Indian IT providers pounce on Mexico's potential

MEXICO CITY -- Indian IT services providers see major potential in Mexico's near-shore business process outsourcing sector.

MEXICO CITY -- Fueling Mexico's fast-growing IT industry are companies from a country that years ago became a brand for back office outsourcing and tailor-made software: India.

IT powerhouses of the subcontinent have been slowly but surely exploiting the market potential they say that Mexico represents, given its proximity to the U.S., availability of certified engineers and comparatively low wages.

The global Indian conglomerate Tata Group arrived in Mexico as the pioneer in 2003.

There has been a rush of others since then, according to Santiago Gutierrez Fernandez, president of Mexico's IT industry association, Canieti. Indian companies with a footprint in Mexico's IT market now include Infosys, Wipro, Hexaware, and Sasken, among others.

"We have been the pioneers of the near-shore model," said Ankur Prakash, chief operating officer of Tata Consultancy Services in Latin America.

"Indian companies' interest in tailor-made software [in Mexico] has grown in the past five years," said Maria Eugenia Garcia Aguirre, director of ContactForum, the magazine of the Mexican Institute of Teleservices. "The cost of labor in Mexico is very competitive on an international scale."

Wage growth after inflation has been sluggish in Mexico compared even with other low-cost nations, inching up just 0.4 percent since 2005, according to the International Labour Organization.

International companies, especially in manufacturing, have been drawn to Mexico for just that reason, according to a recent Bloomberg report. Low, tightly controlled inflation and a highly capable workforce represent additional draws. Those advantages have lured companies in the IT sector, as well.

Mexico's IT sector is valued at $17 billion, including $5 billion in exported services, according to Canieti.

India ranked No. 16 among Mexico's trading partners in 2011 but commercial trade is growing, rising nearly 41 percent last year to $4.15 billion from $2.81 billion in 2010.

At this week's G20 conference, Mexico President Felipe Calderon and India Prime Minister Manmohan Singh promoted reciprocal investments, including a mutual desire to deepen technical-scientific cooperation, according to a statement issued by the Mexican presidency.

Government backing may be a bonus, because for Indian IT companies looking to make inroads in Latin America, Mexico is a must, said Prakash.

"Mexico is the largest Spanish-speaking country in the world, and any company if they are not successful in Mexico, they cannot be successful in Latin America," Prakash said.

When Tata first explored the possibility of making an entrance in the Mexican market, Prakash said he met with a government official and asked how long it would take to hire 500 IT professionals. At the time, the market was highly fragmented, and Mexican IT services providers had a few dozen employees at the most. The official responded with his own question: "Who would want to hire 500 people?"

Today Tata has 8,000 employees across the region.

That's the lesson that Indian companies have taught the Mexican market, Prakash said: that scale is possible.

"Yes, the volume can be generated in a country like Mexico," he said. "We can find the talent to generate that kind of volume and deliver complex projects—not just the projects India doesn't want to do but the projects that India does want to do but can be done better from Mexico and Latin America."

Photo: Keith Roper/Flickr

This post was originally published on Smartplanet.com

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