Image by Peter Arreola from Pixabay

Guadalajara Worth A Closer Look For Nearshore IT Outsourcing: Everest Group’s Parul Jain

 Research firm Everest Group has recently conducted an in-depth study of Mexico’s second largest city, Guadalajara, Jalisco as a potential nearshore services delivery location. Guadalajara is home to many IT operations for large global operators such as IBM, but also headquarters for many nearshore firms such as iTexico. To better understand Guadalajara’s unique characteristics and positioning in the nearshore ecosystem, Cognitive Business publisher Loren Moss recently spoke with Everest Group’s Parul Jain.

 Cognitive Business: Mexico has had a strong and mature IT presence for a long time. How does Guadalajara compare to another popular regional popular location like Costa Rica? Costa Rica is a small country, Mexico is a big country, but what are some of the dynamics that are different between the two?

Parul Jain: That’s an interesting question, Loren. We have informed a lot of players, comparing San Jose, Costa Rica to a location like Guadalajara, primarily because they offer a different model. San Jose is more of a Latin American location, more mature as compared to a city like Guadalajara, but it’s fiercely competitive. We’ve seen a lot of activity coming up in San Jose, expanding to the Caribbean now and also the cost: As you said San José Costa Rica is small so that talent there is quite limited as compared to a location like Mexico or the Jalisco region for that matter is relatively large, so definitively to the cost is higher in San Jose. Having said that, the reason there is definitively interest in San Jose compared to other Latin American locations is the availability of good skills, specifically English language skills. The quality of English language skills is quite commendable in San Jose, and we’ve seen players reporting a couple of challenges in other locations whereas they seem very happy in San Jose, in that regard.

Everest Group's practice director Parul Jain

Everest Group’s practice director Parul Jain

Cognitive Business: It seems that San Jose in some respects is a victim of its own success. I think the country has maybe four or five million people, but I think Guadalajara as a city has more people than that if I’m not mistaken, and of course Mexico has the largest labor pool, where people are moving from one city to another. How does Guadalajara compare to the capital of Mexico? Mexico City does have a significant presence in nearshore outsourcing, but then also Monterey, Mexico which has really worked hard as a region (Nuevo León) and as a city to compete within the region, even within Mexico they kind of try to position themselves as the Silicon Valley of Mexico; whether that’s successful or not, or whether that’s the reality or not. Guadalajara is larger than Monterey, but smaller than Mexico City. Does that affect its competitiveness within the country when companies are looking at Mexico as a service delivery location?

Parul Jain: You know Loren, the way we see it, the value proposition between a location like Mexico City and Guadalajara is different in some respects. Evaluating support functions like cybersecurity, a client would prefer to go to a more mature location where they can find talent that can be easily hired, so they prefer Mexico City in that regard. Also when they want to support the multifunctional centers which can basically have IT consolidated. In those regards they prefer Mexico City. However, when they’re looking at relatively large locations probably with low attrition, they will look at cities like Monterey and Guadalajara. Specifically with Guadalajara I think that is where the locations have evolved well, so there is a lot of manufacturing and engineering that got started back in 1980s or 1990s, so it is easier for the company to leverage that engineering talent, upskill them, gear them up for IT engineering work.

Cognitive Business: Mexico and the United States are very closely linked together, culturally, politically. In the big picture the two countries are permanently linked really, regardless of what any administration says or does in the short term. Still: What about the political situation? It seems that is more targeted towards manufacturing but how is that an ingredient in the dynamic?

Parul Jain: That’s a question we’ve received a lot in regard to US nearshore locations, similarly in Europe with the impact of Brexit etcetera, but there’s a lot of uncertainty involved here, specifically if we talk about what kind of decisions actually make an impact on the services industry. But if we talk about the reality we’ve seen, limited impact, but yes, there have been multiple players just reconsidering: asking “should we be concerned?” Should they have a mitigation plan? But we have seen limited impact actually here on the ground honestly. It may be prudent creating a backup strategy but if we just look at the facts, we’re seeing increasing centers that are far from stopping. We’re seeing an increase in expansion of centers, so while there may be some concerns, we are seeing a limited impact actually, specifically on the global services industry.

Cognitive Business: That’s good to know, and we don’t see any particular changes for the sector domestically within Mexico. With a new administration in Los Pinos (Mexico’s presidential residence) talking a radical departure compared to the previous administrations, do you see that being a factor or you see any change of attitudes from the outsourcing community, or the shared services community?

Parul Jain: We haven’t seen a lot of changes in the geopolitical scenario there, though I think is too early to say something. We haven’t heard any concern or any warning. There could be some concerns, but they are not materializing or impacting any plan.

Cognitive Business: Is there a relative difference in competitiveness in Guadalajara when we compare—let’s look at IT outsourcing versus something maybe a little bit easier which would be contact center outsourcing or let’s add financial services and accounting to the mix. Where would Guadalajara be strongest among those different flavors when it comes to nearshore services delivery?

Parul Jain: We think Guadalajara would be the strongest in the IT engineering side, a lot of work happening there in terms of infrastructure and help desk support. Then after IT I would say the business process sector which means non voice BPO.

Cognitive Business: Guadalajara is a lovely city, there’s a lot going on. It is a very well-connected city and easy to get in and out of. You put this report together and this is something you are obviously an expert in and of course Everest Group is also a global leader in research and intelligence, but as you put these profiles together periodically; putting this one together compared to the last time you put together a Next Wave Location Profile, what is something that really is different this time compared to the last time you did your research as you look at Guadalajara?

Parul Jain: Honestly the reason that we put Guadalajara in a profile is because we’ve actually been asked a lot of times about the location by clients who had other cities on the radar such as Mexico city or Buenos Aires, but now for Guadalajara, we actually are coming up with a lot of requests. Even if we talk about the new global delivery centers, we’ve seen a lot of market activity that is worth paying attention to.

Cognitive Business: I’ve been to Mexico more times that I can count over the years, it’s a neighbor, and I’ve made up a lot of friends there over time, and it’s a lovely city, the food is world class, so I think that anybody that would want to go. I think that the location, Mexico is getting a little bit of an undeserved reputation in the news right now, but certainly it’s a location that people would want to consider, and I think it was why you chose to focus on that city. Hopefully we’ll see more attention throughout the neighborhood, especially as you consider some of the less traditional areas in the future.


The Everest Group Next Wave Location Profile can be ordered on the Everest Group website by clicking here.

Related Posts

Interview: In Slowdown Year, BPO Is Outperforming IT Services Business for Many Providers
Vertical Players Dominate Top Of Everest Group’s BPS Top 50 Rankings For 2023
itel founder and chairman Yoni Epstein
Everest Group Cites Itel BPO In Peak Matrix Analysis of Top CX Outsourcers
Cognitive Business News