Latin America 2010: A Destination To Consider In Your Offshoring Deal

  
Latin America: A destination worth exploring as an 
offshoring destination  Figure
 April, 2010 Â Â Â Â Â Â Â Â Â Â Â Â  Figure 5
Latin America continues to raise the attention as an 
eye-catching destination that offers great value and 
resources when compared to other offshoring 
locations. BPO, Share Service Centres (SSC) and 
Calls Centres industry have grown significantly during 
the past years due to the fact that not only big 
companies such as American Express, General 
Motors, Intel and others are running their operation here, 
but also well known global BPO service providers like,Source: Higher Education Secretariat, Brazil;labour
Wipro, Accenture, ACS, Genpact, IBM, Infosys andobservatory, Mexico; labour observatory,
TCS have established delivery centres in the region.Colombia; ministry of education,
 Argentina; ministry of
What benefits does Latin America offer?education.                 
                Source: The World
Most people would relate to the benefits andCompetitiveness Yearbook 2008 - (10=Fully
advantages the region offers to US based companies.                    available qualified
In a certain way this is true; its proximity and thework)
similarity in time zones eases up the interaction with 
their US customers and allows greater control over 
the operations. But certainly Latina America offersLanguage capabilities: Latin American countries are
much more than that, not only to US based companiesknown for their strong English skills which allow them
but to Europe as well. Below are some of the keyto provide services to both English and Spanish
benefits the region offers:customers. Argentina, Mexico and Costa Rica are the
 countries with the best language capabilities in the
Costs: Latin America offers an average cost reductionregion. Other countries also emerging due to their
of around 30% to European and US based companies.language skills and capabilities are Guatemala and
Colombia is the location with the most favourable costNicaragua. Many people in Guatemala are good English
benefits in the region, followed by Argentina. It's worthspeakers and posses a neutral accent that allows
mentioning that cost savings do still remain higher inthem to assimilate other Spanish accents. Nicaragua
Asia, however it's hard to predict how long the lowhas seen languages skills improve as many of its
Asian costs will be sustainable.  Asia is seeing farcitizens are returning back to the country, from the US,
higher wage inflation than Latin America and theafter they had relocated there for political reasons.
projections do not foresee any reduction in the annualHowever, the current political instability the country
increase in the years to come (inflation in India reachedphases continues to hold back foreign investments.  
15% in Feb. 2010). This trend is clear not only to 
offshoring clients but also to Indian BPO serviceCultural Similarity: North America and Latin America
providers such as Wipro, Infosys and TCS who havehave plenty of cultural similarities and they both have
recently entered the Latin America market. This newEuropean immigrant groups that share their own
market is an opportunity to expand their businesscultural similarities as well. Europe has influenced
offerings and capabilities; and their move here confirmscountries, like Argentina, that has been heavily
they see business development in this region.impacted by Italian and Spanish immigration throughout
Compared to European offshoring/nearshoringits history. In addition to this, a significant number of
locations, Latin America does provide greater savings.young professionals migrated to US and European
A study from A.T. Kearney shows that Easterncountries to acquire higher educational degrees and to
Europe reduces cost from 15%-25% while Latinavoid local economic crisis and high unemployment
America is delivers savings from 20% to 40%.rates South American countries suffered in the last
 couple of decades. A lot of this labour pool have
 returned to these countries and have brought with
          Average wage cost (US$ -them not only greater skills and experience, but some
Annual)         of the cultural similarities that play a key factor on
 Â Â Â Â Â Â Average Building rent prices US$business relationships. These cultural similarities help
m2            improve the business strategy and communication
 between the retained organization and the outsourcer.
  
  
 FigureWhich location is brings the best benefits?
 Â Â Â Â Â Â Â Â Â Â Â  Figure 2 
 Latin America has various locations on where,
 depending on the business strategy, companies can
 look to setup their operations and reach a more
 efficient operating model. Popular locations in the region
 currently are Argentina, Brazil, Chile, Mexico, Costa
Rica and Colombia. The table below identified their
 strengths and weaknesses. 
                              
   Figure 6
       Source: Economist Intelligence Unit, PaySource: Wipro research
Scale 2005 
                    Source: ColliersThere are however other locations gaining more
Internationalpopularity in the offshoring world. For instance,
                           Capgemini opened operations in Guatemala in 2005 to
           provide nearshore services to US clients and in 2008
 started F&A Operations for Coca-Cola. 
           Average Utilities Cost by city for aGuatemala is a country that has cultural affinity to the
family of 4 US, high qualified labour force with bilingual capabilities
 (Spanish and English) and, similar to Colombia, it shares
 a neutral accent that allows them to assimilate any
 Spanish accent, ideal for call centre services.
  
  Figure 3Uruguay is also looking to place themselves in a strong
 position within the BPO and SSC sector. They have
 recently open on march 2010, a free trade zone
 (Aguada Park) which consist of 600,000 square foot
 aimed to provide high-tech infrastructure to companies
          Source: EIU Worldwide Cost of Livingdelivering contact centres, BPO and SSC services
Survey, Ministerio  de Minas y(among others) in a well located region and with low
          Energía; Comisión para lainfrastructure and labour costs.
Integración Eléctrica 
Regional              Latin America vs Asia
 Â Â Â Â Â Â Â Â Â Â Â Â 
                          So where does it stand in comparison to the Asia
 market?  Although Latin America shows a promising
 future, is not as mature as Asia is today. Currently,
Skills: Latin America has a large pool of young (anAsia still remains the most developed and popular
average of 27 years of age) and well skilleddestination for offshoring clients due its low labour cost,
workforce for ITO and BPO services. Brazil has thespecialised skills and for being the most experienced
highest number in the region because of its largeoutsourcing community. However, Asia is struggling
population size (57.5 M). There are many universitieswith factors such as rising wage costs, increasing
within the main cities and the constant economic crisisInflation, and currency fluctuation. Latin America doesn't
South America has suffered over the last decadessuffer the inflation rates and wage increases Asia
has made the working market extremely competitive.suffers every year and it contains a good mix of
This has not only improved the labour skills, but haslabour skills and low operational costs.
made universities and other education facilities to.
invest in new and high quality programmes.When considering an offshoring deal, companies should
 evaluate all offshoring locations and consider the one
 that best fits its business strategy and that brings the
           University graduates in the sectorgreatest benefit in the long term. Latin America is an
(2007)                 Index Availability ofoption that certainly should be considered, along with
Qualified Labor the other main offshoring locations today, when putting
 together your business case.