Nearshore Software Development in Mexico: The Complete Guide 2023

Technology is everywhere—its presence ubiquitous and its possibilities endless. Using it as a business enabler has consistently topped corporate agendas. US businesses have exuded confidence about the tangible, strategic value technology can deliver—and there has been a rush to embrace the latest innovations, such as generative artificial intelligence (AI). In fact, 56 percent of technology leaders surveyed in KPMG’s 2023 Global Tech Report say returns from digital transformation investments have exceeded their expectations on metrics such as: increasing employee productivity, improving efficiency and cost cutting, enhancing customer engagement, supporting new business development, and enabling innovation.

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Against this backdrop, some common transformation barriers—cited as the leading transformation bottlenecks for most U.S. businesses—are that reliable technical talent is hard to find, competitive to hire, and expensive to retain. This talent scarcity has prompted an increasing number of businesses to invest in engineering resources abroad to bridge their skill gaps. 

Mexico, a vibrant and innovative country with a thriving software development industry, has for decades been viewed as a solid nearshore software development destination for tech companies looking to develop pools of talent outside the U.S. Mexico is reaping the benefits not only of geographical proximity and cultural affinity, but also of a growing talent pool of highly skilled software engineers available at knock-down prices.

In this post, we will examine the software development landscape in Mexico, exploring the advantages of collaborating with Mexican software developers for your nearshoring needs. So If you are uncertain of what Mexico has to offer, read on to find out why Mexico is an option worth exploring.

Mexico at a Glance

·         Capital: Mexico City

·         Currency: Mexican Peso

·         Time Zones: GMT-5, GMT-6, GMT-7

·         Official Language: Spanish

·         Population: 128.9 million

·         Developers: 225,000 +

·         Startups: 453+

Mexico is a large and developing middle-income country positioned in the southern portion of North America. Like the United States, Mexico’s ICT sector is extraordinarily dynamic and diverse. The latest statistics in 2023 show that Mexico’s IT market is valued at USD 17.3 billion. The country has 38 IT clusters throughout the country offering software development, call centers, high tech manufacturing, and engineering services.

Mexico has had a long track record as a power house as a nearshoring destination for U.S. companies. In the 1960s and through the 1980s, Mexico served as the manufacturing operations center for large foreign companies like IBM, HP and Kodak. Mexico offered U.S. companies distinct advantages such as reduced cultural barriers, similar time zones, and linguistic similarities (many Mexican professionals speak fluent English). Over time, management for these centers transitioned to local leadership, and we saw a boom in secondary education coursework preparing students for careers in technology and business management.

Nearshoring to Mexico increased about 30 years ago when Canada, United States, and Mexico signed the original North American Free Trade Agreement (NAFTA). From then on, Mexico became a prime location for North American global companies looking to install factories and manufacturing centers. And while nearshoring is often associated with the manufacturing and automotive industries, it has—in recent years— become the go-to destination for tech companies looking to expand their global and remote teams.

Fast forward to today, and you can see that well-known international companies (Google, Microsoft, IBM, HP, SAP, Oracle, Cisco, and HCL), all have campuses in Mexico with various levels of involvement in the process of writing software. 

For example, Oracle’s Development Centre in Guadalajara, which opened back in 2010, is a thriving nexus of research, development, and production support across Oracle’s product line and internal deployments. This includes Oracle Applications, Oracle Database, Oracle Enterprise Manager, and several open source projects. Following the success of that investment, Oracle unveiled a second Development Center in Zapopan—a city in central Mexico—in 2017.

What Makes Mexico a Prime Nearshore Software Development Destination?

Right now the software development industry is booming. U.S. colleges can’t keep up with the demand for programmers—and with the continued boom in global tech, the need for software developers is greater than ever. But the U.S. limits the number of special Visas called H-1B that could allow immigrants to make up that shortfall, forcing some companies to hire abroad for talent.

Today, many global companies based in the U.S. are looking into Mexico as a reliable and convenient destination for identifying tech talent. 

When it comes to nearshoring software development projects, Mexico offers distinct competitive advantages compared to other places. Here are the top 5 reasons why Mexico is quickly emerging as a viable nearshoring location:

1. Geographical Proximity

The main component of nearshoring is geographic distance. By that measure alone, Mexico is a top nearshore software development destination for U.S. companies because of its geographic proximity. Mexico shares a 2,000-mile border with the U.S., making the country easily accessible via land, air, and sea. Hundreds of thousands of people cross the border legally each day and you can easily arrange for in-person meetings with your Mexican based developers seeing that most U.S. airlines operate direct flights to Mexican cities from hubs such as New York-JFK, Boston, Dallas/Fort Worth, Houston, Chicago, Denver, Atlanta, Detroit, et al.

2. Cost-effective Salaries

It is undoubtedly true that labor costs form a considerable part of any company’s budget. Therefore, finding a way to lower these costs ensures that more money can be redirected to other business initiatives. When it comes to nearshoring software development in Mexico, U.S. companies can get to enjoy on-site software development services for nearshore costs. Salaries for software developers in Mexico are significantly lower than in the U.S.

Regardless whether they are junior, intermediate, mid-level, or developers, the average salary of a nearshore software developer from Mexico is far less compared to that of a developer based in the U.S. 

Software Developer Salary Comparison Mexico vs Unites States
Total Pay TrajectoryMexicoUnited States
Software DeveloperUSD 36,674 /yrUSD 139,195 /yr
Senior Software DeveloperUSD 75,765 /yrUSD 192,970 /yr
Software Developer L4USD 77,263 /yrUSD 212,494 /yr

This affordability provides an excellent opportunity for companies seeking high-quality nearshore software development services at a lower cost.

3. Shared Time Zones

With most of Mexico in central time, nearshore software development teams in Mexico can have up to 8 hours of real-time collaboration with their U.S. counterparts. Having this consistency in time zones enhances communication, feedback, and iterative processes. These overlapping time zones also promote seamless collaboration and quick resolution of questions ideal for agile software development practices.

4. Large Talent Pool of Highly Educated Software Developers

Mexico has the highest rate of engineering graduates in Latin America, with 25% of all tertiary degrees related to STEM fields. According to the Washington Post, Mexico has been steadily producing 130,000+ engineers and technicians each year from universities and specialized high schools. Nearly half of these degrees are related to IT and Telecommunications. This figure is more than Brazil which has twice the population.

With a massive talent pool of 700,000+ developers, Mexico ranks second in Latin America, surpassed only by Brazil. These highly skilled developers excel in areas such as data analysis, machine learning, and statistical programming. So there’s a large talent pool in Mexico educated in American standards willing and able to work with U.S. companies. 

5. Cultural Compatibility

Cultural compatibility — shared interests as well as understanding and respect for differences — is an intangible but invaluable asset when forging work relationships across time and space. In reality, Mexicans have a good working knowledge of U.S. culture. Many Americans and Mexicans have friends, relatives and colleagues living across the border. 

American culture has also been deeply shaped by Mexico’s influence on our food, music, entertainment and more — not to mention more than 36 million people of Mexican descent live in the U.S. as of 2017. Consequently, Mexican consumers are generally quite knowledgeable about U.S. products and services. Popular U.S. brands are widely recognized in Mexico. 

Culturally Mexico’s nearshore software developers have very insignificant differences with their U.S. counterparts as the country itself is heavily influenced by the U.S. In a work environment, this shared understanding makes it easier for Mexican nearshore developers to build strong relationships with American companies.

6. Government Support

To promote a high-tech knowledge economy and generate economic growth, the Mexican government, both at the federal and state level, has been equipping more people with the resources and tools they need to expand their skills. In 2004, the Porgram for the Development of the Software and Computing Industry (Prosoft) was launched in Mexico with the intent to boost technical training in IT and enhance Mexico’s global competitiveness in the tech industry. From 2004 – 2015, the government opened 120 tuition-free specialist technology universities. 

In the same period, the government of Mexico also brought together universities and the private sector in a public-private partnership initiative to build new technology parks. These parks offer a good means for providing specialized talent to technology companies in a setting close to a major universities or or high-activity centers. They can be classified mainly as combinations of high-tech incubators (to promote start-ups) and “landing” centers to accommodate foreign technology companies that wish to start operating in the country. 

Today, Mexico is reaping the fruits of years of investment and funding injected into the tech industry. These initiatives have diversified Mexico’s economy, increased the number of higher-wage jobs, and put and end to the shortage of technology talent.

7. Strong Bilateral Relations between Mexico and the United States

2022 marked 200 years of diplomatic relations between the United States and Mexico celebrated. By virtue of shared geography, history, and deep cultural and people-to-people ties, Mexico has for years been one of the United States’ closest and most valued partners. Agreements such as the United States-Mexico-Canada Agreement (USMCA) have boosted trade across borders.

To put this into context, in the first quarter of 2023, Mexico was the top U.S. trading partner with bilateral trade totaling $263 billion and accounting for more than 15 percent of total U.S. trade. Foreign direct investment by U.S. companies in Mexico stood at $130.3 billion in 2022. This enduring business relationship between the U.S. and Mexico further enhances Mexico’s appeal as a premier destination for nearshore development. 

8. Vibrant Tech Ecosystem

There is a thriving tech ecosystem in Mexico with the country being home to several growing tech hubs. Cities like Mexico City, Guadalajara, Merida, and Monterrey, seem to be regional hubs where much of the tech ecosystem stems from. 

The country is also experiencing its own blossoming tech startup scene. Although the Mexican venture capital scene is relatively new, there is major VC interest in Mexico-based startups. In 2020, Mexico concentrated the second highest share of venture capital transactions closed within the region, only behind Brazil. As of 2023, Mexico is already home to six unicorn companies (startups valued at 1 billion U.S. dollars or more): 

  1. SoftBank-backed used car marketplace Kavak valued at $8.7 billion.
  2. Bitso, an online app for cryptocurrency trade valued at $2.2 billion.
  3. Payclip, a digital payments platform valued at $2 billion.
  4. Konfio, a fintech company that offers financial and payment solutions valued at $1.3 billion.
  5. Stori, a fintech company offering credit card products to Mexico’s underserved population valued at $1.2 billion.
  6. Merama, an e-commerce platform that partners with e-commerce product sellers valued at $1.2 billion.
  7. Nowports, an automated digital freight forwarder in Latin America, valued at $1.1 billion.
  8. Clara, a business credit card, payment solution, and expense tracking platform valued at $1 billion.

In addition to startups and the global tech giants embedded in the country, research in technology parks contributes to a lot of the tech ecosystem. There are 38 technology parks in Mexico offering software development, call centers, high tech manufacturing, and engineering services. These include:

  • Apodaca Technology Park 
  • Creative Digital City
  • Guadalajara Software Center 
  • Monterrey Technology Park 
  • Scientific and Technology Park in Zapopan Jalisco 

Key Takeaways

Mexico offers great opportunities for identifying tech talent. The country has thousands of talented software developers willing to connect with the global economy. With the advantage of time zone overlap for real time collaboration, and competitive salaries, it is an option well worth exploring.

Some of the most important advantages of software development outsourcing to Mexico:

  • Huge talent pool: Huge investments in the education sector that graduates 130,000+ engineers every year.
  • Mature tech infrastructure: A strong commitment to technology and business parks that is attracting global tech companies.
  • Shared time zones: Real-time communication is possible from every U.S. state, making it easier to work with remote teams.
  • Professional service delivery: Benefit from and expect the same high standards of professional service in Mexico that you get in the U.S.
  • Low labor costs: Competitive labor costs make it easier to scale a large team of developers, giving you much greater value for money.

Ready to Hire Mexican Developers?

At Next Idea Tech, we believe that investing in technology for the sake of it would be indulgent; in today’s challenging times, transformation must be tied to clear business outcomes linked to bottom-line returns. Hiring the right nearshore software developers whose insight is as broad as it is deep, is an essential ingredient to successfully drive growth and innovation in the digital age. 

With over a decade of experience in the software development lifecycle and data management, Next Idea Tech has worked at the heart of businesses of all sizes, helping clients realize the full potential of their people and technology. Years of IT management mean that we understand that software development nearshoring is about building a long-term partnership with a reliable nearshore software development services provider.

With our offices in Boston, MA, and development centers in Mexico and across LATAM, we are well positioned to provide you with the best possible support in implementing your IT projects. Our nearshore software developers can expand your IT teams, take on and lead new projects, and advise you on the implementation of your IT projects.

Ready to hire top-tier nearshore software developers from Mexico today, visit Next Idea Tech’s 

Hire Page.

To make an informed decision about offshoring to Mexico, spare a minute to read about outsourcing to other Latin American countries: Argentina, Brazil, Colombia, Costa Rica, and Uruguay.


Posted on

November 26, 2023