Mexico is the preferred destination for software outsourcing in the USA. But Mexico is made of more than 30 states, and they’re not all equal when it comes to mastering technology. As the world’s biggest city, DF stands as an heavyweight. But a few hundred miles West of the Trans-Mexican Volcanic Belt stands Guadalajara, capital of the state of Jalisco, and runner-up against DF for the leadership in the country’s new tech economy.
Guadalajara stands on the southern border of the famous region that produces Tequila, but it took more than a few shots to get the tech economy rolling in Jalisco. Historically launched to support the Silicon Valley boom of the 1960s, the Jaliscan tech sector grew so big over the years that Guadalajara is now a major digital hub of Latin America. From manufacturing semiconductors in arid areas to building Latin America’s most dynamic smart city, here’s the unique story of the new tech state of Jalisco.
Silicon Valley-Jalisco: The origins of technology offshoring
Historically, the state of Jalisco is the first technology outsourcing destination chosen by the big makers of semiconductors of the Silicon Valley. As early as the 1960s, the IBM-like players were attracted by Jalisco’s education level, affordability, and government subsidies. Deals were sealed and Jalisco became the first externalized production center of the Silicon Valley.
In the 1990s, the Mexican government and IBM led a joint project to set up a PC design center in Jalisco. The Monterrey Institute of Technology opened its Guadalajara campus. The NAFTA treaty facilitated US-Mexico bilateral trades. Intel chose Guadalajara to establish its only Latin American research lab which, built atop the city’s western hills, houses 1500 employees and produces an average of 25 patents every year.
This being said, up until the early 2000s, the state of Jalisco was mainly focused on manufactured hardware and semiconductors, and when China entered the WTO in 2001, it shook Jalisco’s traditional technology sector. A new tech economy had to be developed to remain competitive.
Creating a Jaliscan tech ecosystem
Guadalajara is the capital of higher education in Western Mexico. During the 1990s, the management of the major foreign tech companies in Jalisco shifted: More Mexicans were admitted at higher management and executive levels, and tech companies worked more closely with local universities to frame the output of tech graduates that would come to lead US subsidiaries in Jalisco. The state of Jalisco manages 13 universities that produce 85K tech graduates every year. 57% of the tech staff hired in Guadalajara is local, and only 4% are foreigners. «Talent is the new oil» says Cindy Blanco, manager of Startup Guadalajara.
In the early 2010s, a firm called Mexican VC started to invest seed funds in various Jalisco-based startups. In a snowball effect, Jalisco became a major hotspot for startup funding and development. Between 2014 and 2017, $120 million was invested in 300 Jalisco-based startups: Sunu, VoxFeed, Espiral, WePow, Kueski, BillPocket, Aspiria, Volabit, #digitt, 100Ladrillos, … The city counts 60 animation studios and at least 100 advertising and PR agencies focused on digital animation. The city became so new tech that the founder of SpaceX Elon Musk chose Guadalajara to announce his plan to colonize Mars in September 2016.
The state is weathering its new tech boom under full sail: In November 2012, the city of Guadalajara introduced its major project to become a smart city, Ciudad Creativa Digital (CDD). In 2018, the government of Jalisco launched Jalisconnect, a new policy to favor tech entrepreneurship with full support on setting a remote office and team in Guadalajara. Jalisco also launched recently the Tech Visa program to give residential-like rights to entrepreneurs going through the Jalisconnect program. The more the state of Jalisco gets virtual, the more its tech economy gets real.
Nearshoring for the USA
Nearshoring from the USA to Mexico is becoming a preferred destination for software offshoring since US companies set proximity as their second priority after cost-efficiency in their quests for the best software outsourcer. In 2016, the state of Jalisco exported $21 billion worth of tech products and services, almost half of the state’s total exports that same year ($47,3 million). «We want tech companies to know there is a huge opportunity for them to grow», said Jalisco governor Aristóteles Sandoval in a February 2017 issue of USA Today, calling Guadalajara the “Creatopolis of Mexico”.
iTexico is a software development company with offices in the Silicon Valley and Guadalajara. From 2011 to 2017, iTexico invested $18 million in the development of their offices in Guadalajara, expanded as far as Aguascalientes, and hired as much as 120 employees in 5 years. According to its CEO Guillermo Ortega, «It’s easy to attract [new hires] to the city because it’s just a great area of Mexico.» Rémi Vespa opened Blue Trail Software in Tepatitlan de Morelos, serving companies such as Samsung and Ring. He first feared that a remote location such as Tepatitlan would drive away top talents preferring large urban settings, but experienced none of it : «The motto of the city of Tepatitlan is ‘Its treasure is its people’, and it’s simply true. Outsourcing technology to Jalisco is seamless.» Bismarck Lepe bet twice on Guadalajara: once in 2009 to successfully develop his startup Ooyala, and later in 2014 with the launch of Wizeline, which already hires 300 employees in Guadalajara, its main development center: «It’s not only the talented people that are there, but the ones we can attract to live there.»
Are you an entrepreneur with experience in outsourcing technology to Jalisco? If so, please share your experience in the comments below.