Why US companies are hiring IT talent in nearshore locations - Part 1: the opportunity

In case you didn’t already know, we’re in the midst of a tech talent crisis.

It isn’t a recent development but an issue that has been threatening to cause shockwaves in the tech industry for several years now.

Fortunately, there are several ways to address the talent shortage, one of which is hiring IT talent abroad. To mitigate time zone-related issues and communication problems, outsourcing to nearshore development teams is becoming a popular strategy among tech firms in the fields of fintech, healthcare, and insurance.

In the US, neighboring countries Canada and Mexico stand out as two of the best nearshore destinations, and in this guide, we’ll explore why that is.

We’ll also talk you through some of the main reasons why US companies are looking to establish nearshore IT talent teams and why you should consider it too.

Facing the tech talent shortage in the United States 

IT and product development companies in industries such as fintech, healthcare, and insurance face stiff competition to attract the best talent in the field, and there are some concerning figures emerging to back this up. For example, a global survey carried out by McKinsey & Company showed that 87% of organizations are struggling to hire talent or will be in the next few years.

With no end in sight, companies are seeking alternative options to sourcing the best tech talent.

Why has this become such a crippling issue in the tech industry?

For one, the restrictions on visas introduced by the Trump administration have limited the capacity of US-based companies to hire the best workers from the global talent pool. With all the complications of setting up in the States, it’s no surprise that few are willing to make the leap.

In neighboring Canada, however, the opposite is true: tech talent is flocking to the country, as it welcomes tech talent from all over the world with open arms. 

As such, the US’s strict immigration policy has inadvertently driven any tech talent that would have perhaps considered working in the States to instead head north to Canada’s shores.

Another possible reason for the tech talent crisis is the rapid adoption of new technologies, which has taken place across a range of industries. The impact of digital transformation was already notable once companies like Kodak and Blockbuster, who failed to adapt to the changing times, were replaced with online platforms Instagram and Netflix.

As such, the workforce can’t keep up and is lagging behind, which has led to a dramatic shortage of qualified tech workers in the United States.

Mexico and Canada: the nearshore opportunity

It isn’t just Canada that’s become a magnet for tech talent, though, but the US’s other neighbor, Mexico, too.

As such, both countries are prime candidates for outsourcing work to nearshore teams.

Why Mexico?

According to the 2021 Global Services Location Index published by global management consulting firm Kearney, Mexico, alongside other Latin American nations, ranks highly. The Index measures factors such as financial attractiveness and digital resonance, which is a metric scoring the countries based on digital skill sets and outputs of the workforce. Mexico has a strong culture of training talent in various fields, which creates a talent pool that both the US and Canada can tap into to bolster their open tech positions. 

Kearney expects that in the long term, trade between the two nations will only increase, in no small part due to the United States-Mexico-Canada Agreement (USMCA).

The USMCA, which was updated during the Trump administration, was first put into place in 2020 to protect US IPs, create a level playing field for American workers, and bring about a healthy trade relationship between Canada, Mexico, and the US.

The growth of tech talent in Mexico and Canada 

Both Mexico and Canada have seen a rise in tech talent in recent years, which can be attributed to several factors - some more obvious than others.

Let’s take a look at why the two nations have been able to cultivate more tech talent and why they’re good options for nearshore outsourcing for US-based companies:

Mexico

One of the biggest reasons why Mexico has been able to produce outstanding tech talent over the years is due to its top universities, which rank highly in the whole of Latin America for the subject of computer science.

The University of Guadalajara, the Technology Institute of Sonora, and the Tec Milenio are among these institutions.

In addition, the GDP in Latin America has enjoyed a steady growth rate in the past few years and is set to grow another 5.9% in 2021. Of course, the COVID-19 pandemic hit the region hard like so many others, but the recent trend towards growth is encouraging and makes Mexico a potential gold mine for tech talent in the coming years.

Canada

As mentioned earlier, Canada has benefited from the US’s strict immigration policy and visa limitations in recent years, which has led to an overall increase in tech talent north of the border.

The statistics back this up, with one tech talent report demonstrating that the big Canadian cities like Toronto, Vancouver, and Montreal are climbing up the rankings in terms of tech talent gained. The CBRE 2021 Scoring Tech Talent report also shows that Toronto occupies the 4th spot of top markets for tech talent and investment.

This is promising news for US companies who are keen to outsource nearshore teams as it shows that Canada is growing its tech talent pools significantly, and has plenty of tech-related opportunities on offer. When a lot of tech talent graduates are heading to Canadian cities instead of sticking around in the US, you have to pay attention, and hiring nearshore talent is one of the best ways to capitalize on this trend.

Stay tuned for part 2 of this article series.