IT Trends for 2010

IT Trends for 2010 say that despite of the ecomonical crisis from 2009, American technology companies will start hiring more IT workers this year but with caution.

"Current predictions of a fragile recovery for 2010 don't reveal the necessary strategic business changes and tough decisions that will be needed to make that happen across all sectors," said Cliff Lineker, BCS strategic business development director.

According to a Robert Half Technology Study to 1,400 CIOs, the 7% will be hiring IT staff in the 1st quarter while 4% will be decrease its workforce. The net 3% increase is up 3 points from last quarter’s forecast. However, IT Executives seem to be careful about hiring because they need to go slow.

BCS says that one of the key priorities for IT Heads in this year are “…to know exactly what skills their IT team possess going into 2010” and “…making sure they have the skilled staff in the right roles to exploit the value of IT consistently and effectively to move the business forward”. After knowing their needs about the IT Staff they could decide to remain the same or add more personnel.

However, many CIOs have recognized that hiring new people has more risks than expanding with an outsourcing partner. When you hire someone directly, you incur in all the overhead that this implies: recruiting processes, benefits, equipment for the workplace, training, payments, etc. with the latent risk that at any time the employee could decide to leave the company.

In the other hand, if you decide to go with an outsourcing partner, you can afford to choose whom to hire, depending on the benefits, qualification and the proposition that is given to you and the one that better fits your needs. In some cases, outsourcing partners can be responsible for the entire process and project, with SLA-like rewards and penalties that are difficult to implement with employees.

The options of outsourcing software development are: Onshore, Offshore or Nearshore. The disadvantages of outsourcing offshore are time zone differences, jetlag when a travel is required and total cost of engagement, etc.

While Nearshore Software Development to Mexico or LATAM Countries give many benefits for the IT Team, especially with regard to software and agile development referred. Indeed CIO magazine has identified 6 IT outsourcing HotSpots for 2010, which includes Mexico.

Considering More than Cost When Choosing an Offshore Locale

This brief article from the Outsourcing Center (part of the Everest Group) suggests that cultural similarities are a very important factor when considering an offshore partner. The second key criteria for choosing an outsourcing partner is time zone similarities. Both reasons suggest Mexico is an excellent outsourcing destination.

As Offshoring Gets Tougher, Nearshoring Alternatives Shine

U.S. Secretary of State, Hillary Clinton visited India this week. Among the topics addressed with the Indian Prime Minister, Manmohan Singh, was a promise to improve cooperation on high-tech trade between the two countries, even though, Clinton didn´t give specifics about how it will be accomplished.

Why weren’t greater details offered? Perhaps because last May, President Obama announced a series of steps aimed at overhauling the U.S. tax code to detect and pursue U.S. tax evaders and go after their offshore tax shelters.

It is clearly known that many companies in U.S. are offshoring information technology services to India, not only to seek out cheaper labor, but also to avoid the taxes that they are bound to pay in their Country.

In the other hand, the U.S. wants to implement a new law that would set a number of restrictions on overseas firms that need H-1B visas to deliver their services. India´s IT Industry is anxious of the solution that U.S. Congress will give.

Less well known are the benefits that a nearshore location, such as Canada or Mexico has to application development. The India-based providers, such as Tata and Infosys recognize the benefits of working in the same time zone. That´s the reason, that Indian companies are moving operations near to U.S. or even in the U.S.

Now, with new tax policies and visa restrictions it looks that India-based firms may have greater difficulty to deliver their IT services. Companies like Infosys Technologies Ltd. (which on March 31 employed 8,900 people in the U.S. with H-1B visas, and 1,400 with L-1 visas, according to U.S. Securities and Exchange Commission filings) has to face this complicated problem. It is estimated that other Indian companies will suffer a huge negative impact as well. It is recognized that some companies are paying less to people with H-B1 visas than what they would have paid to locally hired US employees. Now with the decrease of visas they would need to hire U.S. workers who earn more and require more benefits. The benefits of offshoring could disappear with this new model.

Companies will continue move services offshore, but with the new tax code announcement of U.S. President, it won´t be so easy. Even while the cost of manpower in India rises (find stats and link), the total cost of engagement including taxes will increase the cost of an application software or IT service.

In light of these new restrictions, outsourcing to Latin America, specifically Mexico, looks even more appealing. NAFTA (North American Free Trade Agreement) protect and ensures the safe treaties and relationships between U.S. and Mexico including protection to Intellectual Property and simplifies trade.

Mexico: Competing With India

It is well known India has the biggest slice of the IT cake. How did they get it? It´s easy, Indian software providers know how to take advantage of opportunities. Indian companies have joined various groups and Associations to have a strong presence in the IT world. Reunions, congress, etc. everything where they can gather is an excuse to share ideas, tips, and valuable information about the market. This environment enriches their knowledge and strategies to get into the US business.

Indeed the Indian IT service market is formidable. So can Mexican companies can do the same or better? Mexican software providers have everything to become the next IT hub and even more, the nearshore factor makes them an invaluable place to outsource software development. Mexican software providers only need a little push. If they join more associations, just as Indian companies are doing, they can get more benefits. Sharing ideas and becoming closer are some of the keys to take the control in a competitive and demanding technology world. Is not only about capabilities, this is more about creating connections and alliances that support a strong Mexican IT network.

Even though close geographic proximity between Mexico and US is an advantage, it could become a negative point if Mexican providers don´t use IT to gain more ground. While those doing business with Indian software providers are traveling many hours to meet, Mexican companies seem to be throwing away this opportunity. It´s easy for Mexicans to travel, just one hop is necessary to gather with their clients in the US. Inviting clients to Mexico to show them the place of work is a smart action to let them know the cultural similarities and the well understanding that they will have during the relationship.

All this not bad news. Now is a good time to double the efforts and make their services known to achieve greater success. Mexico has all the advantages; it is only a matter of being aggressive. It´s time to work harder to be better every day.

Outsourcing software development to Mexico: Is it a smart option?

When companies begin seeking to reduce in the cost of web software development, many begin to think of outsourcing, or offshoring, particularly to India. Now, in recent years, many American companies are coming across a new alternative: nearshoring software development in Mexico.

Nowadays, the economic crisis is pushing to companies to cut costs without sacrificing quality for the costumers. When considering the best alternative to cutting costs in software development, outsourcing becomes a smart choice.

More and more, nearshoring software development to Mexico is being recognized as a great option for many reasons (see below).

A good example of these economic pressures is the retail industry in North America. Retailing companies think their business is not just a matter of differentiating products in a crowded market, is also about achieving cost savings while enhancing the operational efficiencies.

Is well known retailers look not only for a provider, but a partner who perfectly understands their needs, bringing the best solutions at the best cost. And it is important to recognize that decreasing costs does not require a decrease in quality in the service or product delivered.

Why they should chose Mexico for nearshoring software development? The close proximity (4-6 hrs by flight), similar time zone (+/-2 hrs), close cultural similarity, and lower cost of labor (30-40% less expensive) are just some of the benefits that Mexico gives to American companies. Moreover, Mexican software providers are always seeking to improve their services in order to not only satisfy but also exceed their customers’ expectations. All this leads to long term profitable partnerships.

Nearshore Development in Mexico

NEARSHORING IN MEXICO

Nearshore is growing rapidly in importance as many are seeking to reduce the risks associated with the offshore model.

Mexico has become one of the most important centers for nearshoring, providing political stability, a defined framework (giving legal and IP Protection), and assuring investor-friendly policies (NAFTA). All these make Mexico an attractive and safe place to outsource software development and testing.

Partnering with Mexican nearshore providers brings many advantages. The same time zone between US and Mexican companies allows the real time collaboration, increasing the productivity and effectiveness of the work delivered. Nearshore application development is cheaper than onshore or remote domestic delivery. There is virtually no language barrier as many Mexicans speak English. Its geographical proximity to the US allows for the reduction of total expenditure in phone communications and air travel. See articles on Total Cost of Engagement.

The nearshore model is being recognized by Indian Companies trying to mitigate the challenges of Asian offshore development. One of the most representative cases is Tata Consultancy Services (TCS), who opened offices in Mexico City in 2003. In 2007 they announced the opening of centers in Guadalajara and later in Querétaro. Recently, they declared the expansion of operations in Querétaro, creating at least 150 new jobs between 2009 and 2012 as part of their strategy to make Mexico the center of their operations for North America, South America and part of Europe.

This clearly shows how valuable Mexico geographical location is and also that is a talent pool to find skillful workforce.