It might surprise newcomers to the region, but regulars know that Mexico has been the top destination for nearshore operations — CoEs, business units, and more — for North America since the 2000s. Seven years ago, Gartner confirmed the country’s leadership in its Evaluating Global Offshore/Nearshore Locations report, citing its large talent pool and hard-to-ignore location. So why does it keep making headlines? And how has Mexico increased its lead over other options in the Americas?
The use of nearshore was already accelerating in the enterprise software ecosystem, then got a big boost when hybrid work appeared — and went into overdrive with the nearshoring phenomenon, which has concentrated in Mexico above all else. On top of that, the cost and risk of opening foreign operations dropped significantly with new soft-landing options. So who is taking advantage, and what are they building?
Nearshore Accelerates
Nearshore is the business strategy where companies locate delivery capabilities in nearby countries rather than offshore locations. Proximity is essential for highly interactive application development projects and business-critical applications — versus routine application management, which is more suited to offshore centers. Competency centers that require same-time-zone collaboration and real-time information exchange get deployed in the region that needs them.
Nearshore adoption accelerated when enterprise software moved to the SaaS model, which enabled mostly remote implementation. System integrators began using cost-efficient nearshore teams that could travel back and forth as needed. Silicon Valley startups looking to extend their runway hired product teams in Mexico — a natural fit for real-time Agile methodologies.
During the pandemic, non-IT companies experimented with remote work and global hiring. They eventually shifted to hybrid models, prioritizing hiring closer to headquarters in regional locations where employees could meet regularly — recognizing the irreplaceable value of face-to-face collaboration.
The Nearshoring Boom
Reshoring — or nearshoring — is the business practice where a company transfers some of its operations or services back to a nearby country. The trend exploded in recent years due to the need to de-risk supply chain disruptions from COVID-19 and the US-China trade tensions.
Mexico, being a neighbor of the world’s largest economy and backed by a trade agreement and existing infrastructure, rapidly benefited. It became the US’s top trading partner — and in 2023, for the first time in decades, the US bought more from Mexico than China. According to Fitch Ratings, Mexico could seize half of total foreign investment inflows into Latin America in the coming years.
It’s not just manufacturing that holds the spotlight. Tech has been equally active. Amazon Web Services announced it will invest over $5 billion in Mexico in February 2024. Microsoft launched its first hyper-scale cloud data center region in Mexico two months later — the first Microsoft data center in Spanish-speaking Latin America. And Google announced the same month it was moving positions to both India and Mexico, one offshore, one nearshore.
Who’s Opening CoEs and Shared Service Centers in Mexico?
Essentially everyone. The usual suspects — large Indian and global IT companies — have been in Mexico for 20 years. But the growth of foreign small-to-midsize companies moving to Mexico has accelerated considerably, due to soft-landing options. Everest Group noted that opening a foreign CoE 15–20 years ago required 1,000–2,000 people; the economics are now down to 30–40.
Strategically located countries have built ecosystems designed to facilitate foreign company entry. Mexico has had the shelter model for nearly 40 years, enabling foreign manufacturers to operate under an existing Mexican corporation — sharing local risk and lowering costs through economies of scale. The IT industry adopted this model to launch operations quickly at any scale, under the Subsidiary-as-a-Service framework.
High-profile announcements like Koch Global Services opening a subsidiary in Guadalajara, or Ascendion’s 1,500-person AI Engineering Center in Monterrey, get media attention. But the quieter wave of smaller foreign operations going unnoticed is equally significant — and may matter more long-term. ISG calls these Micro Capability Centers: scalable, cost-efficient, and well suited for innovation. Mexico’s airports keep growing double digits: Monterrey International expanded its international destinations substantially last year and recorded 22% annual passenger growth.
In Conclusion
Nearshore shows no signs of slowing down, and for small and large tech companies alike, it is becoming an integral part of maintaining competitiveness. Mexico will continue to increase its lead as the prime nearshore option, shifting the question for companies from “where” to “how.” A complex setup and steep learning curve can negate the anticipated cost-efficiency of a new center. In LATAM countries, compliance, operating structures, and labor laws differ from those at home and frequently change.
Keep in mind that the nearshoring trend has boosted foreign investment — but also attracted new vendors eager to join the wave. Amid the media noise, it’s worth remembering this is not new. Manufacturing companies have leveraged soft-landing options for almost 40 years, and that industry prefers vendors with deep local experience across recruitment, international law, taxes, facilities, and government relations. Economies of scale are built through volume and infrastructure developed over time. Tech companies can learn a great deal from how manufacturing has approached this.