Swine flu latest blow for Mexican offshoring business

Mexico had already been falling out of favor due to border violence, drug-related crime, and concerns its cities are inadequately networked for large-scale contact center work

Mexico, once considered one of the more favorable countries to locate offshore facilities because of its proximity to the U.S. and lack of cultural barriers, has been falling out of favor in the past year due to border violence and drug-related crime. Now add swine flu to that list.

"A lot of businesses in Mexico are temporarily shut down, and IT services is a 24-7 business," says Gartner Research Vice President Frances Karamouzis. "The country also has travel restrictions in place now, which was one of the primary attractions around doing work in Mexico -- the ease of travel. If you can't travel there, that ruins business.

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"College campuses campaign for students not to vacation there and businesses advise employees to limit travel to Mexico," she says. "Now the flu outbreak. None of this bodes well for Mexico as an offshore location."

Also read about how companies are turning to telework in light of the swine flu

This is happening even as Indian vendors are losing market share and establishing facilities elsewhere, such as China, the Philippines, and Eastern Europe. These vendors also might consider Argentina or Vietnam before locating in Mexico now, Karamouzis says.

"Labor rates in Vietnam are about one-third of those in India," she says.

Up until recently industry watchers have argued Mexico would be an ideal location for American companies looking to serve a growing Hispanic market. The linguistic familiarity between contact center agents and end-user callers would be a bonus.

But there have been doubters even before the swine flu emerged. Some have questioned whether Mexico's cities are adequately networked for large-scale contact center work.