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Mexico's Tech Startups Look To Overcome Barriers To Growth

Jun 18, 2013
Originally published on June 18, 2013 6:18 pm

In the past decade, Mexico's tech industry has flourished, growing three times faster than the global average. Most of that growth has been fueled by demand from the United States. But as Mexico's startups strive to make it in foreign markets, they say they need more engineers and ways to finance their growth.

Softtek, Mexico's biggest technology services company, spans four continents and provides software support to a client base that includes Fortune 500 companies. The business sector is growing rapidly in Mexico, thanks in large part to the country's proximity to the United States.

"I think it's safe to say that without the U.S., the Mexico market would not be doing very well," says Morgan Yeates, an analyst with the IT consulting firm Gartner.

A Focus On The U.S. Market

Yeates says three-quarters of Mexico's tech services are focused on the U.S. and large, global companies — such as Wal-Mart or Coca-Cola — that need help managing massive computer databases. For years, India and China have been the main providers, but that's changing.

"More and more partnerships are happening between the U.S. and Mexico," Yeates says.

U.S. companies tend to mesh better with Mexican providers. Time zones are more compatible, and Mexico is better able to serve a growing Hispanic market within the United States.

But it's not all about IT support and services. It's also about creating original software. Publish 88 is one of many tech startups popping up across Mexico. The company licenses software to print publishers seeking a multimedia presence.

"Our first office, 16 years ago, was a table in an apartment of a friend," says co-founder Enrique Lima.

Now, its office is a rented house located in a quiet, residential neighborhood in Monterrey, Mexico's northern industrial hub. After only a year, Publish 88 already has the Mexican versions of National Geographic and Cosmopolitan magazines as clients.

"Publish 88 is an incredible example of what you can do if you set yourself to your goals and you plan, and you work hard," says Emilio Arriaga, the company's chief financial officer.

A Need For Engineers And Capital

But while big Mexican companies like Softtek are doing business with big corporations worldwide, it's a lot tougher for smaller startups like Publish 88 to score foreign clients. There's no version of Silicon Valley in Mexico — at least, not yet. The country still thirsts for innovation, and no one knows that better than Guillermo Safa, a 40-year veteran of the industry here.

"We are driving with our hand brake on," says Safa, who directs an IT business alliance in Monterrey.

Safa says Mexico has important challenges to overcome. "Human capital is one challenge," he says. Most engineering graduates in Mexico end up in the manufacturing sector. The other challenge, he says, is financing. Mexico's banks are not small-business friendly. However, a bill meant to reform the banking system is currently making its way through the Mexican Congress.

Meanwhile, Mexican universities are nurturing the country's future entrepreneurs. At the Tec de Monterrey's interactive study center, bright colors, foosball tables and trampolines are all part of an atmosphere meant to stimulate ideas. It works for freshman Rodrigo Medina.

"I'm working on an app that helps you to find objects that you don't remember where you left them," including car keys, wallets and cellphones, Medina says, adding that he hopes to start his own business when he graduates.

Medina's success will be determined, in part, by how much support he gets from his own country.

Mónica Ortiz Uribe is a correspondent for Fronteras, a collaboration of seven public radio stations focusing on the U.S. Southwestern border with Mexico and changing demographics.

Copyright 2013 KJZZ-FM. To see more, visit http://kjzz.org/.

Transcript

MELISSA BLOCK, HOST:

Mexico is making its mark in the tech sector. In the last decade, Mexico's tech industry grew three times faster than the global average. Most of that growth is fueled by demand from the United States. To keep the expansion going, experts say it will take financial and education reform in Mexico.

Here's Monica Ortiz Uribe from member station KJZZ.

(SOUNDBITE OF MUSIC)

MONICA ORTIZ URIBE, BYLINE: The star of the tech world in Mexico is this woman.

BLANCA TREVINO: (Foreign language spoken)

URIBE: Blanca Trevino is the CEO of Softtek, Mexico's biggest technology service company. Here she speaks on video for Mexico's Forbes magazine. Softtek spans four continents, providing software support to clients that include Fortune 500 companies. It's a business sector that's rapidly growing in Mexico, thanks in large part to its proximity to the United States.

MORGAN YEATES: I think it's safe to say that without the U.S., the Mexico market would not be doing very well.

URIBE: Morgan Yeates is an analyst with the IT consulting firm Gartner. He says three-quarters of Mexico's tech services is for the United States. That is large global companies like Wal-Mart or Coca-Cola that need help managing massive computer databases. For years, India and China have been the main providers but that's changing.

YEATES: More and more partnerships are happening between the U.S. and Mexico.

URIBE: U.S. companies tend to mesh better with Mexican providers. Time zones are more compatible and Mexico is better able to serve the growing Hispanic market within the U.S.

(SOUNDBITE OF MUSIC)

URIBE: But it's not all about IT support and services. It's also about creating original software. This song was embedded into an app for an alternative newspaper using software developed by a Mexican startup called Publish 88. It's one of many tech startups popping up across Mexico. Enrique Lima is the co-founder.

ENRIQUE LIMA: Our first office, 16 years ago, was a table in an apartment of a friend.

URIBE: Now their office is a rented house within a quiet residential neighborhood in Monterrey, Mexico's northern industrial hub. Publish 88 licenses software to print publishers that want a multimedia presence. After only a year, Publish 88 already has clients like the Mexico editions of National Geographic magazine and Cosmopolitan. Emilio Arriaga is the startup's chief financial officer.

EMILIO ARRIAGA: Publish 88 is an incredible example of what you can do if you set yourself to your goals and you plan and you work hard.

URIBE: But while big Mexican companies like Softtek are doing business with big corporations worldwide, it's a lot tougher for small startups like Publish 88 to score foreign clients. There's no version of Silicon Valley in Mexico, at least not yet. The country still thirsts for innovation. No one knows that better than Guillermo Safa, a 40-year veteran of the industry here.

GUILLERMO SAFA: (Spanish spoken)

URIBE: We are driving with our hand break on, he says. Safa directs an IT business alliance in Monterrey. He says, Mexico has important challenges to overcome.

SAFA: (Spanish spoken)

URIBE: Human capital is one challenge, Safa says. Most engineering graduates in Mexico end up in the manufacturing sector. The other challenge, he says, is financing. Mexico's banks are not small-business friendly. That said, a bill meant to reform the banking system is currently making its way through the Mexican Congress.

Meanwhile, Mexican universities like the Tec de Monterrey are nurturing the country's future entrepreneurs. At this interactive study center you'll find bright colors, foosball tables and trampolines, all part of an atmosphere meant to stimulate ideas. It works for freshman Rodrigo Medina.

RODRIGO MEDINA: Well, I'm working on an app that helps you to find objects that you don't remember where you left them.

URIBE: Like your car keys.

MEDINA: Exactly. Your car keys, the wallet, the cell phone.

URIBE: Medina hopes to start his own business when he graduates. His success will be determined in part by how much support he gets from his own country. For NPR News, I'm Monica Ortiz Uribe.

BLOCK: That story from Fronteras, a public radio collaboration in the Southwest that focuses on the border and changing demographics. Transcript provided by NPR, Copyright NPR.