Earlier this month, Mexico’s National Chamber of Electronics, Telecommunications and Information Technologies hosted an event to highlight the evolution of the IT and BPO delivery sector in Tijuana and the rest of the country. Sean Goforth of Nearshore Americas offered encouraging insights on how Tijuana’s expanding workload and rising reputation match the reality of the nation as a whole.

“Mexico’s IT outsourcing and business process outsourcing industries will enjoy a combined compound annual growth of 11% through 2018, continuing a trend that began in 2012,” noted Goforth in his presentation. “As a result, Mexico’s ITO/BPO industry will approach $26 billion in value by the end of 2018. At the same time, Mexican BPO/ITO will outpace the industry growth rate in Latin America.”

Tijuana offers the classical advantages of Mexico — proximity, time-zone alignment, and business cultural affinity with the United States — plus much more. There is a macroeconomic foundation in the state of Baja California that is driving innovation, with several local players partnering with major multinational companies on ambitious digital projects.

Combined, this is allowing those traditional advantages to merge with what Goforth calls the “2020 Advantages” of Mexico. These are the next-level areas pushing the nation toward the top of the sourcing location ranks, including the nation’s proficiency in providing agile software development, its widening free-trade agreements such as the Trans-Pacific Partnership, and its ability to exploit nascent tech trends.

Due to all this, Goforth sees Tijuana as a key cog in the ongoing migration of high-end tech work. Originally, much of the industry resided on the East Coast, with Boston’s prestigious universities doing the heavy lifting. Then it all shifted to California, and Silicon Valley became the world’s leading source of innovation. Now, we are seeing more top-end projects coming from the Los Angeles area, including “Silicon Beach,” and Austin, Texas.

This southward movement has put leading U.S. innovators right on Mexico’s doorstep, and this means more cross-border partnerships are inevitable. “This proximity is leading to collaboration with Mexican developer teams and entrepreneurs,” noted Goforth. “Mexico will benefit from greater exposure to cutting-edge tech trends. In turn, this will bleed over into innovation as Silicon Valley grows south.”

Mexico’s BPO and ITO Industry
Compound Annual Growth Rate by Year

Source: Nearshore Americas

With all that momentum, Tijuana’s arrival on the scene is coming at the perfect time. Throw in some labor savings and the ease of doing business with California firms in the Pacific time zone, and the future is only looking up.

In his presentation, Goforth shared the results of recent survey by Nearshore Americas. Last November, the company asked more than 120 nearshore professionals about why Mexico appeals to them as an outsourcing destination. Proximity and cost of operations were predictably still the leading responses, but more than half listed the large talent pool as a key driver of their interest in Mexico. Even more encouragingly, an overwhelming majority — 86% of respondents — said that Mexico’s IT infrastructure meets their firm’s needs.

Taken together — and coming from industry professionals who understand all that the market has to offer — the picture is one of a destination that now has such robust talent and infrastructure resources that these 2020 advantages will be paying dividends even in 2016.

”In the past, classical advantages delivered results based on efficiency and standardized performance metrics,” reported Goforth. “Going forward firms will exhibit a greater degree of innovation, which promises dynamic gains. The foundation for this innovation is Mexico’s university system alongside the willingness of the country to open itself up to global trade flows, incorporating best practices and helping to devise improvements to existing business processes and technology.”