US-based companies are always looking for cost-effective solutions in the rapidly changing field of software development. 

Regarding nearshore software development, Mexico has emerged as a significant player. Forecasts put the value of Mexico's software development business at $3.92 billion by 2023. 

This post will present a high-level overview of the Mexican IT sector, discussing its benefits and limitations.As you navigate the thriving landscape of nearshore software development in Mexico, having the right partner can make all the difference. 

Meet Alcor, your trusted IT recruitment & R&D services provider with a mission to connect businesses with exceptional tech talent. 

With an exclusive focus on senior, lead, and C-level positions for IT product companies, Alcor is your gateway to success in Mexico, other LatAm countries, and Eastern Europe. 

What is Nearshoring software development

Nearshoring in software development represents a business model wherein a company opts to engage a software development team situated in a nearby country, usually within the same time zone or a few time zones away, rather than outsourcing the work to a more distant location. 

The underlying concept of nearshoring revolves around keeping the development process geographically close to the company, thus capitalizing on the benefits of reduced labor costs and other advantages associated with collaborating with offshore teams.

This approach is particularly favored by companies in Europe and North America seeking to collaborate with skilled software developers while mitigating the risks and challenges linked to outsourcing to distant locations. For instance, a U.S.-based company might decide to nearshore its software development by partnering with a team based in Mexico. 

This allows them to leverage lower labor costs while still maintaining a proximate relationship with the development team. 

Nearshoring proves to be a strategic choice for cost reduction while upholding high-quality development standards, especially in projects that necessitate close collaboration or frequent communication between the development team and the client company.

What are the Different Types of Outsourcing Models?

Outsourcing has gained popularity among businesses as a means to reduce costs and tap into skilled resources, with 64% of outsourced services being dedicated to software development. 

With an increasing dependence on technology, businesses are increasingly opting to hire remote software engineers globally. Understanding various outsourcing models is crucial, and here are the primary types:

1. Onshore Software Development: In this model, a business outsources a software development project to a team located within the same country. This choice is ideal for those seeking a team that shares the same language, culture, and works within the same time zone. However, onshore development may not always be the most cost-effective option.
2. Nearshore Software Development: This model involves outsourcing a project to a team situated in a neighboring country. For instance, a U.S.-based company might outsource to a team in Canada or Mexico. Nearshore software development provides similar advantages to onshore development, but with the potential for lower costs.
3. Offshore Software Development: Choosing this model means delegating a project to a team located in a distant country, often on another continent. Popular destinations for offshore outsourcing include India, China, and Eastern Europe. While offshore development can bring significant cost savings, it may pose challenges such as language barriers and cultural differences.

Ultimately, the outsourcing model chosen depends on specific needs and priorities. Opt for nearshore agile development if cultural alignment is crucial. When selecting a model, thoroughly vet your outsourcing partner and establish clear communication channels for a successful collaboration. Now, let's delve deeper into this topic. 

Benefits of Nearshore Software Development

Whether you're a small company, a global conglomerate, or an IT entrepreneur, learning about these benefits will help you better appreciate Mexico's vast software development possibilities.

1.The Growth of the Mexican IT Industry

The information technology sector in Mexico has expanded rapidly in recent years. The software development market in Mexico will likely hit $3.92 billion by 2023, thanks to the continued popularity of mobile app development, banking, and safety solutions.

2.Diverse Talent Pool

Software developers, engineers, and other IT professionals may find a large and varied pool of qualified candidates in Mexico. About 225,000 software developers work in Mexico. 

Now, that number is rising gradually as more than 110,000 local students get degrees in STEM every year. This variety of people directly affects the country's thriving educational system and IT sector. 

When you work with Mexican development teams, you can tap into their depth of knowledge to address any challenges specific to your project. 

3.Cultural Alignment

One benefit of near-shoring software development to Mexico is the teams' shared cultural values. Because of their shared cultural background, people from Mexico and the United States can communicate and work together more efficiently.

4.Time Zone Compatibility

Because of their almost exact time zone, the average time difference in these countries is 2 hours. That's why the United States and Mexico can maintain constant contact and provide instantaneous responses. Thanks to this synchronized process, your project will stay on schedule in the face of unforeseen challenges.

5.Government Support

The Mexican government has been spending much of its budget to improve the country's tech infrastructure. The country started using the 5G mobile network in 2021, which is supposed to enhance internet links and speed up digital processes. IT businesses are also encouraged to make cutting-edge technologies based on AI that can speed up and make software development less error-prone.

Also, more than 20 tech parks with modern facilities and business buildings were built. They can be found in Guadalajara, Monterrey, and Mexico City, which are all big IT hubs in Mexico, as well as in Tijuana and Merida, which are growing IT hubs.

 6.Cost Efficiency and Competitive Rates

The annual salary of a senior Mobile App Developer in the United States is close to $140,000. However, the same expert in Mexico earns just $41K a year. Outsourcing software development to Mexico costs around three times less than in the United States. Because of these savings, businesses may reinvest those funds in more critical areas.

 7.Thriving Startup Ecosystem

In addition to its low business environment risk and good Ease of Doing Business score, it is in 60th place out of 190 countries worldwide. Mexico's political stability is another reason US-based IT corporations nearshore software developers in Mexico.

Risks of IT Outsourcing to Mexico

While there are many positives to outsourcing to Mexico, there are also specific hazards and difficulties to be aware of:

• Intellectual Property Protection: Intellectual property protection is becoming more important in Mexico's IT sector. Commercial-scale infringement is an issue for IP owners in Mexico and the United States. Issues including inadequate legislation, poor coordination, limited funding, and a flood of fake products play a role. Recent legal improvements, led by agreements under the United States-Mexico-Canada Agreement, have enhanced IP protection, addressing concerns including technical protection measures and rights management data.
• Legal and Regulatory Compliance: Understanding Mexico's local laws, taxes, and compliance requirements is essential for successfully navigating the country's legal and regulatory framework. Especially when there's a ban on outsourcing, or to be more exact - subcontracting, in place. Working with a team of seasoned lawyers and accountants is best if you want to stay out of trouble and on the right side of the law.

However, many of these potential pitfalls can be mitigated with the right partner by your side. 

Wrapping up

If your business is in search of a mobile application development solution that seamlessly combines quality, affordability, and a positive collaborative experience, a nearshore software development company emerges as the ideal match.