Mexico’s position as a global IT services leader has been driven by the need to serve the multinationals based in the country and fueled by the large supply of technical resources produced by its universities. Learn how the active cooperation between the private sector and the Government has helped create an industry that makes Mexico one of the top IT sourcing destinations in the world.

1. Mexico’s Hemispheric Role in IT
Leadership
Speakers:
Alfredo Pacheco, Executive Director Mexico IT
Tom Taylor, Business Director, Neoris

2. Confidential // Neoris 2
Regional prominence and proximity
Alfredo Pacheco – MexicoIT
Tom Taylor – Neoris
Nearshore Nexus - April 24, 2013
Mexico’s Hemispheric Role in IT Leadership

3. Confidential // Neoris 3

4. Confidential // Neoris 4
Definitions
 Nearshore
 Mexico, Central America and South America
 Onshore
 US
 Offshore
 Everything else (EMEA, Asia/Pacific)
 Jerseyshore

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Offshore IT services are well established as an integral part of many
companies’ sourcing strategy.
 Foreign providers, particularly India and China, perform a large portion of our IT services
 Worldwide IT services market: $845B in 2011 (up almost 8%)
 U.S. market: $294B (2009)
 India exports to US in 2009: over $30B
 China: $9.6B in 2009
 Offshore services for the U.S. market continues to be a growth industry
 Overall growth expected to be 16-18%
 India share of IT services in U.S. grew 6.5% in 2009
 Over half of the Fortune 500 is outsourcing a portion of their software requirements to India
Demand for offsite IT services is stressing the offshore supply,
creating opportunities for providers in emerging geographies

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While the offshore IT service model is here to stay, frustrations and
concerns are common and some will be difficult to solve.
 Timezone differences
 Great for getting work done while you sleep, not so good
when collaboration comes at somebody’s inconvenience
 The “B” Team effect
 Agile development doesn’t fit
 Immigration (when onsite time is needed)
 Visa cost, time and work restrictions
 Cultural differences
 Risk-taking differences
 Decision-making: tight vs. loose (e.g., regard for time
commitments)
 Simple vs. complex reasoning
 Hierarchical structure
Some challenges with offshore services are structural
and cannot be addressed simply with process improvements.

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IT leaders are evolving their priorities for global sourcing.
Costs Reduce hourly
rate
Reduce total
cost of service
Skills Gain access to
technical skills
Gain access to
technical,
industry skills
and innovation
Flexibility Core vs. Non-
Core
Operational
flexibility:
scope, skills &
delivery model
Service &
Risk
Increase Service
Levels
Mitigate
security risks:
infrastructure,
IP, facilities
Predictability Rapidly deploy
new capabilities
Geopolitical
stability
Companies have become more sophisticated
and the nearshore model is a way to address these expectations

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Many good alternatives for IT services have developed in various
regions of the world.
Gartner’s Top 30 Offshore Locations
Evaluation Factors
- Language
- Government Support
- Labor Pool
- Infrastructure
- Educational System
- Cost
- Political and Economic Environment
- Cultural Compatibility
- Global and Legal Maturity
- Data/IP Security & Privacy

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How do the countries compare?
Evaluation Factor Among the Top Rated Among the Lowest Rated
Language India, Costa Rica, Mexico, Egypt Peru, Hungary, Philippines
Government Support India, Mexico, Indonesia, Poland Bangladesh, Russia, Vietnam,
Argentina
Labor Pool India, Mexico, Indonesia, Poland Bangladesh, Russia, Vietnam,
Argentina
Infrastructure Chile, Morocco, Brazil Czech Republic, South Africa,
Colombia
Educational System China, Chile, Mexico Czech Republic, South Africa,
Panama
Cost China, India, Mexico, Indonesia Colombia, Czech Republic,
South Africa, Panama
Political and Economic
Environment
Brazil, Malaysia, Romania, Ukraine Argentina, Bangladesh, Russia,
Vietnam
Cultural Compatibility Brazil, Malaysia, Romania China, Thailand, Czech
Republic, Hungary
Global and Legal Maturity India, Chile, Peru, Bulgaria Colombia, Vietnam, South
Africa, Russia
Data/IP Security & Privacy Mexico, Indonesia, Poland China Russia, Vietnam
Source: Gartner‘s 30 Leading Locations for Offshore Services, 2010-2011

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For context, let’s first consider the size of the countries in the LATAM
region compared to other major countries.
Major Countries Latin America

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The Latin American business climate has evolved to become highly
suitable for the export of IT services.
 Some of the largest companies in the world are based in Latin America
 LATAM is home to Global 500 companies in Banking, Oil, Chemicals, Energy,
Telecommunications, Mining and Steel industries
 There is a large and growing IT labor pool
 Mexico: 600,000
 Brazil: 250,000
 Argentina: 70,000, growing at 15% per year
 Chile: 20,000
 Uruguay: 20,000
 University focus on developing IT professionals
There’s an indigenous IT service industry that has competently served
the local market for decades and is eager/prepared to serve the U.S. market

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Many LATAM countries are actively encouraging the growth of their
IT export business with trade promotion and policy initiatives.
 International Trade Promotion and Local Advocacy
 Brazil – BRASSCOM
 Mexico – MexicoIT
 Investment
 Creation of Technology Parks (Mexico, Uruguay)
 Tax incentives (Argentina, Brazil, Colombia)
 Education initiatives
 Argentina Vocational Education and Training (VET)
initiative
 Uruguay’s “One Laptop per Child” initiative
 Labor cost reimbursement for employment expansion
 Mexico launched PROSOFT in 2002 and awards
grants that may account for up to 50% of project
expenses
India 3.1%
China 2.8%
Argentina 4.9%
Mexico 4.8%
Brazil 5.1%
U.S. 5.5%
Education expenditures
as % of GDP
Many LATAM countries recognize the IT services industry as strategic
and have taken market and policy actions to help it expand
 Chile – Invest@Chile
 Argentina – VET

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Mexico has special status as a nearshore provider due to NAFTA,
proximity, skills and other advantages.
 Maturity and Scale
 IT services industry is over 25 years old and generates $4.2B; additionally, $2.4B of
software development is performed
 About 1,400 IT companies manage the world’s 7th largest IT human capital reserve
 One of the highest numbers of CMMi certified centers worldwide (A.T. Kearney Global
Services Location Index – 2011)
 “Mexico is now Latin America’s top location in the Index, thanks to currency
depreciation and increased nearshoring sentiment in the United States…”
 Skills engine
 600,000 IT workers and 90,000 IT professionals graduate annually from the university
system
 Monterrey Tech – 25 campuses and 90,000 students
 Cultural affinity
 Shared, highly transited border
 Familiarity with U.S. business and social environment

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Where are the IT service capabilities located in Mexico?

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Spotlight on Mexico, continued
 Visas for non-NAFTA countries (typically H-1B)
 Previously capped at 65,000 for professionals with occasional temporary increases; the
allotment usually runs out
 Policy is being revised right now; cap could be raised but restrictions could be a concern to
India providers (e.g., fee increase, limit on how many workers have a visa and onsite
work prohibition)
 Requirements: paid at prevailing wage and must meet education/experience
requirements (possess a 4-year degree, have 12 years of experience or 6 years experience
and 2 years college)
 Limitations of Business Tourist Visa
 NAFTA provision for TN Status (TN Visa)
 Started 1994 and is unique to Canada and Mexico
 No annual cap
 No prevailing wage requirement
 IP Protection
 First treaty to protect intellectual property
 Minimum standards set for protection of copyrights, trademarks, trade names & slogans,
patents and trade secrets
Travel to the US is made easier for NAFTA parties (Canada and Mexico)

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U.S. perceptions of Mexico are still fraught with misunderstandings
but are slowly merging with reality.
 Security
 “Despite the negative press regarding violence and the potential dangers of traveling to
Mexico, the growth of the IT services industry in Mexico has not been significantly
affected and the industry has been able to effectively manage the initial short-term risk
label that comes with these political and economic issues.” Gartner Analysis of Mexico as
an Offshore Services Location, November, 2011
 Ongoing gap between data and news headlines/perceptions
 Whitepaper available on request: “Doing Business in Mexico: Is the Country Safe?”

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Source: EF Education First, 2011
What can you expect from the region regarding language capabilities?

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The delivery model for nearshore providers is comparable to other
remote providers who assign a mix of onsite and offsite resources.
Client Team (On Site) Nearshore Team
NewDevelopmentMaintenance
Production
Support
Concept100%• Requirements
Design70% 30%• Quick Design
• Prototype Construction
• Integration test and fixing
UAT100%• Prototype Evaluation
• Refine Prototype
Application Analysis50% 50%• Application Analysis
• Requirements and Functional Design Enhancements20% 80%
Ad hoc Reports 100%
Technical Upgrades 100%
Performance Tuning 100%
• Prioritization, Escalation Fix on Fail20% 80% • Fixes and root cause analysis
• Daytime operations Operations Support20% 80% • Day and night operations
User Queries20% 80% • Day and nighttime service• Daytime responses
• Engineer Final Product Build & Test25% 75%
Design50% 50%
Build & Test25% 75%
• Functional Design
• Majority of Build Nearshore
• Technical Design
• Urgent Changes• Operational Urgency Changes Build & Test50% 50%
Nearshore content mix varies depending on client outsourcing maturity and preferences

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To recap, we’ve discussed several reasons why nearshore services are
worth considering as a dedicated or complementary sourcing
strategy.
 The cost gap is narrowed when considering total service costs
 Travel expenses, duplicate onsite/offsite management, retraining, after-hour support, etc.
 Culture influences how things get done (and how well)
 There is a long history of commerce and social interaction with nearshore countries
 Timezone matters
 Morning is morning, afternoon is afternoon, today is today!
 IT wage inflation is a serious worry
 Demand-driven inflation on top of economic inflation will definitely spoil a business case

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There are several good locations for nearshore services…but Mexico
stands out.
 According to Gartner, Mexico is ranked as the 3rd global IT Services provider
 Among Top 5 global IT Services Providers in Forrester’s list
 Ranked 6th in 2011 Global Services Location Index of A.T. Kearney
 Most competitive option - Localization of several IT Services, according to KPMG
 Indisputable leadership in LATAM

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Thank you
Tom Taylor
Vice President, Business Director
tom.taylor@neoris.com
Thank you!
Alfredo Pacheco
CEO
alfredo.pacheco@mexico-it.com

22. Mexico’s Hemispheric Role in IT
Leadership
Speakers:
Alfredo Pacheco, Executive Director Mexico IT
Tom Taylor, Business Director, Neoris