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Outsourcing has proven effective in reducing costs, improving operations, and achieving success. But recently, nearshoring has become a business trend and the preferred option. It involves outsourcing functions to neighboring countries instead of delegating tasks to distant nations.
Mexico stands out as a leading nearshore outsourcing destination, known for its cost-efficient labor, specialized services, and developing tech hubs. To tap into customer service representatives, technical support specialists, and virtual assistants in Mexico, you can partner with an outsourcing company in the country.
This page explains why nearshoring to Mexico makes business sense. Discover its potential benefits below.
What Is Nearshoring?
Nearshoring, or nearshore outsourcing, is when companies outsource their business operations to a nearby country that is culturally similar to their home country. For example, an e-commerce business in the U.S. outsources its customer service operations to an outsourcing company in Mexico to access bilingual English and Spanish agents.
To further understand nearshoring, distinguish it from onshore and offshore outsourcing. Onshoring is when you delegate tasks to a third-party service provider in the same country. On the other hand, offshoring is when you entrust business functions to a distant overseas provider. For North American companies, nearshoring is ideally done in Latin American countries.
Nearshoring to Mexico is a top growth strategy, offering superior business process outsourcing (BPO) and information technology outsourcing (ITO) services. The country is notable for its skilled workforce, competitive labor costs, and favorable location.
To understand what business process outsourcing is, consider it a process of delegating business processes, such as customer service, human resources (HR), and accounting and financial (A&F) services, to third-party providers. Meanwhile, ITO focuses on subcontracting IT functions such as troubleshooting, system maintenance, and network management.
Learn more about the Mexican outsourcing industry in the next section.
A Closer Look at Mexico as a Top Nearshore Outsourcing Destination
Mexico has emerged as one of the leading destinations for nearshore outsourcing. The country offers numerous benefits and specialized services for front-office or back-office outsourcing. Its outsourcing industry is constantly expanding.
The proof is in the numbers: Mexico’s outsourcing market could grow from $3.63 billion in 2023 to $4.75 billion by 2028. The country might achieve a compound annual growth rate (CAGR) of 4.86% during the forecasted period. Nearshoring to Mexico is best for capitalizing on this market growth.
Mexico’s outsourcing industry began with manufacturing in the mid-1960s. The catalysts for its creations were the rise of Maquiladora and the launching of the Border Industrialization Programs, which allowed U.S. companies to develop products in Mexico. Later, this sector transitioned from its roots in manufacturing to encompass a wide range of industries.
Mexico’s strength lies in its robust ITO market. With the rise of its tech hubs and digital ecosystems, the country has become an attractive destination for ITO services, such as IT support and software development. According to Statista, its ITO segment could grow from $4.42 billion in 2023 to $7.90 billion by 2028.
The Mexican outsourcing industry also thrives in the BPO market. The country offers a wide range of services for business processes, such as customer service, HR, and A&F.
Overall, the outsourcing sector has evolved into a growing market, catering to diverse industries and delivering specialized services to meet the unique needs of businesses.
Discover the potential benefits of Mexican outsourcing in the next section.
11 Key Benefits of Nearshoring to Mexico
Nearshoring to Mexico benefits businesses considering customer service or technical support outsourcing. The country can give you access to talent, technology, and resources to help improve business efficiency, service quality, and customer satisfaction. These factors lead to business growth and overall success.
Here are the key benefits of nearshore outsourcing to Mexico:
1. Undivided Focus on Core Operations
In 2021, the Mexican government amended the Federal Labor Law (FLL), prohibiting foreign companies from subcontracting core functions to the country. However, this outsourcing reform still allows personnel outsourcing in the country for non-core operations.
Nearshoring to Mexico allows you to delegate non-core tasks to a reliable outsourcing company. Doing so lets you direct your time, energy, and resources toward core activities. You can prioritize making money and growing your business while your hired service provider takes care of other tasks crucial to your operations.
2. Growing Tech Hubs and Digital Ecosystems
Recently, the world saw the rise of tech hubs in Mexico. Business leaders have regarded the country as the “Silicon Valley of Latin America.” Mexican cities with digital ecosystems include Mexico City, Guadalajara, Monterrey, Tijuana, and Yucatan.
Nearshoring to Mexico gives you access to these technology zones. Outsourcing allows you to tap into a wealth of technological expertise and cutting-edge resources. It allows your company to leverage the latest technologies, accelerate digital transformation, and stay ahead of the curve.
3. Convenient Access to Digital Tools and Technology
Outsourcing can pave the way for digital transformation and business success. The rise of tech zones in Mexico implies the utilization of digital tools and modern technologies. You can use these technological resources by hiring nearshoring services in the country.
For example, you can work with a BPO firm in Mexico to leverage contact center as a service (CCaaS) software for your customer service operations. You can also hire a managed service provider (MSP) in the country to handle your IT functions, such as hardware deployment, software installation, and network management.
4. Vast Pool of Educated Professionals
Mexico takes pride in its vast pool of highly skilled outsourcing talent. The Mexican government invests in its people through STEM (Science, Technology, Engineering, and Mathematics) education. For this reason, the country produces graduates who then become educated professionals.
Let us take the ITO industry in Mexico as an example. According to a report, the country produces over 130,000 engineering graduates annually. The country’s tech talent was in high demand even before the pandemic. Hence, nearshoring to Mexico allows you to tap into these sought-after professionals.
5. High Employee Retention
The pandemic has made employee turnover a problem for many businesses worldwide. Approximately 47 million workers in the U.S. quit their jobs in 2021 amid the so-called Great Resignation. However, this problem has long been rampant in the outsourcing industry, where employees just come and go.
But did you know that Mexico is an exception? The country has high employee retention rates because of less competition in the market. It also offers reasonable compensation, favorable career opportunities, and a great working environment. By hiring a Mexican outsourcing firm, you can guarantee workforce stability.
6. Cultural Similarity with North American Countries
Mexico has geographical proximity to Northern American countries, such as the United States. As mentioned, the Mexican outsourcing industry started with the U.S. entrusting manufacturing operations to the country. The history of interactions and trade between both countries has resulted in cultural compatibility.
Nearshoring to Mexico proves beneficial since the country shares identical cultural traits with North American countries. Such cultural similarity facilitates seamless communication, collaboration, and understanding between clients and their nearshore providers. Outsourcing to the country can guarantee a successful partnership.
7. Favorable Trade Agreements and Business Environment
Mexico has favorable treaties with various countries across the globe. Specifically, it has 13 Free Trade Agreements (FTA) with 50 countries worldwide, which include the following:
- United States-Mexico-Canada Agreement (USMCA), formerly known as NAFTA
- FTAs with the European Union and European Free Trade Area
- Trade agreements with Japan and Israel
- FTAs with ten countries in Latin America
- 11-country Comprehensive and Progressive Agreement for Trans-Pacific Partnership
These agreements foster trade liberalization, minimize trade barriers, and offer an ideal environment for nearshore outsourcing. The solid government support, stable business climate, and favorable regulatory framework in Mexico create a perfect setting for businesses seeking to outsource and expand their operations.
8. Geographical Proximity and Shared Time Zones
Mexico is located in the southern part of North America, sharing borders with the United States to the north and Belize and Guatemala to the south. Its geographical proximity to North America is an advantage for outsourcing businesses.
Nearshoring to Mexico is promising because of its location. Such a close distance to North American countries, such as the U.S., offers ease of travel and similar time zones. Its geographical proximity reduces travel time and ensures constant interaction. Likewise, sharing identical time zones allows for real-time communication and collaboration for operational efficiency.
9. Improved Business Performance
As mentioned, outsourcing to Mexico offers access to expertise, technology, and resources that enhance business performance. Leveraging specialized knowledge and skills improves operational efficiency, boosts quality, and increases customer satisfaction.
The diverse Mexican talent pool provides domain expertise, while state-of-the-art technology drives productivity. This combination results in cost savings, faster turnaround times, a reputation for excellence, and a competitive edge in the market. Thus, outsourcing to Mexico is a strategic choice for achieving improved business performance and success.
10. Flexible and Scalable Functions
Nearshoring to Mexico provides businesses with increased flexibility and scalability. The country offers various outsourcing services across different industries, often with flexible contracts. These choices allow companies to find the expertise and resources to fill their business needs.
Whether scaling up operations during peak periods or quickly adapting to changing market demands, Mexico’s outsourcing industry offers the agility and capacity to meet evolving business requirements. This flexibility contributes to the adaptability and competitiveness of businesses that outsource to Mexican service providers.
11. Reduced Costs and Increased Profitability
Businesses work with third-party providers to save on labor costs and reduce operating expenses. Offshore outsourcing proves viable for significant cost savings. But why would you outsource to distant countries when you can do so in nearby countries?
Nearshoring to Mexico offers cost-saving benefits without compromising geographical proximity or seamless interaction. This strategy gives you access to expertise and technology to improve service efficiency, work quality, and employee productivity. These factors can translate into a boost in business profits.
Five Business Trends Impacting Mexico’s Outsourcing Industry
Now you know the key benefits of nearshoring to Mexico. However, staying current with the country’s industry trends is crucial, whether hiring customer service, IT support, or data entry services. That way, you can make informed business decisions to ensure a successful outsourcing engagement.
Below are business trends in Mexican outsourcing you must keep up with:
- Mexican labor laws. The Mexican government enacted the FLL reform to limit outsourcing workers and prevent bad subcontracting practices, such as employee exploitation and tax evasion. Companies can only outsource specialized services outside of their core operations. Meanwhile, outsourcing providers must comply with laws, such as the REPSE requirements.
- Digital transformation. As with other industries, nearshoring to Mexico confronts the need for digital transformation. The pandemic further triggered the adoption of technological resources such as artificial intelligence (AI), automation, and cloud computing. Companies looking to outsource to the country should capitalize on BPO firms with advanced technologies.
- Specialized services. The Mexican outsourcing industry has shifted towards specialization and prohibited subcontracting core competencies. Companies can only outsource specialized services when these activities are separate from their core operations. Businesses looking to outsource to the country should keep this in mind.
- Talent development. The global outsourcing industry is focusing on talent development. Top outsourcing destinations and service providers invest in their people to gain a competitive advantage. They provide upskilling and reskilling programs and partner with academic institutions. Companies outsourcing to Mexico should capitalize on talent investments.
- Sustainability and corporate responsibility. Sustainability and corporate social responsibility have become buzzwords in the business realm. Nearshoring to Mexico is no exception. Companies looking to outsource to the country should adopt sustainable practices and promote eco-friendly initiatives. They should work hand in hand with their service providers.
Seven Best Practices for Nearshore Outsourcing to Mexico
Nearshoring to Mexico offers businesses a strategic advantage through access to top talent, technology, and resources. However, successful outsourcing engagement requires knowledge of best practices for informed decisions and successful implementation.
Leveraging Mexico’s outsourcing strengths is crucial to achieving productive and sustainable business partnerships. Below are best practices to consider when outsourcing to the country and aiming to gain a competitive advantage, business growth, and overall success.
- Choose the right nearshore provider. Look for a potential BPO partner that meets your requirements and is compatible with your business. Evaluate prospective providers based on their reputation, workforce, technology, pricing, and track record. Select a provider that can maximize your return on investment (ROI).
- Study Mexican outsourcing reform. The recent reforms in Mexican outsourcing regulations have significant implications for businesses engaged in nearshoring. These amendments seek to fight labor exploitation, protect workers’ rights, and avoid tax evasion. Study and understand the FLL reforms to ensure compliance and mitigate potential risks.
- Negotiate a fair outsourcing contract. When outsourcing to Mexico, establish a comprehensive outsourcing contract. Negotiate the terms and conditions to ensure fairness for both parties. Develop a service-level agreement (SLA) to outline service expectations, performance standards, and critical metrics.
- Invest in talent development. Mexico’s outsourcing success relies on its workforce. To optimize outcomes, provide regular training initiatives. Start with foundational and process training, then offer regular upskilling and reskilling programs. Remember, your BPO team is crucial to winning customers and maximizing ROI.
- Capitalize on modern technologies. Embracing the latest technologies is crucial for gaining operational efficiency and a competitive edge. When partnering with a Mexican BPO provider, prioritize those who leverage modern tools such as AI, robotic process automation (RPA), and CCaaS. By utilizing these technologies, you can streamline functions and increase profitability.
- Monitor outsourcing performance. While Mexican outsourcing companies are reliable, establish a quality assurance (QA) team to measure performance and ensure services meet standards. By proactively auditing performance, you can identify areas for improvement, make timely corrections, and drive continuous enhancements.
- Optimize operations regularly. Optimizing operations is crucial for ongoing outsourcing success. Constantly assess the effectiveness of the partnership, identify improvement areas, and make necessary adjustments. Cultivate a culture of continuous improvement to enhance efficiency, quality, and profitability.
The Bottom Line
Nearshoring to Mexico offers a host of potential benefits. Such advantages make this country one of the top destinations worldwide for businesses looking to outsource. That is why the Mexican outsourcing market shows no signs of slowing down.
The country offers skilled talent, modern technologies, tech hubs, and favorable trade agreements. Mexican outsourcing firms can increase your efficiency, improve quality, and ensure customer satisfaction. Not only will they help decrease your operating costs, but they can go as far as boosting your business profits.
With all these qualities, outsourcing to Mexico makes perfect business sense. Consider working with Unity Communications, as we can help optimize your operations and scale your business. Let’s connect today to get started with outsourcing!