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Hola, México, ta-ta India

7 June 2007

I wasn’t sure exactly why I’d bookmarked this item from Commercial Property News, but in a way, I’m glad I did:

May 23, 2007
By Barbra Murray, Contributing Editor

San Francisco’s AMB Property Corp. has made a major purchase in Guadalajara, Mexico. The industrial real estate company acquired a 1.2 million-square-foot industrial campus in a sale-leaseback deal with the sole occupant of the property, a leading global technology company.

I was wondering who was moving to Guadalajara, and the answer, in this morning’s International Herald Tribune, surprised me:

Tata Consultancy Service, India’s largest computer-services provider, plans to hire 5,000 workers in Mexico in the next five years as salaries climb in the company’s home market.

A software-development center in the Mexican city of Guadalajara that opened last week is starting with about 300 employees handling tasks done in India at the moment…

Wage costs at Indian software companies like Tata Consultancy have risen as global rivals including International Business Machines hire more engineers in India. A strengthening rupee is also crimping profit at these Indian companies, which get more than half of sales from the United States….

Salaries in Mexico are about 30 percent higher than in India, and about 40 percent to 50 percent lower than in the United States, where Tata Consultancy employs about 12,000 people, Rozman said. Having software programmers in Mexico allows Tata Consultancy to serve U.S. customers more quickly because they work in the same time zone, making travel to clients for support less time consuming, he said.

What’s going on? India isn’t the go-to place for engineers and geeks?

Apparently not. Michael Backman, writing for The Age (Melbourne Australia), questions whether our perception of India as teeming with engineers and scientists isn’t based on a false perception:

Indian Government figures estimate that India spends just $US406 ($A487.50) on higher education per student, but that China spends $US2728.

Seven Indian institutes of technology (IITs) sit at the apex of the education pyramid. Set up in the 1960s, they turn out world-class graduates. But even today, annual new enrolments in the IITs is limited to 1250 places at the first degree level and about the same number for post-graduate level.

These numbers are infinitesimal given India’s billion-plus population. What of the other 11 million or so students in about 18,000 other colleges and universities?

They face substantially inferior training that is reliant on passive note-taking and holds few opportunities for team work, creativity, debate and discussion.

Many of those in this second tier of education are capable of undertaking the studies at the IITs and miss out because so few places are on offer.

This two-tier system almost deliberately locks millions of Indian students into an inferior education system so the seven IITs can look good.

In other words, there’s only so many geeks to go around, and between the ones that emigrate (giving us the false perception that everyone from India is either a scientist or a motel owner), and Tata has just about exhausted the pool of available mid-level geeks. And, salaries aren’t the only factor in business services.

Tata is not looking for the top of the top of the engineering field, but that in India, they were able to recruit these people. It’s just that they can’t find enough engineers. With a billion people, India has a huge supply of top notch people, of course. But, the two-tiered system meant that there was a limited supply of more than qualified people, and a huge pool of less-than qualified people. With no “qualified” middle available. So… off to egalitarian Mexico.

In Mexico, the “everybody else” are more than adequate. Mexico has its elite engineering schools (ITAM is one of the best in the world), too, but it’s higher education has been more egalitarian and, Mexico is not a “developing country”, but a middle-class one. I’ve always said that if it wasn’t next door to an extremely rich country, you wouldn’t hear people calling it a “third world shithole” (mostly said by people who’ve never been in third-world shitholes, or even poorer parts of the United States).

If India was next to the United States, the rare Mexican you met would be a professor or businessman. And, you’d have Indian gardeners, farm workers and construction workers. And the construction worker might be an engineer .

And what’s the harm in a lot more jobs for Mexican engineers? Customer service and most programming jobs don’t require hiring the most brilliant people, just smart and educated ones. Which Mexico has. And, if the customer service guy on the end of the other line is named Carlos and not Ashok, do you really care? (One job I took on in Mexico City was helping with recruitment of English-speakers for a call-center.  We did some research on this, and U.S.-based callers PREFER Carlos to Ashok … the telephone connections between the U.S. and Mexico are a lot less “overseas sounding” than from the U.S. to India, and folks in Iowa or Pennsylvania assume Carlos is somewhere they can fathom, like Florida or Texas).

A second thought about this. Buried in the New York Times article on the Senate Immigration Bill debate is this:

While senators struggled with the complex legislation, which calls for the biggest changes in immigration policy since 1986, executives from high-tech companies descended on Capitol Hill to express concerns.

Steven A. Ballmer, the chief executive of Microsoft, was among the businessmen pleading with Congress to increase the number of H-1B visas and green cards available to skilled foreign professionals. Ginny Terzano, a spokeswoman for Microsoft, said such visas were urgently needed to help meet “a talent crisis” in the industry.

Mexico has benefited from stupidity in U.S. immigration policy in the past. The Chinese in the 1880s and 90s, Spaniards and Jews in the 1930s and 40s, and the Arabs throughout the 20th century, may not have thought of Mexico as the land of golden opportunity, but it was a place that let them thrive — and the country was immensely better off for their contributions.

If the top-notch engineers and scientists can’t come to the U.S., and Microsoft isn’t going to send their executives to “some third world shithole” there is a fall-back position for them. What’s a few more gringos? Maybe one of them will be named Bill Gates.

4 Comments leave one →
  1. 7 June 2007 11:05 am

    The tech industry in Guadalajara is bouncing back quite nicely. For some outfits, having the production a short flight away is more convenient – and prone to fewer glitches – than outsourcing to China. Guadalajara still needs to do more; a 24-hour customs port would help. Some strange taxes penalize the plants here for keeping too big an inventory of spare parts. The future’s looking a lot brighter than five years ago, though.

  2. Sandra Munoz permalink
    26 June 2007 9:31 pm

    Nortel, the Canadian telecom giant, has also set its foot in Mexico and following a similar trend.

    There were thousands of people in the US kicked out by this “strategy”. They were basically teaching us how to do their jobs knowing they were of no use anymore, when we demostrated we were capable of managing (without expensive training or much ado) and took their place.

    The conference calls were not the friendliest.

    I just wonder how much time will pass before any other country offers savings of 0.000003% and all the big companies will flee – again.

    PS: it hurts when you realize your home country is called “third world shithole”. Yes.

    It hurts.

    How incredibly ignorant and disrespectful.

  3. 13 February 2008 12:36 pm

    In this rare and global world the opposite way is also happening. A middle size IT mexican-outsourcing company (SOFTTEK) is opening offices in India.

    We have on Guadalajara another companies, like Perot Systems and many global manufacturing industries are “insourcing” the IT services from here – like HP, Flextronics or Sanmina-SCI.

    About the life quality, Guadalajara is still a good place for living (even with its problems of a “middle class” countries, as you said). These companies are making the IT jobs’ salaries a little more competitive because we have more places to work.

    And congratulations.. this is an excellent blog!

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