BPO near-shoring benefits the Western Hemisphere.
by JOHN W. McCURRY
john.mccurry firstname.lastname@example.orgThe U.S. economic slowdown has benefited the already-thriving business process outsourcing (BPO) sector as more firms turn to outsourcing vendors in an effort to reduce costs. Near-shoring continues to grow as corporations are increasingly sifting through the Western Hemisphere to find the right mix of costs, language skills and cultural affinities.
"BPO continues to grow, and even the slowdown in the U.S. economy is helping as more companies are looking for alternatives to reduce costs and become more efficient,"
Beni Lopez is CEO of the U.S. operations of Mexico-based Softtek.
Bianca Trevino, president and CEO of Softtek, visits with employees in the company's Monterrey, Mexico, headquarters.says Beni Lopez, CEO of Near Shore Services for Softtek, a Monterrey, Mexico-based provider of ITO and BPO services.
Lopez says the BPO sector is also growing in Europe, but the requirements there are more complex, due to the large number of required language skills and data privacy regulations. U.S. corporations are increasingly turning to Latin America, not only to serve the Hispanic market in the U.S., but increasingly to take advantage of English-speaking capabilities in the region.
Softtek, which trademarked its Near Shore program, strives to be close to its clients, Lopez says. The company's BPO focus is on highly interactive services such as purchasing. It serves U.S. clients from its center in Aguascalientes in central western Mexico.
Softtek's primary business is in IT outsourcing (ITO). Its operation includes four centers in Mexico, two in Brazil, one in Spain and one in China. The company's operation in Beijing serves the ITO sector, but Lopez says Softtek is contemplating adding BPO services to its China mix. That follows a company formula of expanding from ITO to BPO at the same site
"We selected Spain to serve the European market because it can be fully compliant with EU data privacy regulations and it has good infrastructure," Lopez says.
The BPO location-finding process seems to be always in flux. Today, at least for many functions requiring advanced skills, its trends might best be described by the phrase "what goes around comes around." The one-way express highway sending business process jobs out of the U.S. now flows both ways, as the world's major outsourcing firms, including some based in India, are turning to the U.S. BPO provider TCS and ITO specialists Wipro and Satyam have all brought work to the U.S. in the past year.
The huge sweep to go offshore in a quest for labor savings has been abating for awhile as the labor arbitrage dissipates. Now, finding a BPO provider is more a function of finding the right place to get things done, as companies are moving from traditional low-cost countries to achieve "right shoring," says Doug Brown, co-founder of the Brown-Wilson Group, a Clearwater, Fla., outsourcing consultancy. Brown and his partner, Scott Wilson, are authors of "The Black Book of Outsourcing," an annual guide that has rapidly become an industry resource over the past five years.
"It's a matter of finding who has the talent pool and the language capabilities, and where the culture differences are the least," Brown says. "This doesn't matter where the back-office functions are concerned, where there is no human contact â€“ that will still go to a low-cost vendor in India or Southeast Asia. It's the front-office duties that require human contact that are near-shoring. We just did a report on the insurance industry, which is a complex business process. They are looking for people who can understand the culture of insurance in America. That's hard to find in other locations."
Brown says areas in the U.S. that are particularly attractive to BPO vendors include pockets of high unemployment, military towns, university towns, and rural locations with proximity to major cities. All are seeing growth, he says.
But growth is still robust in India. TCS, which opened a center near Cincinnati earlier this year, is planning its largest development center near Pune, India. The TCS Sahyadri Park will be developed over 50 acres (20.2 hectares) with a capacity of 20,000 seats. The first phase is due to open next March with 7,000 seats, and the remainder of the project is to open by the end of 2010.
China has yet to become a significant BPO player because there are no cost savings to be found, Brown says, describing BPO initiatives there as speculation or experimentation.
BPO's top growth markets will be in sectors such as insurance and healthcare, which have been historically hesitant to outsource services, Brown says.
"They are just starting in BPO, and they tend to be more discerning about it, but they are beginning to look a little bit more for near-shore activities," Brown says. "Industries that are in crisis, like banking, will increasingly depend on BPO."
Central America Expansion
The Central American BPO industry has been primarily concentrated in Costa Rica and Panama, but now Honduras is taking the initial steps to make it an option. Manfred Alvarez, president and CEO of Mercury Communications, along with his financial backers, opened the first call center in Honduras in 2006. The center performs BPO services for several telephone services companies in the southeastern U.S. Mercury â€śHonduras has the
potential to become
the service hub in
â€“ Manfred Alvarez,
president and CEO,
Mercury Communicationsoperates with 50 seats, with plans to add 25. Alvarez believes the BPO sector has a bright future in Honduras.
"In five to 10 years, BPO could have a booming business in Honduras," Alvarez says, citing studies that show Honduras has more bilingual workers per capita than its Central American counterparts. "Honduras has the potential to become the services hub in Central America."
Alvarez, 33, who plans to run for the Honduran Congress with a goal of pushing the nation forward economically, has long-range plans to develop one or more 300-seat centers in Honduras.
Honduras' BPO infrastructure will get a major boost with the development of the Altia Business Park in San Pedro Sula by the multinational Grupo Karim's organization. The park, located in the city's university district, will have three office towers dedicated to the BPO, IT and contact center industries.
Western Union is expanding its shared services operations in San Jose, Costa Rica, creating 750 new jobs.The project will be developed in phases through 2012, and will eventually encompass 5.5 million sq. ft. (510,950 sq. m.) of space.
For now, Costa Rica continues as Central America's call center/BPO center. Among the recent projects there is a major expansion of Western Union's facilities near San Jose. Western Union, which has had shared services operations in Costa Rica since 1998, is adding 750 new jobs at its operation, which serves the IT and telecom sectors. Christian Rodriquez, vice president of operations at Western Union's Global Service Center, says his company prefers to keep operations in-house rather than outsource them.
"Some of us have previous experience in outsourcing, and once you have been on the other side of the fence you know what to look for in terms of costs, service level and resource availability," Rodriguez says. "Even when some outsourcers come forward with more attractive costs proposals, when you weigh in the knowledge and track record of your own successful operation, that becomes our basis for expansion."
Rodriguez says Costa Rica offers a variety of European and Asian language speakers, a legacy of settlers from generations ago. Some of Western Union's expansion is a result of business coming from centers it is closing in St. Louis and Dallas.