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For years, China was considered the leader in outsourcing for companies based in the United States. China had many resources to dedicate to U.S. companies, from manufacturing to IT to customer service. Today, Latin American countries such as Mexico are entering the fray and are becoming a much more viable solution. Here are some of the main advantages that outsourcing to Mexico has over outsourcing to China.
China is quite far from the United States. This presents a number of logistical challenges that are just impossible to ignore. No matter what you’re outsourcing, it will be affected by the fact that China is half a world away.
Shipping from China to the U.S., for instance, will take much longer than it would from Mexico—and it will be much more expensive, too. For comparison’s sake, a container that is 40 feet long might cost $7,000 if you’re shipping from China versus only roughly $2,800 if it’s coming from Mexico. And shipping products from Mexico to the U.S. might take only a day or two.
Even if shipping is not a part of what you do, the time zone differences are important to consider as well. Mexico has the same time zones that the U.S. does, meaning no adjustments need to be made for typical working hours. This can allow for seamless communication and collaboration between your company and outsourcing providers.
Cost of Labor
The significantly lower cost of labor in China was one of the most attractive parts of outsourcing to companies there. Labor costs in China were some of the lowest in the world, offering U.S. companies major opportunities to reduce expenses.
That has changed dramatically. For example, typical labor costs could be as much as 20% lower in Mexico than they are in China, depending on what services you’re outsourcing. Per-hour wages in the IT field, for instance, can range from $21 to $50 in Mexico. In America, these rates range from $33 to $62—providing companies with an average savings of anywhere from 16% to 50%, depending on the particular position.
Financial stability can also be realized by outsourcing to Mexico vs China. Wages are much steadier in Mexico than they are in China, giving companies the ability to predict their labor costs more accurately.
Additionally, the exchange rates between the American dollar and Mexican peso are much more stable than between the dollar and Chinese yuan. This provides more financial stability to the outsourcing process.
One of the biggest concerns of outsourcing to a foreign country is the security of a company’s data. Any time you outsource, you must trust your valuable information and data to another company in another country. That can be a scary proposition.
In recent years, there have been examples of intellectual property theft by companies in China that have been devastating to American businesses. Not only have there been many recent examples of counterfeit products and services in China, but the courts there don’t often do much to stop the practice from happening.
Conversely, Mexico is known for protecting other companies’ rights to intellectual property. This fact can help U.S. business owners sleep soundly at night, knowing their private and valuable data is less likely to be stolen.
Trade & Relationships
The U.S. does not have the greatest trade relationship with China at the moment. This fact can make outsourcing to China a risky proposition. It seems that at any moment in time, China could make a decision that could dramatically affect American companies’ ability to outsource to China—even if they’re already in the process of doing so. Such an overnight decision could instantly increase costs and barriers to getting work done in China.
Mexico and the United States, however, do have a great trade relationship. The United States-Mexico-Canada Trade Agreement, also known as the USMCA, is an example of how both countries are committed to working together.
Mexico is also recognized as one of the most favorable countries for trading internationally. They have 12 trade agreements with 44 different countries that provide for preferential trade access. This means that outsourcing to Mexico opens up your business to endless possibilities of international trade.
Mexico has invested heavily into education and training in recent years, producing a highly skilled and capable workforce. Mexico has more than 13,000 computer science graduates each year, ranking them sixth overall in the world. There are 120 universities in the country, and 65,000 students graduate with an IT degree every year. The overall workforce in the country is younger and very motivated to succeed. China’s workforce, meanwhile, is getting much older and isn’t as motivated as they were at one time.
So many aspects of life in Mexico are connected to the United States, since they are so close to each other. As such, many people in the country speak English very well. It is taught as the second language in most schools throughout the country from a young age.
Beyond school learning, many Mexicans are in tune with the culture and colloquialisms of the United States. This means that Mexican workers understand the nuances and less formal aspects of English, which can help U.S. consumers feel less “foreign” when they’re interacting with Mexican workers.
In China, there are many potential barriers to communication that can hamper business quite substantially.
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