Colombia: a Service Delivery Destination to have on your radar

Latin America is rapidly becoming a promisingSource: EIU Worldwide Cost of Living Survey,
alternative offshoring destination.  Up until now India,Ministerio de Minas y Energía; Comisión para la
China and the Philippines have been in the limelight butIntegración Eléctrica Regional
as these markets are reaching maturity, Latin 
American is become a viable alternative option with aTable summarises overall cost compared to main
wealth of choice for  companies choosing to movelocations in the region.
their operations offshore. Even though the region is 
well explored with the likes of Accenture, IBM,1=less expensive; 6= most expensive
Capgemini etc having a presence in various countries 
here, there are still well kept secrets, like Colombia.Inflation is another benefit Colombia offers. Inflation is a
 key factor in the projection of cost in your business
Over the last few decades negative publicity aboutcase. Colombia, unlike other offshoring locations in
guerrilla, drug cartels and high crime rates has slowedplaces such as Asia, has managed to control inflation
down investments from corporate companies in theand additional control mechanisms were put in place in
country and has been limited and has impacted on its1999 to ensure there is no big fluctuation in the
ranking as a service delivery location. However, duringindicator. This allows having a more realistic cost
Alvaro Uribe’s presidential period, security andestimate in the long term.
crime rates have improved significantly. Today, 
countries such as Brazil and Mexico are ranked evenCultural Similarity: North America has a history of
more dangerous and risky destinations. This hasstrongly influenced countries in Latin America, which
allowed Colombia to get back in business and hasgives them plenty of cultural similarities. Additionally, a
contributed to a positive development in thehigh number of Colombians migrated to US and
country’s economy and political stability.European countries to acquire higher educational
 degrees and job opportunities.  They travelled to
  these countries to avoid the local economic crisis and
- In 2009, Bogotá was ranked byhigh unemployment rates the country suffered in the
AméricaEconomia magazine as the 6th (out of 50)late 90’s. Many have now returned and have
top cities to do business in Latin Americabrought with them not only greater skills and
- Doing Business 2009 ranked Colombia as the 2ndexperience, but some of the cultural similarities that
best “Business Friendly” in Latin America (Chileplay a key factor on business relationships. These
being the first).cultural similarities help improve the business strategy
- Foreign investments has increased by 400% sinceand communication between the retained organization
2002 and Banco de La República registered theand the outsourcer.
highest record of foreign investment in 2008 (US$ 
10,564 millions).Talent pool: With a total population of 45 million,
- During the last 5 year the economy has grown overColombia has 18 million people with an average age
4% every year.of 27 years, the largest after Brazil and Mexico.
- Business week rated in 2007 Colombia as the mostAccording to the World Competitiveness Report
extreme merging market(2005), they have the second best skilled group in
- Merril Lynch  ranked Colombia in 2008 asmathematics and science education. This makes
“Country with the lowest risk in the world in timesColombia popular and full of potential for the IT sector
of crisis”and has allowed it to grow in the software market up
 to the point of becoming one of the largest sectors in
 Latin America. It has over 3000 software development
Outsourcing market in Colombiacompanies and has an average of 17,000 professional
 graduates a year in technology and engineering. There
So what about Outsourcing in Colombia? In the lastare many universities within the main cities and the
few years outsourcing has seen a huge developmentconstant economic crisis Colombia has suffered over
and now plays an important role in the country’sthe last decades has made the working market
economy, obtaining significant revenue figures. Theextremely competitive. Professional graduates are
sector has grown 42% in BPO and just over 12% in ITgetting masters and post graduates degrees just after
services in the last three years. BPO servicescompleting their college courses just to maintain their
achieved revenues of US$ 430 million in 2004 and ITcompetitive position within their sector. This has not
services reached revenue of US$ 650 millions in 2004only improved the labour skills, but has made
(almost doubled compared to 2003) and projectionuniversities and other education facilities to invest in
made by Business Software Alliance (BSA) predictsnew and high quality programmes. Today, Colombia
revenues of US$ 1,153 millions in 2009.has 26 schools registered in SAT “Resourcing
 Test” which allows them to enter universities in the
Well known global BPO service providers such as IBM,US, 19 schools that provides graduates with
EDS and Accenture, have already placed operations inInternational Baccalaureate Organization (IBO) that
Colombia. Also European suppliers, such Transcomallows access to the best universities world wide and
Emerigia and Unísono, have entered the market.3 universities ranked in the top 30 universities in Latin
Unísono alone invested in 2008 US$ 3 million inAmerica.
setting up a free trade zone in Bogotá where they 
provide BPO, telemarketing and consultancy services.In terms of language skills, Colombia holds a good level
But not only the big players play an important role inof English speakers and posses a neutral accent that
the Colombian market, also a wide variety of localallows them to assimilate other Spanish accents, ideal
suppliers such as InterSoft, Gattaca, Colgrabar, amongfor call centre services.
others, are growing within the sector and are highly 
qualified to deliver outsourcingGovernment support: President Alvaro Uribe
services.         announced last May in VI Congreso Andino de Call
 Centers, Contact Centers y CRM, held in Bogotá, that
What does Colombia have to offer?Colombian government is working to encourage
 further development of BPO and ITO services in the
Colombia is geographically well located, allowing easycountry.  They recognise this will provide a strategic
and fast access to US based customers and to otherapproach to deal with the impact of the global financial
Latin American countries. Similar time zones to the UScrisis. Even though the Government’s support
also provides great advantages in managing andspecific to the BPO/ITO sector is not very clear yet, is
monitoring operations. Some of the key advantagessomething to keep an eye open for. However, today
are listed below:there are already several investments incentives in
 place that are bringing the attention of foreign
Costs: Colombia offers a significant cost reduction toinvestors, such as:
European and US based companies. As shown in the¨        Free trade zones with 50% off
table below, in terms of labour savings just behindIncome Tax and sales to the local market.
Argentina, Colombia is the location with the most¨        Tax incentives to encourage
favourable cost benefits in the region. A BPO/callinvestments in IT, through law 788 of 2002. This law
centre agent costs on average US$ 447/month (5.292establishes a 10-year income tax exemption to
US$/year) and IT service and development agent ancompanies that invest in software development with
average of US$ 11.500/year. Other key cost such ashigh Colombian content, made and patented in the
real estate and communications are nearly the lowestcountry.
compare to other main locations within the region. Also¨        3 to 20 years Legal Stability Contracts
the privatization of utilities companies has allowed awith the Colombian Government for investments
significant cost reduction and an increase in the qualitystaring at US$1,5 millions.
of the services.¨        Income Tax Deductible Expenses
           (100% of the amount paid for industry and commerce,
Average Building rent prices US$signs and billboards, and property taxes during the
     fiscal year, as long as these are directly related to the
 taxpayer’s economic activity; 25% of the tax paid
 on financial transactions may be deducted, regardless
Source: Colliers Internationalof their relationship to the taxpayer’s economic
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