers 100,000
25 25 350 90,000

300 80,000
20 20
70,000
250
60,000
15 15 200
50,000
150
40,000
10 10
100
30,000
50
5 5 20,000
0 10,000
2002 2011
0 0 Quality -
2002 2011 2002 2011 200 201
Certifie 2 1
IT IT 4 303
0 27 0 24 d Graduate
Clusters Parks Centers s
65,000 90,000


Mexico in the global market

Analyst Recognition on MEXICO
Gartner Mexico ranks as the fourth largest producer of IT services,
after India, the Philippines and China
Gartner Mexico is the only Latin American country to obtain a rating
of "very good" in the evaluation of cost, when other
countries had achieved only "good"
AT Mexico is ranked 6 in the Global Services Location Index
Kearney 2011, being the first country in North America, this is due to
the availability of human capital and financial attractiveness
(costs)
KPMG Mexico is the most competitive location for the activities of
Software Design, Back Office / Call Centers, Web and
Multimedia.


Mexico’s position in the global IT market
México occuppies the 6 position in the Global Services Location Index 2011, beeing
the first country of North America, this thanks to the disponibility of Human
Capital and its finantial atractiveness (costs).

6


Cost comparisson with other countries

•  According to KPMG1, Mexico is the most competitive location for activities
such as software design, back office / call centers, web building and
multimedia.

Saving percentaje regarding
operating in the U.S.
60
50
40
30 53.4
20 34.1
31.7
10
4 12.1 11.2
0
Back Office / Call Diseño de Software Web y multimedia
Centers

México (lugar 1) Canadá (lugar 2)

Subsecretaría deElaboración propia con datos de Competitive Alternatives, KPMG 2010
Fuente: (1) Industria y Comercio

Location and customer satisfaction

Customer sa3sfac3on of IT Services
Type Satisfaction (%) 2008
Sameshore 82.4
Nearshore 81.5
Outsourcing 61.1
Offshoring 33.3

•  Customers of the companies offering IT services are
more satisfied when they are working by companies
relatively close (proximity and time zone)
•  Therefore Mexico is the ideal supplier to markets such
as USA, Canada and Latin America.

Fuente: The State of Outsourcing Industry Report 2008, Brown Wilson

MEXICO FIRST

•  Objective: Accelerate the availability of human capital with International
Skills to proved IT and BPO services globally.
•  Catalog includes more than 200 options of International Certifications
•  39% average discount on Commercial List Price
•  Goal per year: 12,000 certifications


MEXICO FIRST: Achivements

Number of certifications Vs. Goal*
15,19815,000
Certifications

Goal
7,500
5,800
3,690
1,500

2008 2009 2010

* cumulative figures per year

MEXICO FIRST – 2011

Indicators Technology Business English TOTAL
Training persons 11,060 2,667 1,428 15,155 
Certified persons 7,348 2,133 0 9,481 

RESOURCES (MXP)

Project SE IP TOTAL

Technical $ 102,000,000 $ 189,429,719 $ 291,429,719

English and $ 30,000,000 $ 55,716,470 $ 85,716,470
Softskills
TOTAL $ 132,000,000 $245,146,189 $377,146,189


IT Clusters Analysis of competitiveness
Maturity and Competitiveness

Objetive

Fuente: Estudio de Competitividad de Clusters, 2008

Certifications in Quality

Certification methods to evaluate the performance of companies:

302 IT Firms with Quality certifications

Worldwide First place in PSP
Certified Developers
INGLA CHINA Title EGIPTAUST
INDIA Chart
TERR 1% CORE
O RALIA
2%
A 1% 1% A
JAPON
2% 1%
8%
MEXICO TSP/PSP National initiative
EUA 50%
34% •  Objective:To Accelerate the process to
achieve higher levels of quality through
high-performance people and high
performance teams


IT Roadmap

  The IT Roadmap is a planning tool with the participation of representatives from
industry, academy and government, whose purpose to develop Mexico’s Global
Expertise

Vision

Mexico as a leading player in advanced manufacturing automation IT solutions

Vertical Expertise

Electric –Electronic Aerospace Automotive Medical Devices

Milestones

What, where, value, where?

Actions

Players


IT Roadmap

Global IT spending in the manufacturing sector for 2011 is estimated at 446.6 BUSD

Electric –Electronic Automotive Medical Devices Aerospace

Global Exports •  The industry expects •  It´s estimated that by Ninth aerospace industry
§  2° TV´S growth of 12.5% 2014 the market value supplier of U.S. (2009),
§  2° Refrigerate and annually through reaching 9.760 md, and the sixth in the
Freezer. 2013. which would mean an European Union (2008).
§  3° Cell Phones annual growth of 9.9%
R&D Centeres: •  Tenth global exporter Aerospace enterprises by
• General Motors of medical equipment activity(%)
10%
• Chrysler in 2009. 10%
• Delphi technical
Center
80%

Manufactura
MRO
Ingeniería e I&D

IT Roadmap for advanced manufacturing (Model)  

Goal: Mexico as a leading player in advanced manufacturing automation IT solutions
Milesto

1 2 3
nes

4 axes
Axes

3 axes 3 axes

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Supply & Demand
Supply &Demand

6 projects
Actions

Survey

Survey

5 projects

4 projects

Communication Strategy


Fondo PROSOFT

General ojective: Contribute to the development of the information
technologies sector, seeking it’s growth in the long term in Mexico
favouring international competition.

Specific objectives
a)  Promote exports and investment attraction.
b)  Raise the quantity and quality of Human Capital.
c)  Promote the adoption of a legal framework that contributes use and
production of IT.
d)  Foster the approach between IT users with enterprises from the IT
sector located in the country.
e)  Create a broad base of enterprises and IT sector groups, and at the
same time raise their competitivity.
f)  Promote the enterprises achievements regarding international
levels of process capacity.
g)  Raise the options and possibilities of access to financial resources
for the IT sector.

PROSOFT Fund 2004-2010 (Million MXP)

Año 2004 2005 2006 2007 2008 2009 2010 Totales

PROSOFT 139.70 192.49 428.61 438.24 631.98 525.09 624.94 2,981.05

States 42.49 108.03 232.94 283.75 414.12 306.90 297.55 1,685.78

Enterprises 60.42 366.91 763.78 831.81 1,022.51 904.21 951.14 4,900.78

Academy 3.46 13.32 14.62 60.29 125.37 9.28 5.35 231.69
Others 3.45 72.99 31.57 85.56 104.12 8.64 - 306.33

Total 249.52 753.75 1,471.52 1,692.53 2,344.11 1,754.12 1,878.98 10,144.53

Projects 68 181 334 487 494 360 160 2,084

2011 Federal Budget: 677 million MXP

PROSOFT Grants Fund: Simplified supports
distribution process
IT enterprises Universities IT Users Banks Procesess
Target entities

Intern mechanism of
operation of
Promoting organisms

DGCIED analizes
and sends feedback

Executive Board
resolution

Approoved projects

Sign Agreement with
beneficiaries

Payments to the
beneficiaries through
Subsecretaría de Industria y Comercio the PO’s

PROSOFT Grants Fund: support areas and investment

1.  Training and certification
2.  Technological equipment Project investment
3.  Enterprise quality certifications
4.  Use of IT and related services
5.  Innovation
6.  Commercialization
7.  Studies
PROSOFT
8.  Professional services
25%
9.  Events
10. Creation and strengthening of Beneficiary
financing mechanism Federal 50%
11. Acceleration of public policy Entity
25%

Basic mix of contributions


PROSOFT grants fund. Relative importance of
expense areas
Rela3ve importance of expense areas 
within the PROSOFT grants fund

Training

Technological
equipment and fitting
Profesional services
Events
Use of IT and
interlinked services


Parametric model

The score of the
different
variables, and
the integrated
score of every
support
application will
help the
executive board
to prioritize the
projets in it’s
aprobation
process.


X Score calculation

Is it found in the
project? Final
Element Si=1 Value value
No=0 adjustment

Innovation  0.200 
Certifications of Human 0.150 
Capital 
Specialized jobs created  0.150 

Productive project  0.100 
Organizational 0.100 
certifications 
Promoting Organism 0.100 
investment 
IT users projects  0.075 
Successful continuity  0.075 
Academy – Industry 0.050
linked projects
Sum (total score) (value 0
and 1)

Is it found on
the project?
Element Si=1 Value Final Value
No=0 adjustment
Strategic vocation 0.50
Strategic action 0.50
Sum (total points) (value
between 0
and 1)


Is it found in
the project?
Element Si=1 Value Final Value
No=0 adjustment
Is the project linked 0.40
to the World Bank
project
Industry projects 0.35
Strategic vocation 0.25
Sum (total points) (value
between 0
and 1)


Concluding Remarks

1.  The global outsourcing market of IT services continues
to grow, and Mexico has the qualifications and
potential to increase it’s share in such market, where
today it competes strongly.
2.  The efforts and strategies on the years to come will be
focused on the specialization in strategic subsectors
that could foster the country’s positioning among the
global supply.
3.  Mexico seeks to cooperate in regional strategies that
would allow to foster international practices through
the use of the IT  personal data protection,
investments in the productive sectors, Knowledge
transfer and investments.

Case study Mexico

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