Crossing Borders 2

Many of the problems Delphi Mexico's IT group is working on are similar to those IT departments across the United States face. Its 130 projects include rewriting all legacy applications from Cobol to Oracle or Microsoft environments and giving them Web-accessible front ends (EDS is doing the coding), as well as a refresh of all the IT hardware in the 55 Mexico factories. Guevara would also like more automated business processes for running the IT department.

But getting IT work done, particularly on a global basis, isn't always easy in Mexico, where technology innovations arrive a bit slower. Delphi Mexico has no trouble buying hardware or software as soon as it's available in the United States, "but that doesn't mean I can tie them together as effectively as someone in the U.S. can," Guevara says, citing the country's improving, but still lagging, telecommunications infrastructure. And it also takes more management attention to get the performance the company expects from service vendors.

But the advantages can be considerable. First there are salaries, which can be anywhere from 25% to 75% lower than in the United States, depending on the skill and location involved. IT-services outsourcing firms, including the largest Indian companies, have established sizable Mexican operations, so Delphi Mexico gets their lower costs plus the benefit of proximity. EDS, for example, has an outsourcing center in Juarez that's rated level 4 on the Capability Maturity Model, a quality-assessment standard in which 5 is the top level.

Delphi has been manufacturing in Mexico since 1978, and it has built a reputation that lets it recruit from the deep end of the talent pool. Enrique Reza Alba, Guevara's IS&S sector manager responsible for interaction with factories, including this one in Juarez, has a master's degree in computer science and worked for GE Capital in Mexico before coming to Delphi. "We don't have trouble finding people," Guevara says. The most recent proof: He advertised for a position requiring high-level Microsoft certification recently and got 40 applications meeting the qualifications. Guevara finds it harder get someone trained in the very latest technology, but that's not a problem because his group is unlikely to implement brand-new technology, anyway.

Mexico isn't short on technical knowledge beyond IT. Delphi's largest engineering center is in Juarez, serving all seven product divisions and earning 50 U.S. patents since it opened in 1995. And Delphi sometimes exports that talent. The manager of a group of Delphi plants in Germany is Mexican, and several Mexican executives were assigned to get plants in China operational.

Guevara knows his team needs more than lower wages to compete globally in business-technology development. That's why the majority of Delphi Mexico staff have master's degrees, many of which they earned while working for Delphi. About a third of the IS&S staff are taking university-level courses in technology or management, most of them at the Juarez campus of Monterrey's technical university or across the border at the University of Texas-El Paso.

Any country-specific advantage can be fleeting. Today, EDS considers offices in Mexico among its 16 "Best Shore" options for application services--those with the most advantageous mix of factors, including cost, skill, and political stability--among the 93 solution centers where it does business. But EDS's list changes constantly as those factors change, highlighting how complicated global IT sourcing really is. For example, if the political climate becomes less stable in a country, companies need to judge whether the lower costs are worth the increased risk. Guevara experienced that when he ran the Latin American IT services group for Siemens before this job, and he knows what a moving target country-specific advantages can be. "If you follow this industry for 20 years, Brazil was hot, Brazil was cold, Brazil was hot again," he says.

Plant manager Olivas isn't content to rely on a lower-wage advantage over U.S. workers to the north either. U.S. visitors often come to the plant expecting a labor-intensive environment, a factory that substitutes low-cost hands for high-price machines. But the factory is heavily mechanized. There's a wage advantage to being in Mexico, but Olivas doesn't consider it a reliable edge against poorer countries in Latin America or even Asia. "Labor in Mexico is not as cheap as it was," Olivas says. "Labor-intensive jobs are going south."

Instead of leaning on low-cost labor, Olivas looks forward to technological investment that will let his team supercharge the company's lean-manufacturing approach. The factory went live last week with enterprise resource planning software from SAP, part of a phased rollout throughout Delphi. Olivas hopes to use SAP and other technologies to continue squeezing costs out of operations. Even without such tools, workers are experimenting with stocking some manufacturing stations with as little as seven minutes' worth of inventory from a centralized materials station.

With better materials-tracking technology linked to SAP, perhaps even using wireless technology such as radio-frequency identification systems, could it run even tighter? "It's one of those things that you never dreamed might be available to you," Olivas says.

If technology can cut what it costs Olivas to make a radiator, it's not likely to stay a dream for long.

Photographs by David Portnoy/Getty Images