Word on the street at the moment is that several of the leading outsourcing vendors are searching for clients who want to develop resources in Central and South America. This is especially the case for services that require a higher degree of staff interaction and time overlap, for example software development, HR and finance processes. I’m not unusually one for commercials, but I was sent this cute clip – for a small software development outsourcing firm called Nearsoft – which comes up with some very compelling arguments for nearshoring software development work to Mexico for Californian businesses; namely that Mexican nearshoring costs on average 65% of the US costs, compared to 85% for Indian costs for software development services. The principal reasons are as follows:
- Wages rates are comparable
- Little need to relocate staff into the US
- No need for "bridge teams" which spend their time overlapping development work with both onshore and offshore teams
- Productivity – for every 2 US engineers, 3 Indian engineers are needed to combat staff attrition and less experienced staff
- Staff travel costs are far lower for nearshore
- Staff attrition is lower in Mexico
- IP protection is stronger under the NAFTA laws
- Staff visas are easier and cheaper to acquire under NAFTA visas.
While many of these points make a lot of sense, Nearsoft overlooks the issue of talent availability in Mexico and other central American locales, which is my number one concern. Moreover, the productivity issue is debatable. But there is little doubt the LAT-AM nearshore argument is becoming more and more compelling by the day with an ever-weakening dollar and no slowdown with offshore staff attrition rates.