Guadalajara is now an outpost for Indian IT firms

Tapping into the close cultural proximity.
Tapping into the close cultural proximity.
Image: Getty/Scott Heavey
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IT businesses with roots in India are moving closer to their US customers by way of Mexico.

Mexico shares time zones and language with the US, and another significant draw for Indian companies: culture.

“Culture is not something you can sell,” said Carlos Cevallos, the associate vice president of iGate, an IT and business process outsourcing company. “Though we are close culturally to the US.”

While iGate has its headquarters in the US, its major operations are based in India, and it’s now operating out of Guadalajara, the second largest city in Mexico.

In the wake of the housing crisis, the company had partnered with a US mortgage collections firm. While handling those collections calls from India, iGate found it needed Spanish speakers as well as English speakers because homeowners in that demographic had also fallen behind in their mortgage payments.

For that reason, iGate found itself looking to Mexico to hire workers to help handle the contract.

In Guadalajara—a city that’s long been called Mexico’s “Silicon Valley”—there are currently five major Indian IT companies with a significant presence, according to the IT business chamber. While the number isn’t staggering, it’s worth noting that such companies only started looking to Mexico within the past seven years. One of the companies, Tata Consultancy Services, has quickly grown to employ 1,500 people and is looking to add more workers.

Luis Dávalos Barba, who manages Guadalajara’s Software Center, said he’s been in contact with several Indian companies in recent months that are interested in locating their operations in the city. The Software Center—a 112,000-square-foot facility that houses about 40 local, national and international high-tech companies—is run by Jalisco’s Institute of Information Technology, a public-private partnership called IJALTI. At the moment, the software center doesn’t have any available space for a prospective Indian company but does want to attract them to Jalisco, the western Mexican state that includes Guadalajara. So the organization fields their question and provides them with information about the region.

“They ask if we have qualified engineers and if they speak English,” Dávalos Barba said. To that end, Guadalajara has made efforts to create a sufficiently talented workforce both technically and with respect to language.

Any Indian companies looking to operate in Guadalajara are doing so to serve the US market. “They are analyzing Guadalajara as a place to sell products in the US,” Dávalos Barba said.

The tech landscape in Guadalajara began with a focus on electronics manufacturing.

That started to change in the late 1990s as competition from low-cost manufacturers located in China increased. Those in the sector realized Guadalajara would have to broaden its focus to include software production and information technology to remain competitive in coming years.

Now with an increased focus on IT and electronics, the sector added 4,000 jobs in the first half of 2013, and is expected to add another 3,000 in the second, bringing a total of 105,000 workers (link in Spanish) to the industry in Jalisco, according to area’s IT and electronic production chain (links in Spanish) chambers.

By the time Mexico entered the market, India had already built a reputation for its strength in IT and software development. Mexico can’t compete with the country in terms of labor cost, so the better approach is to learn how to work with Indian companies looking to expand their global operations, Cevallos said.

Given the tough competition in the IT industry in India, many firms have begun looking to grow abroad. Companies interested in landing closer to their North American customers began to consider Mexico because labor costs in the United States and Canada are too high. In manufacturing, hourly compensation was more than $35 per hour in the US and Canada compared to $6.48 in Mexico in 2011, according to numbers from the Bureau of Labor Statistics (pdf). Places like Guadalajara, which already had a high-tech ecosystem in place with links to many US companies, emerged as attractive options, especially with some added government incentives.

And while Cevallos emphasized that culture isn’t something a business can put a price on—Indian IT companies are nonetheless seeing its value.