My Mexico’s Nearshore Blog

During these tough economic times, many CIOs, CFOs, and business services executives are turning to IT outsourcing or shared IT services as a strategy to reduce their expenses.

However, developing a clear business case for outsourcing can be complicated. Without any simple industry-wide benchmarks, easy ROI calculations, and cookie-cutter models for successful client-provider relationships, this can become quite a challenge for any company.

Rather than struggle with this complicated business issue, many executives just give up, leaving large cost savings on the table. Yet, other executives decide to do-it alone, usually resulting in a tumultuous sourcing process that delivers less-than-stellar contract terms, a poor client-provider relationship and underwhelming savings.

Neither of these scenarios is ideal. That’s why many sourcing initiatives have a hard time to get off the ground.

Luckily, our clients benefits from our expertise as a sourcing advisor, together we determine if there is a real need and validate the savings. If they decided to go ahead, we help them avoid the pain associated with the sourcing process and provided them with the best IT resources possible at the lowest cost available.

Most importantly, we understand that every client is different and build a strategy as unique as their business.

Some of the benefits include:

Greater cost savings
A disciplined sourcing process/methodology
A decrease in the time to achieve savings
Better contract terms
Stronger client-provider relationships

IT executives may feel their departments are especially vulnerable in an era of shrinking corporate budgets. The good news is that there are several actions executives and hiring authorities can take to demonstrate IT’s strategic value and help their companies weather the economic storm.

Many IT organizations are working to identify discretionary spending and activities versus non-discretionary spending and activities. This effort does not just focus on hardware and applications, but on staffing levels as well. As they identify what aspects of a project are ‘nice-to-haves’ compared to ‘must haves,’ some companies may be trimming a project’s cost by eliminating the ‘nice-to-haves.’ When that approach is not possible, they often outsource projects to Nearshore IT staffing and outsourcing solutions companies in order to keep the key project on target and on budget.

Managing through an economic downturn isn’t just about reducing current overhead, but also reducing future costs. Companies are expanding outsourcing IT projects in order to conserve internal resources and reduce future costs.

Ways Companies Manage IT in a Recession

Demonstrating how IT is an asset and not an expense;

Knowing what is discretionary spending (and what isn’t);

Outsourcing to reduce overhead;

Instituting green initiatives to save power (& expenses).

 

The good news is that many companies are planning for the “bounce-back.” They realize that if they cut too deeply now, they will be unable to fully exploit the eventual upturn.

Gone are the days of hiring inhouse permanent staff, programmers, developers, investing in recruitment costs, retention costs, fringe benefits tax, promotion, infrastructure costs, training costs, etc…

As a Nearshore IT outsourcing specialist, been able to reduce my customers IT staffing related expenses up to 60% and becoming their partner for their IT projects by smartly getting rid of all their hassles when hiring and managing dedicated IT staff from our nearshore facility is quite rewarding.

Correspondingly, staffing and resource allocation have become critical business issues at most corporations, large and small alike. By combining our IT staff working directly from our development center in Mexico, with a Nearshore IT Outsourcing company like BCM International to guide them thru the whole process, enabling the right business strategy and in achieving the client’s business goals is the best foundation for a solid business relationship.

Our team collaborates closely with each client from our facility as they manage them just as if they were sitting in the office next to them. Our highly qualified staff works with our clients full time on their projects as they interact with them and oversee in real-time the development process. Our service works for them transparently; it is as if our staff is a part of their in-house team with their own phone extension. Working in the same time zone makes this all possible.

We dedicate specific ressources to work closely and guide each client thru the whole process for every project, they can choose their own ressources from a wide range of experts without any start up fees, maintenance cost or taxes.

Our Mexico Nearshore IT Staffing program includes at least 8 hours a day, 6 days a week of developing work, a favorable development environment, guaranted timely communication through phone, emails/instant messengers, internet webmeeting and video conferencing, daily and weekly working reporting as needed, easy coding style, documentation written in English, strict delivery time and with the complete hardware and software infrastructure.

Our organization is approved by PMI (Project Management Institute) to support our customers beyond installing their computer infrastructures and assisting in their technological development. We also offer project management training to ensure optimal use of their systems and informed decision-making. The model we have developed to maximize your business revolves around four key components: business, human, organizational and the attainment of set goals. We are really with them on every step of the way.

If you would like to learn more about how our Nearshore Staffing IT Outsourcing Services can help reduce your company expenses, please do not hesitate to contact me.

 In 2003, the Mexican government launched a programme, called Prosoft, to promote the country’s tech industry. The goal is to increase the size of the Mexican IT industry to $15bn annually by 2013.

While Europe looks to India as its offshoring destination of choice, Mexico has launched an initiative to promote itself to the US and Canada as a ‘nearshoring’ destination that’s so close to home it’s often within commuting distance.

And the benefits of proximity add up; there are more than 300 flights per day between the US and Mexico. Bandwidth costs on software projects also add up, so the closer your programmers are to corporate headquarters, the better.

Leveraging an application development resources at a Nearshore Development Center in Mexico, allows companies to develop quality software applications typically for 40% less than in-house and offshore Asian providers.

The advantages of working with a nearshore application development partner are quite compelling:

• Software Product Development Expertise – Clients benefit from over 15 years of experience building software products.
• Development Practice – Often offering the best software development methodologies (ex.: Agile) , which help brings greater transparency and alignment to development projects.
• Cost Savings – Companies typically save 40% over hiring permanent employees with most on-demand application development services.
• Cultural Affinity – US, Canada and Mexican culture has had extensive exposure over the years. Cultural similarities facilitate mutual understanding of a project’s objectives.
• Close Proximity – They are located 2 to 6 hours away from most major US and Canada cities.
• Time Zone – They work on Central Time allowing real-time collaboration, which is critical for delivery and providing rapid response to critical issues.
• Flexibility – They are a nimble company allowing for flexibility in engagement model and budgets.
• Low Attrition – They have excellent work environment, keeping attrition very low.
• English Fluency - Communications in English with our bilingual development team is simplified via web meetings.
• Physical infrastructure – Mexico has a world-class communications infrastructure.
• Intellectual Property Protection – Mexico has a solid legal framework to protect intellectual property.
• Low Geo-political Risk
• Business Model Sanctioned by the North American Free Trade Agreement (NAFTA) – There are no export/import tariffs, no limitations on technology disclosure, and there is a special visa program for Mexican engineers.

COST EFFICIENT
The cost advantage of offshore services comes from having more people working at a lower cost geography.

A typical offshore project has an onsite component at the client’s facilities in the US/Canada and an offshore component at the vendor’s development centers in the offshore country.

Man/Hour rates in Mexico tend to be higher than other countries, like India or China, due to a higher cost-of-living.

Mexico’s advantage in terms of cost resides in the possibility to carry out an important amount of work at the vendor’s facility due to closeness. The percentage of work that can be done in Mexico fluctuates around 80%, while in Asian countries is generally around 50 to 60%.

When a high degree of interaction is needed, a typical offshore engagement with India requires measures to mitigate impacts of time-zone difference and distance. Such measures include allocating a significant number of people on-site (customer locations in the US) and having a redundant project leader role, one on-site and one off-shore, due to the fact that travel and voice communication are cumbersome and expensive. In this case Mexico is highly competitive, because distance and time zone have no negative influence in the engagements.

Near Shore engagement configuration has a higher impact in the Total Cost of the Engagement than India’s lower man/hour rates.

Total Cost of Engagement

The Total Cost of Engagement (TCE) evaluates the total expenditures of outsourcing projects. In addition to the hourly rates of engineering talent you must consider the cost of additional management overhead, travel costs, the painful cost of staff turnover, and a certain amount of productivity loss due to the distance and degraded communications. Most of these costs are directly related to the separation in time between teams.

The overall cost of nearshore engagements is equivalent or lower than offshore because of the efficiencies brought about by working in close proximity to the US and in the same time zone.

TCE: Project Team Costs, Project Overhead Costs, Cost of Vendor’s attrition, On-Site Ressources Allocation Costs, Long Distance Costs, Knowledge Transfer Costs, Project Trips Costs, Productivity Losses Costs and Risk Management Costs.

If you would like to learn more about the benefits and savings, I can provide you with an estimate of the true costs of an engagement for any type of projects; you can reach me via email or by phone (located top right). As always, it is better to consider all the facts, costs up front and not have surprises later.