Written by Allie Delos Santos
Table of Contents
Many businesses worldwide are outsourcing and hiring virtual assistants in Mexico to scale operations and save on labor costs. Nearshore outsourcing to Mexico is a trend that has been around for a while. Corporate giants across different industries have been outsourcing to the country for decades.
But is it the right move for you? Will it help your profitability and scalability?
This article discusses the benefits of nearshoring to Mexico. It also covers the trends impacting the country’s future in nearshore outsourcing and why it is a rising destination.
Ten Benefits of Nearshoring to Mexico
To start, what is business process outsourcing (BPO)? It is subcontracting specific business processes to a third-party service provider. Nearshore outsourcing is a type of BPO that involves hiring a vendor from a nearby country.
According to PWC, 66% of BPO clients already clearly preferred nearshore outsourcing as early as 2007—for good reasons. Nearshore outsourcing in Mexico has a significant edge over offshore and in-house operations.
Here are the key benefits of outsource work to Mexico:
1. Geographical Proximity to the Target Market
Perhaps the most crucial advantage of nearshore outsourcing to Mexico is the BPO company’s proximity to the target audience. Businesses whose target market is in the U.S. can leverage this option.
The closer distance benefits manufacturing operations since it minimizes the risk of extended supply chains and transportation routes. On top of outsourcing manufacturing, companies can also outsource customer service or data entry services. The geographical proximity makes the time zones between the U.S. and Mexico similar.
The differences in time zones, if any, are often within one to three hours. This enables faster communication, closer collaboration between on-site and remote teams, and more control over the outsourced work than offshore solutions.
You are also only a short flight away from your nearshore outsourcing partner, making it easy to have in-person meetings whenever necessary. The travel costs are not too limiting.
2. Better Cultural and Organizational Fit
One of the benefits of nearshoring to Mexico is the country’s cultural fit with the United States. Workers who agree with the company culture tend to perform at higher levels and be more productive. On the other hand, workers at odds with a company’s culture can feel dissatisfied and stifled, which causes productivity levels to drop.
Effective communication requires more than simply a good command of the English language. Nonverbal cues, cultural differences, and societal norms also play an essential role. Third-party teams based in offshore locations are more likely to encounter cultural and linguistic problems.
Conversely, the geographical proximity of third-party teams in Mexico helps prevent miscommunication and ensures a better cultural and organizational fit. BPO clients in North America working with Mexican outsourcing vendors can expect an organizational culture and work ethic similar to those of their local teams.
3. Big Time Savings
Nearshore outsourcing is often more time-efficient than in-house operations, but not at the expense of expertise, experience, and credentials. Although offshore outsourcing is more affordable regarding labor costs, its nearshore counterpart comes with additional savings due to better quality control, faster and improved communication, and a shorter time-to-market.
BPO companies match you with pre-vetted and pre-screened talent who fits your qualifications and has undergone rigorous training. They will handle recruitment and training; you only need to provide learning materials. Hence, setting up a nearshore outsourcing arrangement is often quicker and easier than establishing an in-house department.
Lastly, Mexican talent does not only possess specialized skills. They know from investment in continuous personal development and experience how to work with U.S. companies. You will get the same levels of commitment to work and professionalism when managing customer expectations with a Mexican team as with an in-house unit.
4. Easier Access to a Wider Talent Pool
The demand for skilled labor is always high, especially in the tech industry. The Bureau of Labor Statistics expects software development employment to grow by 25% between 2021 and 2031 in the U.S. alone. Other occupations show an average projected growth of 8%.
However, you do not need to wait until 2031 to see where the talent market is going. A 2020 McKinsey report showed that companies were struggling to fill talent gaps in the following business areas:
- Data analytics (43%)
- Information technology (IT), web, and mobile design (26%)
- Human resources (HR) and talent management (23%)
- Sales and marketing (22%)
- Customer service (15%)
- Financial and risk management (14%)
The competition for hiring and retaining top talent is fierce. This is where the benefits of nearshoring to Mexico come in. Nearshore outsourcing allows you to transcend the restrictions of your local market and hire world-class professionals abroad at more competitive costs without the common drawbacks of offshore outsourcing.
5. Low Labor Costs
Low labor costs are the primary factor driving nearshore outsourcing to Mexico. Although Mexico recently increased its minimum wage by 15% to $7.03 per workday in 2021, outsourcing costs are still significantly lower than onshore outsourcing solutions.
To illustrate the cost difference, an entry-level manufacturing worker makes about $4 per hour versus $30 per hour in the U.S. Doing business in China is also less cost-effective than before; labor rates in the Asian country have doubled on average in the last few years.
Companies can see similar cost differences in other skilled personnel. A skilled Mexican customer service representative makes approximately $4-$5 per hour, compared to $16-$18 per hour for the same role in the U.S.
6. Shorter Supply Chain and Free Trade Agreements
You might have heard of the issues plaguing global supply chains in the past few years, leading some experts to call it the supply chain crisis. Companies in the U.S. need not worry about border or travel restrictions when engaging in nearshore outsourcing in Mexico.
One of the benefits of nearshoring to Mexico is that goods reach the market faster thanks to shorter geographical distances and cheap transportation costs. Additionally, Mexico is the United States’ third-largest trading partner.
The two countries have a strong trade partnership due to the United States-Mexico-Canada Agreement (USMCA), which developed from the North American Free Trade Agreement (NAFTA) trade pact.
The trade agreement allows U.S. companies to invest in the Mexican market and establish operations there. It enables better mobility of services and goods across the borders of all three nations.
7. Highly Educated Workforce
Another benefit of nearshoring to Mexico is the large pool of educated and qualified talent, especially in the technology and manufacturing industries. The universities in the country are some of the highest producers of STEM graduates each year, generating over 130,000 computer science graduates annually.
Mexico has skilled workers who can bridge the gaps in your team because the government prioritized education to boost the country’s economy a decade ago. They built 120 tuition-free, specialized technology universities. The nation is dedicated to ensuring the tech industry complies with the highest standards and meets client needs worldwide.
Owing to the country’s focus on education and training, it now has vast talent pools well-versed in the latest technologies and suitable for IT, software development, and technical support outsourcing.
The country’s growth sector has also evolved from basic assembly to more complex, sophisticated industries such as medical devices, product design, and research and development.
8. Strong Intellectual Property Regime and Industrial Infrastructure
Copyright protections and intellectual property (IP) are critical as the United States continues to be a leader in innovation. The USMCA agreement, which took effect in 2018, creates a strong protection scheme for copyright, patent protection, IP, and pharmaceutical and agricultural innovations.
Furthermore, developing industrial infrastructure is another benefit of nearshoring in Mexico. The government has heavily invested in improving its infrastructure. BPO companies have access to essential structural and building utilities, industrial areas, and quality roads that clients can leverage when outsourcing to the country’s nearshore.
The Mexican government continuously works on progressive infrastructure plans for energy projects, IT, and transportation. They announced a more than $14 billion budget for improving infrastructure in 2020. Based on the Global Innovation Index 2022, they ranked 58th among the Top Digital Nations worldwide in the same year and in the top three in the LatAm region.
9. Low Staff Turnover
The competition for talent in the worldwide front-office and back-office outsourcing markets is fierce, resulting in extreme worker retention issues. However, Mexico has only been exposed to the worldwide outsourcing market recently. Hence, competition is lower, and staff retention is higher.
The low staff attrition in Mexico is due to relatively less competition in the country’s job market. This means clients in the U.S. have an advantage because they can start and end a project with the same staff. The individual who worked on the project will stay with the BPO company, which allows new team members to benefit from their retained experience and knowledge.
Working with the same team from start to finish helps stabilize operations. When worker attrition is high, BPO clients lose more than the output of the staff who left. They also lose institutional knowledge and technical solutions to complex problems, which impacts the overall project.
10. Professional Service Delivery
Mexican service providers and workers take service delivery seriously. Although the country was not always seen as a reliable and mature outsourcing destination, it has recently caught up in terms of reputation and image, especially in tech.
Mexico is increasingly viewed as a top outsourcing country for software development, help desks, contact centers as a service (CCaaS), cyber security, and machine learning by U.S. companies. When partnering with outsourcing providers in Mexico, you can expect to receive the same level of professionalism as you do at home and agree on timescales.
That said, you should have a clear process to fully reap the benefits of nearshoring to Mexico and ensure the projects stay on budget and schedule. The in-house and third-party teams must keep communication lines open and coordinate efforts. Ensuring both teams listen to each other and work with transparency is key to success.
What to Look for When Working with Mexican BPO Providers
Nearshore outsourcing to Mexico also has downsides, so perform the following before committing to a service provider:
- Look for case studies or testimonials and samples of work. Verification is crucial to ensure the nearshore team can meet your expectations.
- Ask someone from your team to review the provider’s work, especially if the project is technical.
- Agree on timescales, deadlines, project milestones, and other relevant processes.
You can sign the contract once you are happy with the service provider. During the engagement, make sure to maintain the following:
- Regular communication ensures your needs are understood.
- An onshore project manager who will oversee the external team’s progress and outputs and point out mistakes to improve on in the future.
- Milestones hit or project delays should be communicated between both parties.
The Bottom Line
Mexico is a reliable, secure, and safe nearshore outsourcing destination. Some benefits of nearshoring to Mexico include a wide availability of talent, a strong commitment to infrastructure and technology, real-time communication, low staff turnover, and professional service delivery.
The country’s strong and competitive labor force can work with your in-house team in real time, giving you what you need at a fraction of the cost of hiring locally. Whether you want to build a nearshore team or hire virtual assistants, this strategy is worth exploring.
At Unity Communications, nearshore outsourcing is our bread and butter. We can establish an excellent team for you in no time and take care of the details so you can concentrate on satisfying customers and growing the business.
Let’s connect to find out more.