The Rise of Mexico in the Nearshore Tech World

Welcome everyone to the Nearshore Cafe podcast. I'm Brian Samson, your host. And if you're interested in how you can start, how you can start breaking into nearshore and using talent from Latin America, this is going to be the episode for you. We're going to get into all the details, the process, the how, the who, the why, and we're going to do this with Plug's president, Ruben Santana. Before we do that, we want to acknowledge, uh, Plug is sponsoring the show. That's plugg.tech. Plug is a great way to connect all the talent from Latin America to growing U.S. companies. Without further ado, Ruben, great to see you again.

Hey, Brian, great to be here again for sure.

All right. Well, Ruben, it's December 2024. Break it down for us. What did that mean? You know, you've been nearshoring for a few years. How was 2024 similar? How was it different from past years?

Yeah, can you believe it? We're already in December. The year has flown by. It's been an interesting year. It's been a productive year. It's been a good year. It's been a good year. And I guess what I would say for this year, it's been— there's been a lot of interest, a lot of interest, a lot of education. If I were to, to kind of label the year, there's been a lot of education, educating companies, clients, potential clients about nearshore, about what's out there, what's happening. There's a lot of movement in Latin America right now when it comes to clients, companies looking for talent. A lot of companies are seeing the benefits, they're seeing the opportunity, and they're moving. They're moving to Latin America. They're looking for resources there. So we're seeing a lot of that. We saw that this year. You know, a lot of interest. Most of the interest that we see from clients has been in Mexico. So a lot of clients call, they want to, they want to see developers, software engineers in Mexico. A lot of it has to do with, uh, time zone alignment. That's something they're, they're very familiar with and would, would like that, as well as the cultural alignment that they feel is there, uh, in Mexico as well. So it's been a very interesting year when it comes to, to what we're seeing in Latin America.

Yeah, so it sounds like an uptick for sure in demand. Um, You know, and when I think about it, it could come from companies that were already offshoring, maybe moving to Latin America, maybe using Eastern Europe, maybe they've never outsourced or offshored before. Are you seeing, you know, movement from like one particular bucket over the other?

No, it seems to be pretty mixed. Although I will tell you, you just mentioned that in Eastern Europe and had a call yesterday for a company that's looking to move a software development center from Kosovo to Mexico. And so we've seen this before, and there's definitely some interest, and most of the interest centers around AI and them putting together a software development shop in Mexico for AI specifically.

So as more demand comes to Latin America, What's the impact of supply? You know, um, a competitor of Latin America is India, which seems to graduate more software engineers than any year than maybe in the entire continent of, of South America. Can Latin America keep up with this?

You know, I believe— I, I think we're going to be fine. I mean, knowing that, you know, Latin America has great universities Many, many of the developers that are working today in Latin America have been working for US clients for many years, and they're continuing to do so. So the talent is there. So far, over the last 2 years, we haven't seen a hard time in being able to identify good talent. We're finding the talent that we need to find for the clients that we're working with, for sure. I do believe that as things begin to loosen up in '25, that that could become an issue. That could become an issue. Demand could be a lot stronger than what we're seeing today.

Any thoughts on the impact of the election that just happened in the US? Is that going to create more opportunities for Latin America, less opportunities?

I think it's going to create more opportunities. That's my opinion. And if the last month or two months are an indicator. I mean, I'm getting calls on a regular basis, whether that be from end clients or staffing companies, consulting companies that are looking for help navigating nearshore, navigating Latin America, asking questions, wanting to know. And some of it is that they want to establish an entity in some of these countries. So educating them about what it takes to do that has been part of what we've been doing over the last several months.

So as we think about this election and for the last 8 years, you know, let's talk about campaign slogans, you know, build a wall, right? I'm going to assume that doesn't really impact the nearshore software development industry or call center or anything else. Can you maybe comment on that?

Yeah, I mean, I'm not seeing any concerns today I think there are some concerns about maybe some laws that might be put in place in some of these countries. But for us, you know, 99% of what we do is contract labor. So it's people that are living in Latin America that are contracting through us for US companies. And so I don't think that's going to be really impacted.

When we have a constrained supply, and it seems like the labor supply should keep up with demand, but anytime you have constrained labor supply, there's an impact on price, right? And there's also the, the other side of that, when you have a more mature market, price becomes a factor because it gets commoditized. Talk to us about those two different pieces of price, you know, when there's more constraint on supply, but also more maturity in the market?

Yeah. So we are seeing— there's no doubt we're seeing rates go up. A lot of the, you know, software engineers in Latin America are being contacted, whether it be from US-based staffing agencies working nearshore, from companies from India or even Indian companies that are here in the US with US clients that are looking for nearshore talent. So we are seeing rates from developers go, go up. And what that's caused is, or what it's— a lot of clients are asking for us to do some deeper dives into some other countries. So we're looking at places like Colombia, places like Peru. So maybe second-tier countries that are now— that have talent, very good talent, that, that companies want to see what, what the difference is in price in some of those, in some of those countries.

Besides price, are there any other trade-offs to consider? You know, like if, if a company was thinking, I'll put them in Lima or I'll put them in Mexico City, you know, what, what are, what are some other things of consequence for them to consider?

I mean, I think a lot of it has to do with, you know, what, what are you looking for to begin with? Uh, certainly education is something that's important. Where are some of the better universities? Uh, as well as where, where we can find an abundance of talent. So if you're looking for a team of people, you know, we may be better off in a more populated country than maybe in a place like, like Peru, for instance, or maybe in Bolivia. Right. The talent is there, but it may not be there in masses to build a full team of people. So it's something to consider. The other thing that we've been— that we've worked a lot over the last couple of years and become pretty well versed in is when it comes to hardware and moving hardware around these different countries. A lot of our clients want, uh, the, the developers to have a new machine that they're working on that they can establish some security with their, with their servers, their networks. And so for that, uh, there's, there's some understanding of what happens in terms of customs and getting machines in and out of those countries. So we've been able to educate, to help find ways and abilities to be able to move equipment around Latin America.

Yeah. Could you go a little more specific? Are there countries that are just flat out easier and countries that are just flat out more difficult to get hardware into?

Yeah. I mean, Mexico by far is the easiest right now to get equipment in and out of. That's, that's not— it's not generally an issue for us. Some of the other countries can be really challenging. Peru, for one, can be challenging trying to get equipment out of the country. The, the amount of money that they charge at customs to taxes to get things out of the country are exorbitant. Brazil can be also challenging. So we're seeing some of that in these countries. Costa Rica is another one that can be challenging, but it's knowing the ins and outs. We have contacts in some of these countries. We have vendors that can help us to be able to move equipment around Latin America, which is very helpful as well.

Yeah, this is really interesting. You know, as, as a market, as a talent market becomes more mature, uh, the myth might be that, uh, there's DIY opportunities, do-it-yourself. You know, if I'm a tech company, I'm thinking, well, you know, I'll just, uh, figure this out. Um, but I guess there's more nuance to it. Um, you know, getting the right machine, figuring out what country to do, how to recruit. You know, are there— you know, do you have any, any thoughts around what a lot of first-time users of nearshore, maybe they, they didn't quite realize?

You know, you're right. There is a lot that goes into it. And it starts, as you mentioned, it starts right from the beginning at the recruiting process. When we start talking to them and building that rapport. All of our recruiters are in Latin America. They speak Spanish. They're from there. They can talk the talk. They understand the issues. They understand tax situations, healthcare situations, and they can have the conversations with these candidates, which is very important in building rapport, obviously, and building trust. So I think that's one of the things that you can't take for granted. Then through the whole interviewing process, being able to instruct them and making sure that they know what's going to take place. It also helps when you've built that rapport with them. After they've been placed and they're on assignment, we do a lot of work in what we call consulting care and just making sure that they're happy in their assignments and that they're enjoying the work they're doing. They're taking care of any issues or challenges they're having. We try to resolve those. As quickly as possible for them. So all those things really matter. The culture in Latin America loves that type of care and feeding, if you will, and it makes a world of difference. And of course, we enjoy it. We love these guys, do a great job for us, and we want to make sure that we reciprocate in that way.

Yeah, I was going to assume that by being able to communicate to them in their native language, they might be more honest and forthcoming about challenges that they're facing.

It is. And we had a case just recently with an individual who had some questions, and it wasn't that he couldn't speak English or couldn't understand English. It's just that he felt better understanding some of the technicalities when it comes to some of the laws, tax situations in Spanish. And that was really the driver that made a big difference in him being able to feel better about the opportunity that he was taking.

Ruben, earlier you talked about companies are not just looking at individuals to hire, but teams. You know, maybe they're moving a team across the world or they're starting a brand new team. Is there any, you know, do you have any stories or anecdotes that you could share about why a company decided to do that? And like, how do they start? You know, what did day one look like for that?

Yeah, and so what we saw this year was a number of companies doing exactly that, building teams out. We had one example of a company that's out in the Philippines that wanted time zone alignment and less attrition. And so because of that, they decided to move their teams over to Mexico. We have, as a company, just this year, we've built 5 Salesforce teams in Mexico. And these teams are put together with a team lead and mid-level Salesforce developers that work together. And that's worked very, very well. As well. That seems to be a very good model that companies are deploying or asking for, and we're certainly able to accommodate that even with the skills such as Salesforce developers and others. We've built a front-end development team, a QA team as well, all in Mexico this past year.

Can you talk more about the process? Like, okay, Ruben, I think I want to put a Salesforce team in Mexico. Like, What's next? How does that happen?

Yeah, so it's, it's, yeah, uh, it's, I mean, understanding the requirements, honest, you know, obviously understanding exactly what they're looking for, uh, good recruiters that know how to find these folks because they're not easy to find, uh, Salesforce developers, whether that be in the US or in Latin America, are not easy to find, especially very good ones. So, so that was, uh, really getting our team really focused on looking for places where we can find them, whether it's people that have you know, had come out of working with U.S.-based companies and have had good solid experience, uh, working directly with our clients and, and setting up the interviews that were necessary to make it— to make that happen and build those teams.

What kind of cost savings, um, and I'd imagine if maybe they're even moving from the Philippines, it might cost more, um, why, why would a company want to do that?

Yeah, I think that's something that a lot of companies have learned that they, they try. I've seen that a lot this year where companies are trying to compare offshore to nearshore. Well, if I just move to nearshore, I'll get the time zone alignment and the same price as I maybe had at offshore. But that's not the case. The fact is that it's going to be a little bit more expensive than it is offshore. That's what we've seen over and over again. But the time zone alignment has been the biggest factor. There's no doubt about it. That has been huge for many different clients. Additionally, I would say, and we've heard this from our clients, is just being able to talk on a daily basis, pick up the phone, and whether you're talking about work or technical issues that you're dealing with, or just wanting to just have conversation, that cultural affinity goes a long way, especially when you're trying to build a team. If you're trying to build 5 Salesforce teams, you want to have some rapport with those developers. You want to be able to talk to them about things that you talk to people in the US about. And so that, you know, building these teams in Latin America really does afford that.

You talked a little about Mexico City. I know you've been to Monterrey countless times, even lived there for a little while. Maybe let's compare these two cities because these, these come up a lot. I'm sure with customers, Mexico City and Monterrey. Why should they choose one or the other, you know, and maybe even your own personal experiences living in these cities?

Yeah, sure. Well, I mean, Mexico City, obviously, I think most people know it's, you know, one of the biggest cities in the world and certainly has the most software engineers in all of Latin America. So there's plenty of talent in Mexico City. We've seen that over and over again. As we look at our pool of consultants in Mexico, the majority of them are in Mexico City. The talent is good, the education is good there, and so we're able to find a good diverse pool of different types of skill sets in Mexico City. You know, next to Mexico City, you know, there's certainly— there's Guadalajara, which is probably the next largest in terms of software engineers, and oftentimes is referred to as the the Silicon Valley of Mexico. And then third would be Monterrey, but Monterrey is growing a lot of, a lot of opportunity there. A lot of, a lot of software engineers in Monterrey that, that are available there as well that have worked for many different US-based companies. All, all those cities are great cities. Personally, for me, you know, we, even though we've spent a lot of time in Monterrey, I love Mexico City. It's got a very unique appeal, especially for somebody from the US. It's really a very cool city.

Yeah, tell us more about that quality of life, restaurants, you know, what did it mean for you?

Yeah, it's an amazing place. My wife and I recently spent some time there. We spent time in places like Polanco, Roma Norte is another place, La Condesa. Those are, those are, are good areas where there's plenty of expats, very international city, people from all over the world that are living there, working there, a lot of digital nomads that are there working in cafes and restaurants or home. So it's a, it's a great city to, to, to be in. There's so much to do when it comes to just, you know, going to the museums. There's so many nice museums in Mexico City. Beautiful parks. The greenery around Mexico City is really spectacular, at least for me it is. It's pretty very, very interesting, very nice. And then restaurants, I mean, you can't go wrong. I mean, some of the best restaurants in Latin America are in Mexico City. And I'm not talking about your, you know, tacos and things that are really about Mexico, but I'm talking about other types of foods, whether that be sushi or whether that be, you know, fish or different types of cuisines. It's got it all. The cafes are amazing. If you're a coffee lover, you'll never run out of places to go to. So yeah, it's very walkable. It's also very safe, very safe, extremely safe in Mexico City. So Yeah, we love it there very much. It's a great place to be, great place to be.

Ruben, earlier you talked about Salesforce being a hot skillset that's needed. What else do you predict for 2025 and beyond? Are there certain types of talent, certain skillsets that are gonna be hotter than others going into the next year?

Yeah, I believe there is, Brian, What I'm seeing so far in companies that are calling us and talking about the possibilities for '25 is a lot of skill sets around data. So whether that be data analysts, data engineers, data scientists, data architects, we're seeing a lot of demand for those types of skill sets for sure. We're seeing a lot of AI, AI engineers, machine learning type folks as well. So I do believe that's going to be, that's going to increase as we go into '25 and see more of that. And of course, all the other skill sets are going to be there. There's still going to be a need for software developers, full stack, front end, back end, those kinds of developers as well.

Talk a little more about AI. And then also, if a company is thinking about using nearshore for AI, is Mexico the place? Would you look at another country? You know, what are some of the considerations?

So right now, what I'm seeing is that for sure, Mexico is a place that we can find AI engineers. There's no doubt that Brazil has got a lot of talent there and a lot of AI engineers as well. Argentina. So all those three larger markets, we're going to see a lot of talent in those cities. But again, it's not to put aside some of the other countries, you know, Colombia or Peru that are going to have talent as well. But again, in terms of groups or teams of people, those three countries are definitely Argentina, Mexico, and Brazil are going to see a lot of that, a lot of that talent for sure.

Well, Ruben, this has been, as always, really interesting. I'm excited for 2025. I think it's going to be a huge year for nearshoring. You're listening to the Nearshore Cafe podcast. I'm your host, Brian Samson. And Ruben, if anybody was interested in learning more about nearshore, how should they get a hold of you?

Ruben@plugg.tech, or, you know, look me up on LinkedIn, please, and give me a shout.

All right. Ruben Santana, president of Plug Technologies. Thanks again for listening to the Nearshore Cafe podcast. We'll see you next time.