Case study Mexico

Subsecretaría de Industria y Comercio

Mexico’s Public Policy to Develop the IT-ITES Sector

  CLAUDIA IVETTE GARCÍA ROMERO   Director General for Domestic Commerce and Digital Economy   [email protected]   Tel. 52296100 Ext 34100   SUBSECRETARIA DE INDUSTRIA Y COMERCIO May 19 2011


Agenda

1.   Diagnosis of Mexican economy

2.  Fostering the development of the IT-ITES

Sector

3.  Main National Initiatives

4.  PROSOFT Grants Found

5.  Conclusions


Gross Domestic Product 2010 (billons of usd)

Nowadays Mexico is the 14 largest Economy in the world. According to recent forecasts from PricewaterhouseCoopers and HSBC Global Research, it is estimated that towards 2050 Mexico will be ranked as the 7th or 8th Economy, over countries such as France, Italy, Canada, Spain and Australia.

Mexico is the 14 largest economy in the world


Overachieving all expectations, the Mexican economy grew in a rate of 5.5% during 2010 showing the greatest dynamism over the last 10 years, fostered mainly by commerce which registered a growth rate of 13.3% and manufacture industry with a rate of 9.9%.

GDP of Mexico (anual growth %)

Mexico is in an expansion phase, the GDP reached a growth of 5.5%


From 2010 to 2011, the investment of infrastructure in Mexico shows a growth of 77%, thanks to this, more than 15 thousand kilometers of highways have been modernized.

Infrastructure investment (thousands of millions of pesos 2011)

Mexico shows an increase of 77% in infrastructure investment


Agenda

1.  Diagnosis of Mexican economy

2.   Fostering the development of the IT-ITES

Sector



5.  Conclusions

Subsecretaría de Industria y Comercio 1. The Economist Intelligence Unit), 2 IMCO; 3. McKinsey y London School of Economics) ; 4: Gartner

GDP1 IT’siscapableofraisingGDPupto5%

Countrycompe33veness2 Thereisaposi8vecorrela8onof92%betweentheadop8onofIT‐ITESandthecompe88venessofna8ons

Enterpriseproduc3vity3 TheuseofIT‐ITESalongwithhighlevelbusinessprac8cescanincreaseupto20%enterpriseproduc8vity

Knowledgeeconomy Knowledgeeconomyofferstheopportunityofcompensa8ngthedisadvantagesincosts,migra8ngtovalueaddedservices

Salariesandeconomicshed ITsectorsalariesare3to58meshigherthanmanufacturingsalaries

WhyfosteringthedevelopmentoftheIT‐ITESsector?


At international level we can observe a positive correlation between the information technologies and the economic performance of economies.

¿Why thinking about Information Technologies?

Suiza

México

2.00

3.00

4.00

5.00

6.00

7.00

3 3.5 4 4.5 5 5.5 6 6.5 7

Com

petit

iven

ess

inde

x

Use of IT

Corelation between the use of IT and the competitiveness of economies

Source: World Economic Forum. Networked Readiness Index 2010 y Global Competitiveness Index 2010.

Switzerland


Size of the global IT market

36%

64%

Global IT outsourcing market United States Rest of the world

Source: Gartner 2011, A.T. Kearney Global Location Index, 2011

The ICT global market for 2011 it’s estimated to be 3.6 TUSD •  Approximately 25% of that total is produced through outsourcing •  IT services and software represent 50% of the total expense

0 0.5

1 1.5

2 2.5

3 3.5

4 4.5

Global IT market

2009 2014


High competitiveness and impact sectors

(Attract investment and industry development)

• Manufacture of transport equipment.

• Manufacture of machinery and equipment.

• Manufacture of electric and electronic devises.

• Miner (excluding petroleum and gas).

•  Business Process Outsourcing.

•  Food industry. • Health services •  Tourism.

Development of local market (Continue to promote it’s

sane development)

• Commerce • Housing •  Financial services

Develop of entrepreneurs and professionals

(Promotion for the creation of new enterprises)

•  Agriculture, fruits and flowers.

•  Physical devices, Software •  Investigation and

development services (I + D)

•  Architecture, engineering and design services

• Music, movies, radio and television

Envi

ronm

enta

l Sus

tain

abilit

y (C

lean

tech

nolo

gies

)

Development platforms (Assure the development of platforms through the adequate regulation, bigger competition and investment)

1.Infrastructure 2.Telecomunications 3.Educational services

IT services are considered an strategic sector for Mexico


•  Human Capital volume •  Geographical location •  Government support •  Software industry

maturity •  Alignment of efforts

S Positive

loca

l

Positive

Fore

ign

Mexcio´s IT Sector - SWOT

o •  Local market potential growth •  Trade Agreements •  Entrepreneurial culture •  Development of high

expertise services supply

W Inte

rno

Negativos

T •  Local market

articulation •  Quality of Human

capital •  Industry – academic

links •  Financing for

industries

•  New players •  Foreign financial crisis •  Human Capital leeks •  Mexico’s international image •  Commercial policy in •  Protectionist commertial policy

in international market sectors •  Continuity of strategies

loca

l

Fore

ign

Negative Negative


2002 2006 2008 2010 2012

PROSOFT Launch:

Public policy

PROSOFT Grants Fund

Deployment platform

Productive chain

consolidation

PROSOFT 2.0

Innovation and

technology development

World class

player

10 Year Vision

2004


Exports and investment

Human Capital

Legal framework

IT use diffusion

Productivity & Innovation

Standards and Marturity (Quality)

Funding access

•  15,000 MUSD

Production level

•  2.3% TI/PIB

IT Market

•  Latin American Leader

Awareness

•  625,000

Employment

Long Term National Public Policy - PROSOFT 2.0


Human Capital

•  Mexico FIRST •  IT Talent •  Labor standards

Investments and exports

•  Mexico IT •  IT Link

Productivity & Innovation

•  Clusters •  Innovation •  IT Technology

Roadmap •  Technology

parks

Maturity and Quality

•  MoProSoft •  PSP/TSP

initiative

Financing

•  PROSOFT fund

• Warranty fund •  Risk Capital

IT use diffusion

•  IT user projects • Government

purchase power

•  Trust seal for electronic commerce

Legal framework

•  Personal data Protection Law

•  Homologation framework

•  NOM 151 – Data messages safeguard

PROSOFT 2.0: Strategies and impact tools


2,785 enterprises 27 IT Clusters 90,000 annual

graduates

600,000 employees

303 centers with quality levels 24 IT parks

5% annual rotation

IT/GDP expense =1.7

4.15 BUSD exports

Mexico’s IT Industry Profile


IT services exports

•  In 2010, Mexico’s IT exports were 38% of it’s production, with an estimated growth rate of 16.6% for 2011.

Fuentes: (1) Gartner, (2) Estimación, Elaboración propia con datos de Atkearney y Select

5.00 5.82 6.34 5.90 6.72

1.99 2.51

3.16 3.72 4.15

0

2

4

6

8

10

12

2006 2007 2008 2009 2010

Local market and IT + BPO exports (BUSD)

Mercado Interno Exportaciones

1% 13%

19% 14%


2002 2011 Compa

nies 2095 2785

0

500

1000

1500

2000

2500

3000

IT Companies

2002 2011 States 4 32

0

5

10

15

20

25

30

35

States

2002

2011

Growth Rate -1% 13%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Growth Rate

2002 2011 IT-BPO Exports 200 4,150

0

500

1000

1500

2000

2500

3000

3500

4000

4500

IT-BPO Exports

Achievements (1/2)


2002 2011 Quality Certifie

d Centers

4 303

0

50

100

150

200

250

300

350

Quality Certified Centers

2002 2011 IT

Clusters 0 27

0

5

10

15

20

25

30

IT Clusters

2002 2011 IT

Parks 0 24

0

5

10

15

20

25

30

IT Parks

2002

2011

Graduates 65,000 90,000

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Cience&Tech Graduates

Achievements (2/2)


Mexico in the global market

Analyst Recognition on MEXICO Gartner Mexico ranks as the fourth largest producer of IT services,

after India, the Philippines and China Gartner Mexico is the only Latin American country to obtain a rating

of "very good" in the evaluation of cost, when other countries had achieved only "good"

AT Kearney

Mexico is ranked 6 in the Global Services Location Index 2011, being the first country in North America, this is due to the availability of human capital and financial attractiveness (costs)

KPMG Mexico is the most competitive location for the activities of Software Design, Back Office / Call Centers, Web and Multimedia.


Mexico’s position in the global IT market México occuppies the 6 position in the Global Services Location Index 2011, beeing the first country of North America, this thanks to the disponibility of Human Capital and its finantial atractiveness (costs).

6


Cost comparisson with other countries

•  According to KPMG1, Mexico is the most competitive location for activities

such as software design, back office / call centers, web building and

multimedia.

Fuente: (1) Elaboración propia con datos de Competitive Alternatives, KPMG 2010

53.4

31.7 34.1

4 12.1 11.2 0

10 20 30 40 50 60

Back Office / Call Centers

Diseño de Software Web y multimedia

Saving percentaje regarding operating in the U.S.

México (lugar 1) Canadá (lugar 2)


Type Satisfaction (%) 2008 Sameshore 82.4 Nearshore 81.5

Outsourcing 61.1 Offshoring 33.3

Customersa3sfac3onofITServices

Fuente:TheStateofOutsourcingIndustryReport2008,BrownWilson

•  Customers of the companies offering IT services are more satisfied when they are working by companies relatively close (proximity and time zone)

•  Therefore Mexico is the ideal supplier to markets such as USA, Canada and Latin America.

Location and customer satisfaction


Agenda



Sector

3.  Main National Initiatives


5.  Conclusions


MEXICO FIRST

•  Objective: Accelerate the availability of human capital with International Skills to proved IT and BPO services globally.

•  Catalog includes more than 200 options of International Certifications •  39% average discount on Commercial List Price •  Goal per year: 12,000 certifications


MEXICO FIRST: Achivements

* cumulative figures per year

3,690 5,800

15,198

1,500

7,500

15,000

2008 2009 2010

Number of certifications Vs. Goal*

Certifications

Goal


MEXICO FIRST – 2011

Indicators Technology Business English TOTAL Training persons 11,060 2,667 1,428 15,155

Certified persons 7,348 2,133 0 9,481

RESOURCES (MXP)

Project SE IP TOTAL

Technical $ 102,000,000 $ 189,429,719 $ 291,429,719

English and Softskills

$ 30,000,000 $ 55,716,470 $ 85,716,470

TOTAL $ 132,000,000 $245,146,189 $377,146,189


IT Clusters Analysis of competitiveness

Maturity and Competitiveness

Fuente: Estudio de Competitividad de Clusters, 2008

Objetive


Certification methods to evaluate the performance of companies:

302 IT Firms with Quality certifications

MEXICO 50% EUA

34%

JAPON 8%

INGLATERR

A 2%

INDIA 2%

CHINA 1%

EGIPTO

1%

AUSTRALIA

1% CORE

A 1%

Chart Title

Worldwide First place in PSP Certified Developers

•  Objective:To Accelerate the process to achieve higher levels of quality through high-performance people and high performance teams

TSP/PSP National initiative

Certifications in Quality


ü  The IT Roadmap is a planning tool with the participation of representatives from

industry, academy and government, whose purpose to develop Mexico’s Global

Expertise

Actions

Players

Milestones

What, where, value, where?

Vertical Expertise

Electric –Electronic Aerospace Automotive Medical Devices

Vision

Mexico as a leading player in advanced manufacturing automation IT solutions

IT Roadmap


Electric –Electronic Automotive Medical Devices Aerospace

•  The industry expects growth of 12.5% annually through 2013.

R&D Centeres: • General Motors • Chrysler • Delphi technical Center

Global Exports §  2° TV´S §  2° Refrigerate and

Freezer. §  3° Cell Phones

•  It´s estimated that by 2014 the market value reaching 9.760 md, which would mean an annual growth of 9.9%

•  Tenth global exporter of medical equipment in 2009.

Ninth aerospace industry supplier of U.S. (2009), and the sixth in the European Union (2008).

80%

10% 10%

Manufactura MRO Ingeniería e I&D

Aerospace enterprises by activity(%)

IT Roadmap

Global IT spending in the manufacturing sector for 2011 is estimated at 446.6 BUSD


2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

21 3

3 axes 3 axes 4 axes

Goal: Mexico as a leading player in advanced manufacturing automation IT solutions

ITRoadmapforadvancedmanufacturing(Model)

Communication Strategy

Supp

ly &

Dem

and

Surv

ey

6 projects

5 projects

4 projects

Axe

s

Act

ions

M

ilest

one

s

Supp

ly &

Dem

and

Surv

ey


Agenda



Sector


4.   PROSOFT Grants Found

5.  Conclusions


General ojective: Contribute to the development of the information technologies sector, seeking it’s growth in the long term in Mexico favouring international competition.

Specific objectives a)  Promote exports and investment attraction. b)  Raise the quantity and quality of Human Capital. c)  Promote the adoption of a legal framework that contributes use and

production of IT. d)  Foster the approach between IT users with enterprises from the IT

sector located in the country. e)  Create a broad base of enterprises and IT sector groups, and at the

same time raise their competitivity. f)  Promote the enterprises achievements regarding international

levels of process capacity. g)  Raise the options and possibilities of access to financial resources

for the IT sector.

Fondo PROSOFT


2011 Federal Budget: 677 million MXP

Año 2004 2005 2006 2007 2008 2009 2010 Totales

PROSOFT 139.70 192.49 428.61 438.24 631.98 525.09 624.94 2,981.05

States 42.49 108.03 232.94 283.75 414.12 306.90 297.55 1,685.78

Enterprises 60.42 366.91 763.78 831.81 1,022.51 904.21 951.14 4,900.78

Academy 3.46 13.32 14.62 60.29 125.37 9.28 5.35 231.69 Others 3.45 72.99 31.57 85.56 104.12 8.64 - 306.33

Total 249.52 753.75 1,471.52 1,692.53 2,344.11 1,754.12 1,878.98 10,144.53

Projects 68 181 334 487 494 360 160 2,084

PROSOFT Fund 2004-2010 (Million MXP)


PROSOFT Grants Fund: Simplified supports distribution process

Target entities

Intern mechanism of operation of Promoting organisms

DGCIED analizes and sends feedback

Executive Board resolution

Approoved projects

IT enterprises Universities IT Users Banks

Sign Agreement with beneficiaries

Payments to the beneficiaries through the PO’s

Procesess


1.  Training and certification 2.  Technological equipment 3.  Enterprise quality certifications 4.  Use of IT and related services 5.  Innovation 6.  Commercialization 7.  Studies 8.  Professional services 9.  Events 10. Creation and strengthening of

financing mechanism 11. Acceleration of public policy

Beneficiary 50% Federal

Entity 25%

PROSOFT 25%

Project investment

PROSOFT Grants Fund: support areas and investment

Basic mix of contributions


Rela3veimportanceofexpenseareaswithinthePROSOFTgrantsfund

PROSOFT grants fund. Relative importance of expense areas

Training

Technological equipment and fitting

Profesional services

Events

Use of IT and interlinked services


Parametric model

The score of the different variables, and the integrated score of every support application will help the executive board to prioritize the projets in it’s aprobation process.


Element

Is it found in the project?

Si=1 No=0

Value adjustment

Final value

Innovation 0.200

Certifications of Human Capital

0.150

Specialized jobs created 0.150

Productive project 0.100

Organizational certifications

0.100

Promoting Organism investment

0.100

IT users projects 0.075

Successful continuity 0.075

Academy – Industry linked projects

0.050

Sum (total score) (value 0 and 1)

X Score calculation


Element

Is it found on the project?

Si=1 No=0

Value adjustment

Final Value

Strategic vocation 0.50 Strategic action 0.50 Sum (total points) (value

between 0 and 1)


Element

Is it found in the project?

Si=1 No=0

Value adjustment

Final Value

Is the project linked to the World Bank project

0.40

Industry projects 0.35 Strategic vocation 0.25 Sum (total points) (value

between 0 and 1)


Agenda



Sector



5.   Conclusions


1.  The global outsourcing market of IT services continues to grow, and Mexico has the qualifications and potential to increase it’s share in such market, where today it competes strongly.

2.  The efforts and strategies on the years to come will be focused on the specialization in strategic subsectors that could foster the country’s positioning among the global supply.

3.  Mexico seeks to cooperate in regional strategies that would allow to foster international practices through the use of the IT personal data protection, investments in the productive sectors, Knowledge transfer and investments.

Concluding Remarks


Mexico’s Public Policy to Develop the IT-ITES Sector

  CLAUDIA IVETTE GARCÍA ROMERO   Director General for Domestic Commerce and Digital Economy   [email protected]   Tel. 52296100 Ext 34100   SUBSECRETARIA DE INDUSTRIA Y COMERCIO May 19 2011

Case study Mexico

Business

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