Daria Spizheva

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Picking the Perfect Nearshoring Spot: Colombia or Mexico?

Updated on January 25, 2024

Hiring, Scaling

👍 Rating — 5 (7 votes)

As the world of technology continues to forge towards an incessantly connected future, sourcing top-quality tech talent has become an intricate chess game for many businesses. Among the various strategic moves on the board, the practice of ‘nearshoring,’ outsourcing work to countries that are relatively close in proximity, has gained exceptional acclamation.

Entrepreneurs, startup owners, and technological moguls are incessantly analyzing Latin America for the ideal nearshoring destination. Today, my crosshairs are trained on two potent spots brimming with promise—Colombia and Mexico. I’ve been busy behind the scenes, nerding out on the latest stats and insights, and doing a deep-dive into these two standout contestants.

In this post, I will put these two Latin American powerhouses under the microscope and delve into their unique strengths and weaknesses within the tech sphere. Despite their geographical proximity and cultural affinities, Colombia and Mexico offer very distinct landscapes for nearshoring operations. Brace yourself as we embark on this journey to discover which one of these countries could steal the nearshoring crown – or sombrero, if you prefer! Let’s dive in, shall we start with Colombia?

Colombia Overview

Advantages

Ready to explore software development in Colombia? The home of vibrant salsa rhythms, tantalizing coffee, and — as it turns out — a thriving tech scene that’s growing faster than you can say “nearshoring”. This South American nation is stepping into the spotlight as one of the best countries for nearshoring, attracting tech businesses, foreign investors, and tech companies alike. Now that you have the general lay of the land, let’s look at why this Latin American heartthrob country is stealing hearts and why companies across the world are eyeing it for business processes and back-office services.

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Highly skilled workforce: Colombia has a large pool of English-speaking workers with technical skills and expertise in various fields, making it an attractive destination for nearshoring in the technology and service sectors. With a flourishing tech scene in cities like Bogota, and with digital transformation taking place across the country, the local pool of software developers is expanding, fueled by a high level of English proficiency.
Favorable business environment: Colombia has a stable economy, fiscal policies, legal security, and investment guarantees that have allowed the country to stand out among other economies in the region. And did I mention the Colombian government's support of free trade zones? It's like the tech sector hit the government support jackpot!
Reduced costs: Nearshoring to Colombia is like shopping at a high-end store and finding everything on sale. The relatively low costs here are a magnet for North American companies, giving them the advantage of top-tier services for lower costs. If you're looking for cost efficiency, Colombia offers a lower-cost alternative compared to many other regions.
Time zone proximity: With its GMT-5 time zone, it's like they're our next-door neighbors. Forget China, India, or other outsourcing locations from around the globe, the proximity to the USA makes communication and collaboration easier without burning the midnight oil.
Cultural alignment and strong economic ties to the US: Despite cultural differences, there are significant cultural similarities between Colombia and its North American business counterparts, making it easier to work together and understand each other's needs. And let's not forget the free trade agreements that further foster this collaboration.
Vast pool of highly educated talent: Colombia has been splurging on infrastructure and education. With 30 top universities, they've got a deep talent pool that would make any recruiter swoon. The Colombian peso also goes a long way in providing numerous additional educational opportunities.

In a nutshell, if you’re looking to nearshore, Colombia could be your perfect match. It’s got the skills, the support, the time zone, the culture, the talent… and did I mention the coffee? If this sounds like your kind of party, Colombia might be the nearshoring dance partner you’ve been looking for!

Drawbacks

Let’s switch gears and look at the flip side of the nearshoring coin. Don’t worry, it’s not all doom and gloom, but every coin has two sides, and this one’s no exception.

First off, language barriers. Now, Colombia’s got a sizable English-speaking population, but sometimes it’s more like a cha-cha with a few missteps.

And, let’s talk experience. Colombia is a recent entrant to the nearshoring market, and some companies may have limited experience working with Colombian partners. As TurnKey is already working with many other countries, we dove deep into Colombia’s legislation and tax systems. Add to that our hands-on experience dealing with local developers and let me assure you: Colombia is 100% ready for nearshoring software development!

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Finally, let’s talk security. Colombia has a reputation for high crime rates and security concerns continue growing, which can impact the safety of clients, employees and the security of a company and business operations.

So, just remember – while Colombia is one heck of an attractive nearshoring option, it’s like a spicy salsa dance: thrilling, but it does come with its own set of twirls and dips. It’s important to have your eyes open to potential challenges like language barriers, limited experience, infrastructure issues, and security concerns.

Now let’s shift our attention to the other side of this dynamic duo, Mexico.

Mexico Overview

Advantages

Let’s pay a virtual nearshoring visit to Mexico, another Latin American gem that is continuously attracting companies for nearshoring. Mexico, like Colombia, offers many benefits to American tech companies, looking to streamline their business processes and back office services. Mexico has got a pool of English-speaking, tech-savvy workers that would make any nearshoring venture a fiesta. Think of it like having your very own tech mariachi band in the same GMT, ready to perform software development symphonies!

Overall, Mexico is another heavyweight contender in the nearshoring ring. And no, it’s not just because they’re neighbors with the U.S. or because of the geographical proximity to tech hubs. Check out these 6 advantages:

Proximity to the US: First, there's the "next-door neighbor" perk. With Mexico being so close to the U.S., it makes everything easier and faster, from travel to communication and collaboration. This results in potential cost savings and happier customers, making it an attractive market for nearshoring.
Cost savings: Mexico offers low labor costs, which can help growing technology companies reduce their expenses. Compared to other offshore locations such as China or India, Mexico, just like Colombia, provides a lower-cost alternative.
Time zone alignment: Mexico is in the same time zone as the US, making coordinating and working hours with teams easier. It's like your teams are just a hallway apart, not separated by an international border!
Beneficial trade conditions: Mexico has a good reputation for protecting intellectual property, and goods imported from Mexico can enter the US duty-free thanks to the North American Free Trade Agreement (NAFTA). This advantageous free trade agreement furthers the collaboration between Mexican and North American companies.
Availability of talented workforce: Mexico has a large pool of English-speaking workers with technical skills and expertise in various fields, including information technology, making it an attractive destination for nearshoring services. These software developers are contributing to Mexico's digital transformation.
Developed industrial sector: Mexico has a well-developed industrial sector, which can provide companies with access to advanced manufacturing capabilities and technologies.

So, to sum it up, nearshoring to Mexico offers benefits galore: geographical proximity, cost savings, time zone alignment, free trade agreements, perks, a talented workforce, advanced industry, and convenience. Sounds like a nearshoring party waiting to happen, doesn’t it?

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Drawbacks

Now that we’ve talked up the fiesta that nearshoring in Mexico can be, it’s time to look at the flip side of the tortilla. Here’s the straight tequila, no chaser.

First off, language can be a communication barrier. While many tech whizzes in Mexico could probably argue Star Trek theories in English, there can still be hiccups. Remember, perfect English doesn’t always equate to perfect communication!

Cultural differences also come into play. Yes, Mexico shares a lot of cultural similarities and traits with the U.S., but remember, it’s a whole different world of enchiladas and mariachis. So, keep in mind that collaboration could require a salsa lesson or two.

Despite Mexico being an old hand in the nearshoring outsourcing game, some nearshoring companies might still be fresh off the boat. Limited experience working with Mexican partners could be a challenge.

Lastly, administrative costs. You know those annoying fees and expenses related to taxes and local government regulations compliance? Yep, Mexico has them too.

But if this small list of potential headaches concerns you, I’ve got great news.

What if I told you that you won’t have to manage these hassles, as TurnKey has come up with the perfect solution? Our Rest Easy! Promise guarantees all the headaches are on our side. Keep reading for a real-world example of what I am talking about (yes, I promise it’s that easy!)

Who’s up for a little show and tell? This Client, with $215.9M of funding, 70 million downloads, and who’s on the list of the top 50 companies for their industry, entrusted building their CoE in Mexico to us (can you guess who I’m talking about?) Here’s what they had to say about the way we work:

TurnKey was able to build out the first team in under two months of working with Headspace. The talent was overwhelmingly positive. We were surprised at the quality of the engineers TurnKey was able to find and the speed with which they were able to find them.

Headspace

It’s clear to me that Nearshoring software technology development to Mexico comes with its fair share of both maracas and sombreros (benefits and lower cost) and spicy jalapeños (drawbacks). I suggest companies eyeing Mexico for their nearshoring weigh all the factors when considering the location.

So now that all the cards are on the table, you might be wondering how does Mexico stack up with Colombia?

Colombia vs Mexico: Key Comparisons

Okay, let’s put these two contenders in the ring and see who’s going to be the heavyweight champion.

	Colombia	Mexico
Labor Pool	Large, skilled tech personnel	Even larger, mature tech industry
Cost	Competitive ( 0,000-$30,000)	Slightly higher ( 5,000-$40,000)
Advantages	Strong tech scene, time zone compatibility	Proximity to the U.S., strong English proficiency
Drawbacks	English proficiency, complex regulation	Security concerns, bureaucratic processes

Colombia or Mexico: Making Your Choice

It’s a tough call, isn’t it? Both Colombia and Mexico offer your startup’s unique strengths and challenges. Your choice ultimately depends on what factors are most critical to your business – whether it’s cost, language proficiency, time zone, or proximity to your headquarters.

Need help to weigh your options?

Through our work helping U.S. tech companies nearshore their software development to Latin America, we’ve gained significant experience and expertise. We’ve dedicated considerable time and effort to understand the legal frameworks of conducting business in these countries, which culminated in comprehensive legal guides. These guides cover all aspects of business, from employment laws to complex trade agreements, equipping our clients with the knowledge to navigate the local legal landscape confidently.

Beyond our legal expertise, we have a track record of helping companies recruit the best senior software developers quickly and cost-effectively. By leveraging our understanding of the tech talent market in Latin America, we can help your company make the most informed nearshoring decision, whether you’re considering Colombia’s vibrant tech scene or Mexico’s mature tech industry. We’re committed to ensuring that your choice perfectly aligns with your business goals and strategic needs.

Key Takeaways

In summary, when comparing Colombia and Mexico for nearshoring, both countries could be considered among the best countries for your choice. If you’re looking for a vibrant, growing tech scene with cost-competitive skilled labor and an environment that continues to support digital transformation, then Colombia might just dance its way to the top of your list. However, if a large, mature tech industry, strong English proficiency, and geographical proximity to the U.S. top your list, you should tilt towards Mexico. Both these nations of Latin America offer unique advantages to North American businesses looking for nearshoring services.

Remember, there’s no one-size-fits-all solution in nearshoring. Your perfect fit depends on your unique business needs and strategic goals, be it software development or business processes. Whether it’s the attraction of lower costs or the lure benefit of the perfect time zone that makes collaboration easier, each country offers a unique market advantage. I hope this brief comparison of Colombia vs Mexico for nearshoring, coupled with the specifics of each country in South America, helps light the path to your decision!

July 18, 2023

TurnKey Staffing provides information for general guidance only and does not offer legal, tax, or accounting advice. We encourage you to consult with professional advisors before making any decision or taking any action that may affect your business or legal rights.

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