| It might not yet have the same profile as South Asia | | | | looking at operations in a different way? |
| or Eastern Europe, but Latin America is becoming an | | | | Laura Bao Castro: Intel Corporation has been, over the |
| increasingly popular destination for organizations looking | | | | past 2.5 years, on a restructuring and efficiency |
| to establish shared service centers, either serving | | | | program that has resulted in run-rate savings of |
| domestic markets or as part of regional or even global | | | | greater than three billion dollars, CapEx avoidance in |
| shared services strategies. Furthermore, along with this | | | | excess of one billion dollars, and a reduction of twenty |
| growth in the captive sector Latin America has | | | | thousand employees from our peak in 2006. We as |
| become the focus of growing interest on the part of | | | | part of the Corporation are taking actions to contribute |
| major outsourcing providers whose entry into the | | | | in this process. We are doing a big effort to reduce |
| market has had knock-on consequences across the | | | | discretionary spending and one example is travel. We |
| board. Throw into this already-volatile mix the current | | | | are also increasing the number of meetings over the |
| economic instability and it's easy to see why the | | | | phone and are focusing on productivity and efficiencies |
| region's activity is making waves across and beyond | | | | so we can do more with the same. |
| the shared services and outsourcing space in 2009. | | | | Esteban Carril: Laura mentions the travel and |
| The Shared Services & Outsourcing Network | | | | entertainment reduction, and this is clearly an area |
| convened a panel representing practitioners, providers | | | | where we have tried to pay close attention – but |
| and advisors to take a look at the current level of | | | | as a matter of fact I think that there is no doubt that |
| maturity of the Latin American market and to examine | | | | the economic crisis will bring new opportunities for |
| how - and if - the economic malaise affecting much of | | | | shared services here in Latin America. I think this might |
| the rest of the global economy is impacting upon | | | | now be a great time to demonstrate that Latin |
| operations in the region. | | | | America is a reliable region, especially for global shared |
| Attending were: | | | | services. As we speak my company is looking for |
| Laura Bao Castro | | | | new opportunities in emerging markets. Right now we |
| CR FSSC Controller | | | | are looking for a shared service center for sales |
| Intel Corporation | | | | operations here in Latin America; this might be a great |
| Esteban Carril | | | | opportunity for consolidation and cost efficiency. |
| Director, Latin America Finance Operations | | | | Like Laura we have accelerated process |
| EMC Corporation | | | | improvements and efficiencies, and tightened our |
| Mauro Mezzano | | | | controls over expenses; we are also now |
| Partner | | | | implementing new tools to give us better visibility of |
| Vantaz Group Consulting | | | | customer usage patterns and people’s |
| Ricardo Neves | | | | performance, in order to drive customers to more |
| PwC Global Sourcing Leader for South America | | | | efficient services. Those services that may be |
| PricewaterhouseCoopers | | | | high-cost and are not being used by our customers |
| SSON: I think the first question we should look at is: is it | | | | are the ones that we would like to either outsource or |
| right to talk of "Latin American shared services" at all? | | | | discontinue. We have also identified other opportunities |
| Latin America is a very big region geographically and in | | | | to expand our scope of services by leveraging our |
| terms of population; it’s got a smaller linguistic | | | | shared services to serve new internal customers, and |
| diversity than, for example, Europe, but there are still | | | | redirecting our services to areas where they can add |
| very big differences between, say, Brazil and Costa | | | | more value… [Regarding discretionary spending] As |
| Rica. To what extent is it actually possible for | | | | Laura mentioned, we have to do more with the same; |
| organizations – captive or BPO – to take a truly | | | | in my case I’m trying to engage people from my |
| regional approach in Latin America? Is it impossible to | | | | shared services to lead some of these projects. On |
| avoid having significant resources in individual | | | | other cases we will prioritize those projects where we |
| countries? | | | | see there is a clear benefit in costs in the short term. |
| Ricardo Neves: This is a region different from other | | | | Mauro Mezzano: What I would say is, working in |
| regions in the world. If you talk about intra-region | | | | shared services implementations in 2000, 2001, |
| services, you’re talking about two major languages | | | | everybody was looking towards cost reductions. Then |
| which are, in some ways, close to each other; you | | | | moving through 2005, 2006, 2007 and last year – up |
| have also a closeness of overall culture; and usually | | | | to October, of course! – I had, as a consultant, many |
| what you see with multinational or regional operations | | | | customers who were very focused on growing, so |
| here is that the larger countries like Brazil, Argentina, | | | | they were very interested in preparing for big growth |
| Mexico, Chile correspond to a significant size of the | | | | rates. Now, after October last year, once again I’m |
| operations. Usually if you look at most of the global or | | | | getting many calls from people looking for cost |
| multinational companies in the region, they have 50% or | | | | reductions, and being very proactive in implementing |
| even 75% of their operations carried out in two or | | | | projects with quick results. I think it’s come back to |
| three countries at most - and then 10, 12 other | | | | that, and I think as Esteban was saying, in our region |
| countries where they do have operations but which | | | | some countries become even more interesting for |
| make up only 25% or less of their business. | | | | multinationals to do medium-to-long-term cost |
| This gives a challenge when setting up a regional | | | | reductions because the labor costs are under what |
| center, because there is a scale for the larger | | | | they can see in other regions. |
| countries which is not present in the smaller ones – | | | | Something which is different from the 2000 period, in |
| and what I’ve seen here is a mix between totally | | | | 2008, 2009, 2010, I think the offshoring/BPO providers |
| centrally run shared services and a lesser local | | | | are really appearing here in Latin America, and this |
| presence in smaller countries to make sure the right | | | | could be a very interesting moment to potentiate that |
| scale is achieved and the right support is done at the | | | | outsourcing and offshoring business. |
| regional level. There are companies based in Brazil that | | | | SSON: Have you been seeing clients are coming to |
| I’ve seen who have regional shared services – | | | | you with the need to do more with the same amount |
| like the brewer AmBev, now connected with InBev | | | | of money, or reduced budgets? |
| and AnhauserBusch, which has a very large regional | | | | Mauro Mezzano: I’ve been seeing both. Some of |
| shared services based in Sao Paulo serving not just | | | | the clients that were working here during 2008 in |
| operations in the region, but also the firm’s | | | | shared services have come to me and said "Sorry, I |
| operations in Canada for the Labatt operations. | | | | cannot come anymore with this budget because my |
| Unilever has also set up an HR shared services - and | | | | company is in a crisis"; but at the same time I’ve |
| has just sold its finance shared services to Capgemini | | | | been having new calls from customers who |
| in the region. | | | | weren’t working with us previously, but who really |
| In sum, from those large operations that I’ve seen, | | | | want to work with us because they’ve got a new |
| as I said I’ve seen a mix of some centralised | | | | approach to shared services. The market is still very |
| services and some small countries with local services | | | | open and diverse, but I think it’s going to narrow |
| combined. | | | | down into cost reductions during March and onwards. |
| Esteban Carril: We’re serving Argentina, Chile, Peru, | | | | SSON: Obviously globally over the last few years one |
| Mexico, Colombia, Venezuela, and Brazil. My team is | | | | very big question has been how to attract and retain |
| divided into three functional areas, in two countries. | | | | talent. Recently however as the economy has |
| One team is working in Sao Paulo, Brazil; the other two | | | | worsened there has been the feeling in other parts of |
| functional teams are working here in Argentina. We | | | | the world that talent acquisition and retention isn’t |
| run accounts payable, accounts receivable, credit and | | | | going to be such an issue over the foreseeable future, |
| collections, billing, cash applications, payroll, commissions | | | | because people aren’t going to be willing to move |
| and bonuses. It’s actually not divided linguistically: we | | | | out of secure jobs. Is this mirrored in what’s |
| found we already had some good skills in Brazil to | | | | happening in Latin America right now? |
| develop the credit and collections department there, so | | | | Laura Bao Castro: You know, Costa Rica is behaving |
| we decided to leave the existing group providing | | | | very differently from other markets, specifically in the |
| services there in Brazil, to provide services for the rest | | | | service industry. This year is no different; and the |
| of the Latin American countries. We wanted to have | | | | projection is 3,500 new jobs, so we actually have a |
| three functional groups, but we wanted to try to keep | | | | pretty hot market. Talent retention is critical for our |
| the same skilled people working and we didn’t | | | | success. |
| want to have to move them from one country to | | | | In terms of our sourcing strategy, we work very |
| another. | | | | closely with the technical schools – particularly the |
| Laura Bao Castro: We’re part of a global strategy. | | | | accounting technical schools – and the public |
| We have currently two pretty large financial shared | | | | university that provides accounting professionals. We |
| services centers in Intel. One is located in Malaysia and | | | | provide internship programs for technical school |
| the other one is located here in Costa Rica; the | | | | graduates and a student program for university |
| markets that are supported from Costa Rica are | | | | students: we bring those people while they’re still |
| Canada, the US, Costa Rica, and Mexico, Colombia, | | | | studying to work part-time for us – some of them in |
| Venezuela, Chile, Argentina and Brazil. | | | | an internship mode, some as what we call "student |
| SSON: Laura and Esteban, you both come from big | | | | workers" – and by the time they graduate, and if |
| global organizations with significant worldwide | | | | we feel that they have delivered to our expectations |
| presence. Do you think it’s still the biggest | | | | – we offer them full-time jobs. That has been a |
| companies who are setting up shared services in Latin | | | | very successful strategy that we implemented about |
| America or are the smaller, or maybe mid-market, | | | | six years ago, and we have a conversion rate of 95%. |
| organizations also getting involved? | | | | In addition we provide English classes to those |
| Laura Bao Castro: I think the mid-market is coming up. I | | | | employees to ensure that by the time they get |
| was able to go to [SSON’s Shared Services | | | | converted they have reached the level of English that |
| America Latina 2008 event in] Chile last year, and also | | | | we require to do our jobs, because we offer services |
| participated in the SSON conference in Mexico City, | | | | to the North American market and a lot of our jobs will |
| and I was very surprised by the number of Latin | | | | require a certain level of English capability. So that’s |
| American multinationals that have already moved into | | | | a sourcing strategy that I think has proven to be very |
| this journey, or are in the process of doing so – | | | | successful for us, and it gives a continuous pipeline of |
| especially in Mexico where I think a lot of companies | | | | new employees coming in. |
| are looking into it, even having shared services within | | | | In the area of talent retention, Intel is a company that |
| Mexico itself. The concept is right there; they know | | | | believes in flexibility and we do provide a lot of flexibility |
| they can reduce costs and produce more quality with | | | | to our employees. I don’t know if you’re familiar |
| shared services, and even within Mexico itself | | | | with the term "Generation Y" for people born after |
| companies are developing shared service centers. | | | | 1980; 80% of the population that I manage are |
| Mauro Mezzano: Actually we’ve been seeing this | | | | Generation Y, young people with very different |
| shift since two or three years ago. At the start of the | | | | mentalities – they have a different chip in their minds |
| decade many multinationals began establishing shared | | | | from mine, for example – and they value flexibility |
| services in the region, but when I went to conferences | | | | very much, so we have programs like what we call |
| in Miami and Orlando there weren’t many Latin | | | | "telecommuting" where they’re able to work from |
| American-owned companies present. Then in 2004, | | | | home up to two days a week. They have different |
| 2005, bigger local companies and groups started with | | | | start and ending times – some of these employee |
| the concept. Now smaller and smaller companies are | | | | are going to school so they need flexibility to continue |
| doing it; some of them don’t really implement what | | | | their studies – we have found through the surveys |
| we would call shared services but they do centralize | | | | and questionnaires that flexibility is one of the main |
| and they do take a few concepts from shared | | | | reasons why they choose to stay with us. We provide |
| service centers, and perhaps redesign a process. The | | | | portable computers to all our employees which they |
| influence of shared services is spreading out through | | | | can take home – and this generation are |
| many more companies than before. | | | | technology-growers, of course, so they love that. |
| Ricardo Neves: I’ve seen an increase in interest: | | | | These two things have really been proven to help us |
| among mid-market companies it’s less regional. | | | | retain employees – in addition to the career |
| What I’ve seen is among large companies, | | | | development of course. One of the beauties of shared |
| they’ve done a lot of rationalization in each of their | | | | services is that you manage different functions, you |
| countries of operation, and a lot of discussion about | | | | manage different groups, and if someone wants to |
| regional shared services. What I’ve seen in the | | | | start a career they will have the opportunity to move |
| mid-market, specifically in Brazil, are still questions on | | | | into these different groups and become a rounded |
| "in-country" shared services if you know what I mean. | | | | professional. |
| It’s more making sure that they leverage their local | | | | SSON: Esteban, how are you finding the employment |
| operations, and then as a second step – especially | | | | market – and has there been a shift in your |
| with some of the systems work done – it’s | | | | acquisition and retention strategies as a result of the |
| something of a done deal to set up something regional: | | | | economic crisis? |
| when you have a regional systems platform, for | | | | Esteban Carril: In our case – and I would say that |
| example. | | | | this applies for every other shared services in Latin |
| SSON: Let’s shift focus slightly and take a look at | | | | America – turnover rate is one of the most |
| the outsourcing market in Latin America. Over the past | | | | challenging areas for shared services. We have been |
| couple of years we’ve seen the entry into the | | | | doing several things to retain our talent. We have been |
| region of some of the big global players – in | | | | cross training – so, for example, when an employee |
| particular some of the big Indian providers. What | | | | comes to work in one department we offer them |
| impact has that had on the market – and on firms | | | | some exposure to other areas of operations, to other |
| that are running shared services? | | | | processes, so they can learn other activities and |
| Esteban Carril: In my experience in leading a shared | | | | processes which as Laura pointed out adds more |
| service centre I have been trying to find different | | | | value to their own career. |
| ways to do things, and finding vendors who can | | | | This year we are also offering a new service inside |
| provide services in a more efficient and economical | | | | shared services which is that we loan employees to |
| way than us doing it ourselves. When it comes to the | | | | other areas, so for example if a business area needs |
| outsourcing sector, I find that in Latin America things | | | | an extra person because someone goes on maternity |
| are still in development. When it comes to outsourcing | | | | leave, or even leaves the company, we provide them |
| it’s important to see how well-organized companies | | | | with people as a service. If our people are trained in |
| are, and how well they provide services in multiple | | | | other systems and other processes we can add value |
| countries – and I see the challenge for many of the | | | | by moving those people to other areas where they |
| big firms is that they are still working as independent | | | | can spend two or three months. We’re offering |
| companies in each country, and not really regionally | | | | that as another service from our shared service |
| organized in order to provide services to multi-country | | | | centre. |
| shared service centers. | | | | Another area is flexible time. The nature of our |
| I think that’s one of the key points that I’ve | | | | business is, 70% of our business takes place within the |
| been finding. Another key point is that some | | | | last three weeks of the quarter so we really need to |
| companies are regionalized but unfortunately they | | | | be flexible with our people. We let them do some |
| might not have presence in all markets, so that | | | | telecommuting, we offer flexible time, because – as |
| becomes a problem in terms of finding a single regional | | | | Laura pointed out – you should give them some kind |
| outsourcing solution to meet our needs. | | | | of freedom inside the company. We provide English |
| Laura Bao Castro: About five years ago companies | | | | and Portuguese classes as well. |
| providing outsource service arrived to Costa Rica. | | | | The key here is that we’ve signed some |
| Since then, these companies have grown , for | | | | agreements with universities through which we bring |
| example HP has now close to 8,000 employees. While | | | | new people on board; we usually train them in those |
| I can’t be specific about their services or regions | | | | areas which are more transactional, so they gain |
| they serve, these companies look for people speaking | | | | experience – and then we move them around, not |
| Spanish, English, Portuguese, French, Italian – even | | | | only inside shared services but also outside, offering |
| Chinese. We do not work specifically with an | | | | them now career opportunities in the business, in |
| outsource vendor at this moment – but periodically | | | | different countries, in our local finance team. So we |
| we reassess our current strategy. | | | | offer them several routes to success inside our |
| Ricardo Neves: One of the features that I’ve | | | | company. |
| noticed, one of the movements in the outsourcing | | | | SSON: Are you thinking that turnover is still going to be |
| space in Latin America, is that there’s been a lot of | | | | an issue for you in a worsening economy and a |
| currency fluctuation between the dollar and the real, | | | | consequently tightening job market? |
| and the dollar and other currencies, and I’ve seen | | | | Esteban Carril: I think right now, there are several |
| some discussions on contract review - especially for | | | | companies that are letting people go, and I think the |
| service providers – from both sides: if the clients | | | | labor market will be better for us. However, inflation is |
| want to take advantage of that, or even discuss | | | | still a problem – particularly in Argentina – so |
| relocation of some work; or if the providers are saying | | | | when it comes to retention we would expect to be |
| that an increasing cost is related to currency fluctuation | | | | reactive in terms of salary adjustments, to ensure |
| putting added pressure on their margins. Definitely | | | | competitive salaries. So in general terms I think the |
| currency fluctuations have been one of the biggest | | | | market’s going to be quieter; however, we should |
| topics of discussion in the region. | | | | always keep an eye on the need for salary |
| SSON: OK, let’s move on and address the big | | | | adjustments – especially with the inflation |
| issue of the moment and, perhaps, of many moments | | | | fluctuations we may see in coming years. |
| to come: the financial crisis and global economic | | | | SSON: Ricardo, what’s your take on the job |
| downturn, and their impact upon shared services and | | | | market and the pressures on talent management at |
| the sourcing sector in the region. Ricardo, what do you | | | | the moment? Have things changed as a result of |
| see as having been the main changes in the space | | | | October’s events? |
| since the beginning of the main phase of the crisis in | | | | Ricardo Neves: Some of the clients I support have |
| October? | | | | said the pressure on them has increased to deliver a |
| Ricardo Neves: What I’ve seen is basically a larger | | | | good service at a lower cost, and the best way to do |
| interest in discussing measures to reduce costs. Some | | | | that is with good people. So I think the search for good |
| of the plans that were lined up to be rolled out in the | | | | people, and the importance of retaining them, and |
| future have now become more interesting for | | | | working the talent market, is still a big challenge as we |
| discussion now; specifically, if they can help reduce | | | | go into crisis mode. Even though when you think about |
| costs. The mood, the willingness to do something now | | | | it there might be a little more availability of resources |
| has increased. Organizations today want to do | | | | on the market, when you look at the example |
| something bolder than they were willing to do even six | | | | we’ve heard of Costa Rica - or even Brazil, where |
| months ago. We used to hear things from the | | | | companies are going more into the interior of the |
| business like "don’t disrupt my growth", "don’t | | | | country and looking at other cities inside Brazil to be |
| rock the boat"; now executives are coming and saying | | | | able to retain a good flow of people coming out of |
| "hey, where can we make this boat more nimble? | | | | universities, and have been growing very fast |
| How can we rock the boat but at the same time | | | | throughout the country – shared services and new |
| make us leaner and more prepared?" | | | | organizations coming in are going after talent very fast, |
| I’ve seen this happening in a couple of ways. One | | | | wherever it is; so I don’t believe it will be an easier |
| is, clients coming to us looking for an overall | | | | time managing talent for shared services during the |
| assessment of cost reduction – which usually | | | | crisis we have now. |
| includes the theme of shared services. Secondly, | | | | SSON: And have you noticed – or are you |
| we’re also having a lot of discussions on reviewing | | | | forecasting – a drop in attrition rates over the next |
| outsourcing contracts – or even making those | | | | few months? |
| contracts broader, in order to ensure they are | | | | Ricardo Neves: Not at this point; considering what |
| capturing all the value they could based on the | | | | I’ve both from clients and from providers with |
| relationship. So overall what I’m seeing is an | | | | whom I’ve been working closely I have not seen |
| increased willingness to take bold measures to ensure | | | | any significant change in those rates at this point, in |
| cost reduction. | | | | Brazil particularly. |
| SSON: Do firms still have money to spend on big | | | | SSON: And will the increased operation of big BPO |
| implementations, or is it about making changes as | | | | providers have an impact here? |
| cheap as possible? | | | | Ricardo Neves: I think so. I have not seen a slowdown |
| Ricardo Neves: I think a lot of it is, as you say, to make | | | | in any way in the growth of the shared service |
| things as cheap as possible, as fast as possible. But | | | | centers either from providers or companies going after |
| I’ve seen some room to say "if I need to spend | | | | it. So even if there is any increase in supply I don’t |
| that to get that back, then let me hear what you have | | | | think demand will decrease; actually, I think demand will |
| to say". Again, I think firms are more willing to do things | | | | increase from both existing shared services and from |
| than they were before - but no-one’s saying | | | | new companies coming into the market. I don’t |
| they’ve got a big pile of money to reduce their | | | | foresee an easier time on turnover rates or talent |
| costs. What they need to do is support the investment | | | | retention. |
| through the cost reduction itself. | | | | More Articles: Want to receive more articles like this? |
| SSON: Moving over to the practitioners: Laura and | | | | Have a tip, learning or case study you want to share? |
| Esteban, how have you been responding to the crisis? | | | | Join our growing community of shared services and |
| Has it had a big impact on your business and are you | | | | outsourcing professionals. |