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Why Mexico Is Your Best Choice for Outsourcing Your Software Development

Posted by Steven Lopez
Aug 9, 2016 9:56:24 AM

Why Mexico Is Your Best Choice for Outsourcing Your Software Development

The United States is currently experiencing a significant talent gap in the science, technology, engineering and mathematics (STEM) fields. The wage gap between the U.S. and Mexico is even greater, making Mexico an ideal outsourcing location for U.S. businesses. This gap is especially wide in the STEM fields, in which Mexican university graduates earn one-fourth of the salary of their counterparts in second-tier U.S. cities who don’t even have a college degree. Furthermore, Mexico is producing STEM graduates at a higher rate per capita than the U.S., reducing the competition between recruiters. Mexico is therefore becoming an attractive option for nearshore software development.

Talent Gap

The work of STEM leaders is largely responsible for the U.S.’s position as a global leader. However, the U.S. Department of Education (DOE) reports that this position is now being threatened because of the relatively small number of U.S. students who are pursuing an education in the STEM fields. Only about one-sixth of high school seniors in the U.S. are interested in a STEM career, and only about half of the college students who pursue a college major in a STEM field actually end up working in such a field. Additionally, the pipeline of teachers in STEM fields is inadequate to support these students.

David Williams, director of organizational development at Quanta Services, was recently interviewed by Nearshore Americas about the STEM talent gap in the U.S. Williams, formerly the global manager of talent acquisition at FMC Technologies, said, “The short answer is yes, there is a shortage of STEM talent.” He added that many people would refute his answer if he said “no,” and many businesses would agree with him if he said “yes.” Williams went on to discuss the more important question of what to do with the talent that is available. He also said, “We have to completely retrain [STEM talent] anyway because of the niche services and disciplines that we require.”

President Barack Obama added $170 million to the 2015 budget to provide funding for STEM initiatives and increase the number of teachers and students in these fields. Nevertheless, the talent gap in the U.S. continues to advance as technological advances create a greater demand for STEM talent in almost every industry.

A 2012 U.S. Congress Joint Committee report on STEM education noted that the global economy has increased the requirement for workers with STEM skills. It also reported this trend applies to fields that don’t traditionally require STEM talent because of the general diffusion of technology that’s occurring in all industries. This report also added that technological innovation improves the position of industries in the U.S. by driving the growth of exports and high-quality jobs.

Mexico’s Performance

U.S. Senator Bob Casey, a Democrat from Pennsylvania, reported in a 2012 Joint Committee report, “while the U.S. produces by far the greatest number of STEM degree recipients among OECD countries (348,484 in 2008), adjusting for the overall number of degrees and for the population paints a different picture.” This report goes on to say that in 2008 the United States had 1,472 STEM graduates for every 100,000 employees between the ages of 25 and 34. In comparison, Mexico had 1,085 STEM graduates per 100,000 employees in this age range in 2008, which is an average figure, according to the Organisation for Economic Co-operation and Development (OECD). However, about 25 percent of the bachelor-level graduates in Mexico were in STEM fields in 2008, compared to 15 percent in the United States for that same year.

The Washington Post reported in 2012 that 130,000 engineering and technical students were graduating from universities and specialized high schools in Mexico every year. This number is greater than the annual number of STEM graduates in many other countries with larger populations, including Brazil, Canada and Germany. The Mexican government built 140 institutions of higher learning from 2006 to 2012, with 120 of those dedicated to STEM fields. Ninety-six other public campuses were also expanded during this period. However, the number of Mexican engineers only increased from 1.1 million to 1.3 million, primarily due to the limited number of STEM jobs available in Mexico.

STEM Salaries

Mexico’s Department of Labor and Social Welfare conducted a study in 2013 that showed aviation and marine transport engineers had the highest starting salaries, at an average of about 191,000 pesos (US$14,370) per year. Physicists, ecologists and environmental engineers start out at about 187,000 pesos (US$14,068) per year, while the annual starting salaries for biomedicine graduates are 147,000 pesos (US$11,021) and 141,000 pesos (US$10,584) for math graduates.

In comparison, a 2013 study by the Brookings Institute shows that the starting salaries of non-degreed STEM workers in second-tier U.S. cities is about four times higher than college graduates in Mexico. For example, the average starting salary in 2013 of a STEM worker without a degree in Bridgeport, Connecticut was about $62,092 per year. Equivalent salaries in other second-tier cities were $44,851 for Tulsa, Oklahoma, and $48,353 for Wichita, Kansas. Another 2013 study from Burning Glass Technologies showed that the U.S. national average salary was $47,856 per year for non-degreed STEM workers and $66,123 per year for degreed STEM employees, which is nearly five times the highest starting salary available to STEM graduates in Mexico.

Geographic location generally affects a STEM professional’s salary in the U.S., although the industrial sector typically plays a much larger role. However, a cost-of-living raise may increase salary expectations, especially when moving from a second-tier city to a first-tier city. Similarly, a U.S. employer should be able to offer STEM graduates in Mexico a competitive salary in addition to paying for a work visa. Furthermore, the wage gap between the two countries also provides plenty of opportunity for future salary increases.

A 2014 study by Forbes shows that the most lucrative STEM careers in Mexico are in robotics, with starting salaries averaging about 360,000 pesos (US$27,074) per year. These salaries typically increase to about 1.2 million pesos ($90,247) a year after 20 years in that industry. Software developers start at around 300,000 pesos ($22,562) a year, which increases to about 960,000 pesos ($72,197) per year, plus bonuses, after 15 years. These salaries are high by Mexican standards, although they’re well below that of their counterparts in the U.S. For example, the Forbes study shows that the average salary for a non-degreed software designer in San Francisco is greater than that of a software designer in Mexico with a degree and 15 years of experience in that country.

Software engineering outsourcing talent from Mexico can incur additional costs such as work visas, but so can recruiting software engineers in the United States. The competition for STEM workers is so fierce in the United States that employers must routinely offer additional incentives. Adecco, a human resources consulting company, reports that large high-tech companies frequently provide benefits such as free meals and unlimited sick days to tempt new hires.

Tiempo Development allows a company to employ highly skilled workers at an affordable rate, thus maximizing efficiency during a software engineering outsourcing project. Nearshore software development may also provide additional benefits to the traditional offshore outsourcing model. Find out more about outsourcing software development by contacting Tiempo today.

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