By Patrick Haller

When making sourcing decisions, a lot of attention is paid to the pricing structure and qualifications of service providers, while their actual location is sometimes a secondary  consideration. However, when assessing a destination, it’s important to realize that what might be favorable today can morph into a nightmare scenario tomorrow. Don’t be caught unaware and unprepared for the ever-changing dynamics of  the Nearshore.

The best-shoring process goes beyond looking at the usual criteria like cost effectiveness, employee attrition and service capabilities, and examines issues such as the hidden aspects of hiring and firing, how non-performance claims are managed, a country’s political stability, propensity for natural disasters, nationalization of businesses, and concerns about infrastructure. It’s dangerous to give these critical factors short shrift when concentrating on which provider offers the best financial deal.

International management consulting firm A.T. Kearney advises that “the best-shoring evaluation process selects the most favorable location by applying a comprehensive set of criteria, which include not only current cost effectiveness and scenario analyses, but also an assessment of service and quality levels, as well as the question of warranty.”

“There are several items that are driving the trends towards best sourcing of solutions,” said Ed Fitzpatrick, director of Managed Services at Charles River Development, during a podcast about IT development, “The key thing is the competitive nature of the industry. Especially coming off the last couple of years in the worldwide financial situation, it’s about proving competitiveness, lowering costs, driving operational efficiencies, getting more value out of their investments in technology and systems, better aligning costs and values, and of course, reducing the strain on limited internal IT resources.”

Looking deeper than immediate cost savings, buyers should take into consideration driving factors, such as:

• Available Talent – How big is the current qualified labor pool? Will the operation be able to scale-up over the next five to ten years? Who are the competitors for the same talent? What are the strengths and weaknesses? Are wages expected to increase from year-to-year? Do the labor laws favor workers or employers?  For example, even though Brazil has the largest population in South America, can the country offer better software developers than Colombia? Can Colombia compete on the wage scale with Chile? Will Chile produce enough qualified candidates for contact center work over the long-term than Argentina? Will wage inflation and restrictive labor laws in Argentina have an adverse effect on the ability to continue operations there? Which nation is known for a strong work ethic as compared to the others?  When it comes to hiring and firing, every aspect of the country’s employment law should be examined carefully.

• Soundness of Infrastructure – Just because a country was known for having solid infrastructure in the past does not mean it will be true in the future. For instance, Chile was thought of us being relatively sound in this regard, but recently President Piñera warned executives that Chile would face an energy crisis during his administration due to an estimated annual demand increase of up to 7%. Other nations too might face energy crises, or an inability to keep up with the need for improved telecommunications technology and internet access. Safe roads and highways, efficient and adequate transportation systems, accessibility to international airports are also major considerations. El Dorado, the main international airport in Colombia’s capital city, Bogota, is being completely rebuilt in order to accommodate the heavily increased passenger traffic. However, observers have noted that by time the new facility is completely operational it will already be inadequate. Therefore, plans are under consideration to build a second airport.

• Natural Disasters – No country on earth is safeguarded from nature’s wrath. However, some are more prone to disasters than others. As charted by PreventionWeb, Chile is more prone to earthquakes than flooding, Colombia can suffer from flooding and earthquakes, Argentina is also susceptible to flooding whereas drought is the biggest threat to Brazil. Whatever the hazard, be sure redundant systems are in place and assess how quickly business can resume.

• Claims for Non-performance – Even though the contract might contain very specific clauses relating to non-performance issues, what jurisdiction will the contract be enforced in? If in the provider’s home country is there a enough of a history of similar cases in order to establish a precedence, and if so, who have they favored? If not, how would such a case be handled?

• Political Risk – Are foreign business entities welcome to operate freely within the selected country? Does the country have a history of nationalizing private enterprises, or are there indications to suggest this will start happening? Can the government close down an operation that is deemed contrary to their philosophy? Will a foreign entity, or a company hired by a foreign entity, be abruptly shut down? These are very real concerns, especially in Latin America where the political dynamics change rapidly in some nations. Closely examine the policies of countries such as Venezuela and Argentina who have been shown to be volatile environments, whereas Chile and Colombia stand as recent examples of political stability.

• Immigration Policies – Providers might need to hire employees from other countries, even on a temporary basis, in order to ensure they have the right individual in the right position. Also, companies that have shared services or captives most likely will want at least some high-level personnel from established business centers to oversee their operations. What countries are more welcoming to foreign workers? Where are the least restrictive immigration policies? Can foreign employees be arrested or deported without cause? Be sure to research these policies in-depth and gain an understanding of a particular country’s record, and pay attention to the “writing on the wall.”

Do not underestimate the importance of digging into these fundamental aspects of sourcing. Remember that the relationship is not only with your provider, but also with their country.

By Luke Bujarski

High employee turnover is something that sourcing managers have learned to put up with when offshoring IT and BPO tasks to India. But now the Philippines has also begun showing signs of overheating. Given Latin America’s relatively small labor pools, we worry that the region might follow suit and succumb to the same pressures that have pushed the Philippines to its limits. So far, rampant turnover has not been a major problem with LatAm markets. But just in case, we decided to take another look at some of the details around attrition and other symptoms of hot labor market conditions.

What we found is that while Latin American labor pools are fewer and often smaller, sound management practices at the company level, greater company loyalty, and slower, more organic industry growth have kept attrition rates lower than what has been seen in both India and the Philippines.

What’s Up with the Philippines? 

“BPO firms [in the Philippines] are experiencing difficulty in hiring and retaining “capable employees,” thus, resulting in higher attrition rates and an increase in hiring and retention costs,” noted global consulting firm Tholons in a recent report. Other sources suggest that up to 75 percent of the Philippine people speak good English, so it’s no surprise that the BPO industry (in revenues) has been growing at 20 percent annually. Market research firm XMG Global also expressed concern over the growing “talent problem” in the Philippines – not only with today’s labor force, but also with high dropout rates in the labor pipeline in primary and secondary school. As a result of this and other factors, labor costs are expected to go up by 25-60 percent over the next five years.

Despite these warning signs, the Business Process Outsourcing Association of the Philippines, in a joint report with Everest Research, anticipates the industry to almost double by 2016 to 900,000 employees. For those service providers already battling it out with runaway training and recruitment costs, wage inflation, disrupted project workflows, and inconsistency in service level quality, those projections may be a hard pill to swallow.

LatAm Sensitivity to Demand Pressures 

When it comes to contact centers and BPO, English-speaking labor pools in Latin America are relatively small and hence tend to be more susceptible to demand and supply misalignment. Central American countries are a case in point as is currently being witnessed in Guatemala, where a growing price war for bilingual agents is forcing companies like 24/7 Customer to diversify their coverage base into Nicaragua. Going forward, as even smaller markets like Belize and Honduras grow into the BPO industry, service providers should take care not to over promise and under deliver on total cost and service level agreements. Likewise, government officials should be careful not to ‘over promote’ their regions’ capabilities, without backing up their initiatives with matching training and education dollars.

Concern over employee churn also has a lot to do with the type of business that you’re in. According to Tony Mataya from Think Solutions, on the whole, Mexico’s IT services industry has not seen the type of attrition rates experienced in India. Chris Snyder CIO of Hulcher also said that it has a lot to do with the fact that just like Americans, “Indians don’t want to work the third shift if they don’t have to” – referring to the 12-hour time zone gab between the US and India. This is particularly true when dealing with agile, scrum and other live-time software development methodologies. “We tried agile with India, but turnover got to the point of ridiculousness.” Snyder also noted that they’ve had much better luck in Brazil, although they’ve found it increasingly difficult to retain and recruit talent since signing on with Stefanini Solutions three years ago.

Market Fundamentals: Mexico vs. India vs. the Philippines 

When looking at macro-level data there are a couple of things to be mindful of when analyzing labor markets. Consumer price inflation is perhaps the most indicative of rising wages, since employers typically need to adjust salaries annually in line with overall inflation. Below we see that the cost of living has more than doubled in India over the last five years, while Mexico and the Philippines have seen lower inflation year on year. GDP per capita is clearly much higher in Mexico, which puts a premium on wages. Likewise sheer market size in terms of population emphasizes India’s dominance as an offshore hub to both Mexico and the Philippines.

Attrition Boils Down to Economics, Management, Culture

Personal expectations and the promise of higher wages is what ultimately cause BPO employees to jump ship. However, work culture and company management style also has a lot to do with it. Eric Simonson Director of research at Everest pointed out that “the Indian work mentality is focused more heavily on ‘getting ahead’, rather than subject matter expertise. We’ve seen good things coming out of Poland lately partly because the work culture follows a more artisanal approach focused on mastery and domain expertise.” Mataya from Think Solutions also backed up this claim and mentioned that it is “not uncommon to see BPO workers in India move companies for ten cent raises”.

Second Annual Nearshore Nexus Comes to New York City this April

Nearshore Nexus, the only North America investor conference focused entirely on the Caribbean and Latin America IT and BPO sector, will take place on Thursday April 19, 2012, in New York City.

Nearshore Nexus will feature the best minds in global services to examine the growing role Latin America is playing in delivering quality outsourcing services to businesses across the Americas. The outsourcing sector in Latin America has been growing at over 20 percent per year – noticeably higher than the global average. The theme for the 2012 edition of Nexus is: “Intelligent Analysis of Outsourcing in the Americas.”

“I’m very proud of the fact that we will attract delegates and sponsors from over 15 countries in Latin America. This testifies to the strength of our business and the appeal of this topic,” said Kirk Laughlin, CEO and Founder of Nearshore Americas, the company staging the conference. The event brings together CIOs and IT leaders, global sourcing decision makers, procurement heads and country representatives. Besides analyzing complex ideas and generating stimulating debate, Nexus is also a place to enjoy something different. Musical entertainment will be provided during the event, and multiple networking opportunities are built in.

”The Nearshore outsourcing market is extremely robust,” noted Laughlin, “yet a good percentage of U.S. buy-side sourcing customers continue to lack sufficient knowledge of Latin America to make good business decisions. Our conference is all about accelerating that awareness and generating high-value connections.”

Nearshore Nexus features a list of top tier speakers from organizations such as GE, The McGraw-Hill Companies, Pace Harmon, Pegasus Solutions, UBS, HfS Research, Tata Consultancy Services, Ci&T and A.T. Kearney. Topics range from the current state of outsourcing in Latin America, getting smart about site selection, and how to manage vendors in a multi-vendor, multi-location environment.

Sponsors include Tata Consultancy Services (Diamond); Ci&T (Platinum); BRASSCOM, MexicoIT and Pro Mexico (Gold); Belatrix Software Factory, Common Sense, Invest Pacific, Nearshore Call Center Services, Neoris, ProBarranquilla, VSI Nearshore Outsourcing and Wipro (Premier). Partners include Avasant (Advisory Partner) and HfS Research (Research Partner).

This year’s conference will be held at the elegant Crowne Plaza Times Square Manhattan, which offers a luxurious oasis in the middle of Manhattan’s most vibrant and iconic neighborhood. Nearshore Nexus has secured a special room rate for attendees of $309 per night. This rate expires on March 16, 2012.

Nearshore Nexus is an invitation-only event. Individuals who are outsourcing services decision makers may request an invitation to the conference by sending an email, with your title and company name to invitation@nextcoastmedia.com . After submitting your registration request, your qualification status will be verified for eligibility. Qualified invitees are granted complimentary access to the entire conference. Vendors, service providers, business parks and government/private promotion and investment agencies may obtain access to the conference through sponsorship.

For information about Nearshore Nexus, visit www.nearshorenexus.com or contact the conference office at (516) 277-1108. Nearshore Nexus social communications can be found on Twitter and LinkedIn.

Speed is of the essence, DeMent says.

By Patrick Haller

Success of a shared-services operation depends upon more than just a good plan and solid execution – like any good relationship, it requires constant monitoring and regular maintenance. Without a serious, ongoing commitment by the CEO, CFO, CIO, and managers throughout the company, shared services will implode. The entire corporate way of thinking has to change.

With a shared-services approach, support functions such as finance, HR, IT, and supply chain are run as if they were outsourced even though they are still internal to the company. “You change the mindset from being aligned to corporate offices to being aligned to business units,” says Brad DeMent, partner at management consulting firm ScottMadden.

One of the first fundamental decisions to deal with when developing a shared-services organization is whether the center will serve a single function or multiple functions. The former has been more common in the US, where a company might have a financial services center in Tennessee and its HR services in Missouri. Whereas the trend in Latin America is to open combined centers so that all of the shared services are operated from one location and under one manager, who most likely will report directly to the president of company.

That is the case with Alpina in Bogota, Colombia, which has about 300 employees working in the same location, as opposed to a company like Pfizer, which has centers throughout the US. DeMent recommends the same-location approach. “By combining all of these functions, you can instill one culture, under one leader. You can even build a shared services center within a shared services center,” he says.

Not only is it easier to coordinate various areas in a multifunctional center, there are also economic benefits and the ability to cross-train employees, enabling them to become a resource across the organization as opposed to being rooted in one area.

There Will Be Resistance

When considering opening a shared services center, those involved should be prepared to confront the “big change barriers.” Getting over the hurdle of the corporate headquarters not wanting to relinquish control is one of the greatest challenges. DeMent points out that friction can be especially heated when it is time to release people from existing business units, and hire new people at a remote location. Having strong executive support for such a momentous organizational change is integral or else the shared-services operation can become fragmented.

“Speed is your friend; there are a lot of things that can happen, such as turnover and a change in executive leadership,” says DeMent. “We were working with a pharmaceutical company in Bogota, they got through initial phases, then the company sold off a large business unit. You want to knock these things out as fast as you can – in less than a year.”

Rather than trying to build a shared operation all at the same time, it is more efficient to phase it in. Start with the functions or departments that are more isolated, such as finance, which is very transactional and doesn’t touch everyone in the company. Save things that affect everyone, like HR, until later. For example, during a two-year timeline, Alpina went live with finance after seven months, HR four months after that, and IT one month later. This approach allowed the organization to adjust to the idea of a shared-services operation and react to any problems as they arose.

Take a Tiered Approach

DeMent recommends using tiers to create the most beneficial shared arrangements:

Tier 0 – Provide as many self-service, automated, on-line procedures as possible so that people can get as much done by themselves without interfacing with a human.

Tier 1 – Establish transactional procedures, move fast and automate.

Tier 2 – Provide excellent customer support; the shared services center should treat the business unit as a client (this is part of what distinguishes it from corporate operations).

Tier 3 – Establish centers of excellence made up of very small groups of people who know specific areas, to establish uniform policies and procedures.

From Internal to Outsourcing

Shared services are growing to include legal operations, engineering, marketing, corporate communications, and plant maintenance. Some companies, when they feel they are competitive as an outsourcer and when the corporate office gives the green light, have been offering their services to others. Doing this creates another profit stream, but it can also create a situation where the services center becomes too focused on making money and loses sight of its primary client – the parent company.

DeMent suggests that companies set up a mirror organization that can market and provide outsourcing while the core operation still concentrates on the business units it was created to assist. Procter & Gamble had such an arrangement with its hemispheric employee services center in Costa Rica. That facility caught the attention of IBM, which took it over and started offering those services to P&G and other clients.

Organizations tend to make the mistake of thinking that once their shared-services operation is up and running that it will take care of itself. There is always the possibility of self-sabotage if the company slips back into a duplication of efforts, or the type of corporate oversight that was in use before the center was established. One productive way to help prevent this from happening is to create a unit dedicated to continuous improvement. This would involve a staff member who is designated as shared-services quality champion; he or she attends conferences, learns about new practices, keeps up with and tests new technology, and stays abreast of any developments in the shared-services space.

Complacency is the enemy of an effective shared-services operation. “Stagnation will kill you,” DeMent warns.

By Daniel Berthiaume

A crucial aspect of many IT outsourcing and BPO initiatives is internal staff reduction. Despite the cost savings and more efficient operations that might result, few managers look forward to determining who stays and who goes when a department outsources certain functions. But properly evaluating employees in the event jobs need to be terminated is absolutely critical to BPO success.

Michael D. Brown, a corporate speaker, coach, and trainer who specializes in personal and professional development, has a few tips for managers trying to successfully execute an outsourcing-related staff reduction.

Think of the Customer

Although reducing staff is an internal process, Brown advises managers to begin with an external focus. “Define the experience you want to create for your customer, and then assess whether you have the right skills to deliver it, to be competitive, and to stay fresh and take it to the next level,” he says. “If you have some folks who can’t deliver this kind of customer experience, that’s your first filter.”

Doing the Job Is Not Enough

Brown also advises managers to be leery of employees who are willing to “do the job,” but little or nothing else. “Let go of people who never went above and beyond their job and never proactively went outside the job’s parameters to take things to the next level,” he says. “You want people who seek personal growth and have a hunger for more. People lacking these qualities or who are myopically focused on their jobs, you can do without.”

Brown warns that employees who strictly adhere to the official boundaries of their jobs don’t provide the necessary bandwidth for a company to grow. “You can’t pay for every piece of an employee’s contribution. Something has to come from passion and loyalty,” he says. “You want to keep people who say, ‘I know this isn’t my job but I really like what I’m doing,’ and develop their own skill-set on the job that they can also use in other areas of life.”

Be Honest and Open

Frequently, companies will shroud staff reductions in a veil of secrecy, leaving employees who will potentially be affected nervous and prone to gossip and innuendo. Brown says by maintaining an honest and open approach, managers can minimize disruption in the workplace.

“Be transparent early, quickly, and frequently,” Brown says. “Don’t let people hear things someplace else. If there are things you aren’t in a position to reveal, inform your employees, ‘I can’t tell you everything now.’”

Brown also recommends that managers help keep control of the inevitable office rumor mill by maintaining an open door, which can include making information available online or via a phone hotline. He further advises managers to provide transparency by holding meetings with individual departments or small groups of employees, in addition to large corporate meetings.

“Some people won’t want to ask questions in a big group setting,” he says. “People can deal with change but they cannot deal with uncertainty.”

Treat Everyone with Dignity

While Brown is clear about which employees should be the first targeted for a staff reduction, he is just as adamant that everyone, especially those whose jobs are terminated, be treated with dignity and respect throughout the process. “Don’t damage your brand with layoffs,” he says.

“The people you let go will eventually become your customers or have influence on your customers. They understand things happen and will get over it [if reductions are handled correctly], but with the effect of comments on social media like Twitter and Facebook, brand damage from disgruntled former employees can cost you more money trying to undo than the cost of creating a dignified process with features like help lines, extended benefits, retirement planning seminars, and resume workshops that help employees have a smooth exit.”

Move Forward

After reducing staff, managers must then act to assuage any fears or concerns remaining employees might have. “Reinforce why your business strategy required layoffs,” Brown says. “Don’t get into reasons why individual employees were terminated. Instead, explain why the employees who kept their jobs were chosen and how they can make themselves more competitive.”

And finally, Brown says managers should provide a direct answer to any questions about possible future staff reductions: “If people ask whether this will happen again, you need to be honest. Say, ‘We’re in a dynamic and changing marketplace and will respond accordingly.’ You can’t promise it won’t happen again.”

This article was originally published on BPO Outcomes

By Patrick Haller 

Forrester's Lutz Peichert recommends "a holistic view" of a supplier.

Effective vendor management requires more than monitoring service level agreements and keeping a watchful eye on things after the contract has been signed. Buyers can save themselves a lot of grief by examining certain criteria in advance that might not currently be part of their due diligence process.

Many companies seem to be aware of the fact that they need to improve their vendor management processes. In the latest Forrester’s Forrsights Business Decision-Makers Survey, Q4 2010, 48% of the respondents indicated that they will expand their vendor management capabilities.

And 56% plan to have a special innovation council in place within the next 12 months. In most cases, this council will include internal employees and external suppliers and a strong role for the most strategic suppliers within the organization.

The Forrester report suggests a variety of things a vendor manager should to to guarantee a productive, cost-effective relationship with a provider:

• Examining the vendor’s financial stability
• Soliciting feedback from the vendor’s current and former customers
• Acquiring information on the vendor’s wins/losses
• Monitoring the vendor’s product strategy
• Understanding the vendor’s industry/geographic focus
• Gauging the supplier’s flexibility and willingness/ability to be a partner

Nearshore Americas discussed details of the report’s findings with Lutz Peichert, Forrester Research Vice President and Principal Analyst.

NSAM: What is the most important thing that customers should be watchful for when managing vendors? 

Lutz Peichert: In general there are two things to observe: the delivery performance of the vendor and establishing a good relationship with the account manager. Delivery performance is being monitored anyway as part of the vendor management duties. And not only monitoring the performance to ensure “what we get is what we pay for,” but analyzing performance consistency and stability over time gives an indication of the vendor’s stability in the area we source. And a good relationship with the account manager or the account team will provide an information channel that can add a lot of insights when used in the right way. Through this channel a client may receive information about management moves and changes, product strategy changes, and other information.

NSAM: Do you recommended not using new vendors and only those with a track record?

LP: Not at all! For sure new vendors can’t provide a long-standing financial track record. But not using them would sacrifice any innovation, as new vendors fuel the market with innovative ideas and solutions. Financial stability in respect to the research I have published does not mean that we will not utilize “new kids on the block.” We will simply have a closer look at those vendors – i.e., the time between the financial analyses of those vendors would be shorter than the frequency in which we check “established” vendors. When Forrester supports clients in vendor selection activities we propose to ask for a three-year financial track record. But if there is a vendor in the market that is not in business for that period but the solution will help to better do business – we would take this into account when defining the risk mitigation strategy.

NSAM: How many customers should be consulted in order to get a good picture and understanding of the vendor? 

LP: This can vary heavily. In most cases – for the large vendors – the professional network of the sourcing and vendor management (SVM) manager will provide sufficient information through regular meetings. Other than that most vendors provide “user groups” or “customer advisory boards” as well, enabling the SVM professional to get in touch with peer clients of those vendors. Having a good relationship with three to five other clients shall be enough if the other sources are not sufficient. But it is important that those clients are selected by the SVM professional – not by the vendor.

NSAM: How do clients find information on the vendor’s wins and losses? 

LP: SVM professionals will need to tap into various sources. Press, Internet, or analyst firms will provide such information. A good relationship with the account team can be used as a source as well. And the relationships through customer advisory boards, user groups or other professional networks will help.

NSAM: Is it more important to ensure the vendor can provide the products needed by the client as opposed to understanding the product strategy? 

LP: For me as a client it is most important that there is a stable product strategy in place for the goods and services I purchase as my ability to deliver relies on those solutions. If the vendor’s strategy changes, this may have a negative impact on his delivery performance for the products I use. And understanding and monitoring the product strategy will allow a client to discuss any contingency plans with the vendor early enough – if the vendor doesn’t automatically inform the client about upcoming changes.

NSAM: Should it be required that the provider advise the client well in advance of changes in its industry/geographic focus? 

LP: Sure – in an ideal world, yes. But broadly forming strategic relationships is new to the market. When a real relationship is formed – all of those discussions may go away as there is a trust level between both parties. Or all of the mentioned information is provided by the vendor and openly discussed as part of the relationship. But until this level of trust is established, the SVM professional is the responsible person for vendor analysis. And it is his sole job to monitor and manage the external supply.

NSAM: What is reasonable to expect when it comes to supplier flexibility? A client could make too many changes or demands that the vendor is unable or unwilling to comply with. 

LP: Yes – but as said in my research document – it is the holistic view on the vendor’s behavior. And professional SVM managers do know the line between “reasonable” change requests and a demand that will require an addendum to an existing contract or even new contract negotiations. The intent of this measure is not to ask the vendor for all we need for free. And I am not saying we want it all for free. Flexibility can mean as well that the vendor moves first and the client and the vendor will find a mutual agreement after solving the issue. Rather than the vendor asking for a contract before moving at all. The notion of all of this is a level of partnership that needs to be established. And a partnership requires investments from both sides.

It is important to mention that all of the above points have to be seen in a holistic approach. The main reason for performing those activities is to enable clients to get indications if something changes on the vendor side. So a single indicator may not tell a big story – but comparing it with other facts and analyzing the information in relationship will provide a holistic picture. And will enable the client to take actions before something happens. Or at least be warned to react fast if something happens.

By Patrick Haller

At the beginning of December, a group of 34 Colombian software designers, mobile app developers and gaming designers participated in an exploratory tour to Silicon Valley – meeting with executives at Google, Facebook, Pixar, Apple and Cisco.

The trip – which was organized by Proexport Colombia – featured several key takeaways, including alternative business management and process approaches, leading-edge ways to market and sell software and the need for Colombians to worry less about certifications and focus more on serving core business needs.

This was the second such trip of its kind (a smaller one was held in May 2010). “At the end the feeling was that they (the US companies) could work with the Colombian firms and enter the market. The experience was very inspiring,” reported a representative from Proexport.

Understand What Matters

The main takeaways from the event included understanding the way that firms in Silicon Valley structure their business models, the importance of risk taking and reducing the widely held fear of failure and the need to focus on the business opportunities in the US. Peter Darling, Vice President of US Market Center (US-MAC), stressed the importance of Colombian firms having a presence in Silicon Valley, understanding the needs of US clients and responding to them quickly.

Cross-collaborating between US and Colombian companies was a key theme. Proexport will be organizing a trip for representatives of US firms to visit Colombia so they can see firsthand the type of software services and development being done in cities like Bogota, Barranquilla, Cartagena and Medellin.

“We Latins tend to “beat around the bush… We take a longer time to close business. In the US it is straight to the point” – Jorge Enrique Umana, an executive with Azuan

Opening Doors

Gustavo de la Vega, CEO of Proactive Consulting – soon to be rebranded as Nativapps – a developer of cross-platform apps, benefited from the access to people and companies that individuals would not normally be able to meet. “Now we are developing four or five business leads. This event is really important to get awareness in the US about what Colombian companies can do,” he said. With a development center of 80 engineers in Cartagena, Proactive Consulting established an office in San Jose, California under the Nativapps brand to help forge direct connections with US clients. Having been part of the first trip to Silicon Valley, de la Vega used this opportunity to consolidate his relationships with US contacts and the market. Currently he travels to the Valley two or three times annually, but given the success he has had, that will change to monthly in 2012.

de la Vega observed that in Silicon Valley, a startup can begin in a garage or basement with no funding and concentrate solely on developing the product before formalizing the structure or thinking about an office and attracting investment. He also noted the “union between artists and geeks” which fosters creativity and innovation, especially in design. Perhaps most importantly he saw how important it is to create apps and software with a simple user interface and usability.

One of the main challenges that is seen across Colombian industry is the lack of understanding of effective marketing. While Proactive Consulting has quality products that can compete in the US market, according the de la Vega, the company has a deficient comprehension of how to market them. “That is the key more than technology – marketing and understanding the US market because it works differently from the Colombian market,” he said. “In the US every one wants to pay with a credit card, download the software and use it. In Latin America they expect you to send an engineer to show them how to use it. The software needs to be so simple so that you don’t need guides to use it.”

Culturally, Colombians tend to believe that they must obtain degrees and certifications  in order to be taken seriously. This is a point of contention for de la Vega, “If you check the big companies like Facebook and Google they are not trying to get certifications – they are focused on the business. In Colombia they think if they get a lot of certifications they will be better, but you need to create the product in order to get better.” However, certification is definitely required if a company is developing security products or doing business with the government, he stated.

English language skills continue to be a challenge in Colombian industry, including technology. Having recognized this, Proactive Consulting contracted an institution with American teachers to train its staff in Cartagena.

Get to the Point and Innovate

Jorge Enrique Umana, Business Director of Azuan, a software developer, noticed that the ways of conducting business in the US are very different from Latin America. “We Latins tend to “beat around the bush,”” he said, “We take a longer time to close business. In the US it is straight to the point.” He believes that Colombians will have to adapt this approach if they hope to successfully conduct business with the US and Europe.

Umana echoed de la Vega’s concern that English language proficiency is not up to par, but observed that the Colombian government is trying to address the issue. While the technology infrastructure received a lot of attention from the federal government, with 50% of the population enjoying Internet access and a national push to make it available to all citizens, Colombia is still far behind the US when it comes to e-commerce and e-banking, Umana said. Physical infrastructure, such as roads and transportation, also has to improve within the country. Due to the devastation caused by an unprecedented rainy season, most of the funds are being spent on repair as opposed to improvement.

The university system, Umana observed, doesn’t prepare students for the real world so that it takes longer than it should for a new graduate to adjust to the work environment. “We have to change that approach,” he declared, “We (Azuan) are connecting with students in order to gain as much time as we can with them. We are trying to bring the company much closer to the universities and create research groups within the universities.” By doing so students are encouraged to be creative and innovative while still at university, which gives them a solid base for entering the job market.

Learn From the Best

With production operations based in Bogota, and sales offices in Panama, Mexico, Brazil, China and Colombia, Brash 3D is one of the biggest companies to have had representation in Silicon Valley. Luis Martinez, CEO of the stereoscopic production company, echoed de la Vega’s appreciation for the fact that Proexport opened doors that would have been inaccessible otherwise. This being his first trip to the Valley, Martinez was very happy to get an up close view of how companies like Facebook and Google operate.

He realized how important it is to be really close to the biggest companies in the industry in order to learn from them and work with them. “For example,” he said, “I learned a different model of managing employees from Pixar. We usually check the quality one time a week but at Pixar they do it every two days. This way they are managing the process and always controlling the production pipeline.” Another thing that struck Martinez was how these large firms provide everything to meet employee needs, such as food, beverages, dry cleaning, fitness facilities, doctors and even gum. This allows the programmers to be more productive, so much so that many of them don’t have time to take advantage of all the benefits. “In Colombia no one would work,” commented Martinez, but seeing what is available inspired some ideas as to how his own company can improve productivity.

In addition to curiosity, Brash 3D’s products also generated interest from potential investors, and collaborators. “One guy was interested in seeing if they can do production in Colombia and send it to the US,” said Martinez. “We had a positive reaction from really important people when they saw the product, like the 3D ads we are doing for movies,” reported Martinez, “They asked a lot of questions at Pixar.” Overall, Martinez believes that the US attendees did not expect the quality of the Colombian tech products and were surprised at what was presented to them.

Obtaining a visa to visit the US for Colombians can normally be difficult at best, but it was streamlined for the participants given that this was an official mission sponsored by a Colombian governmental agency. In the first quarter of 2012 Proexport will open registration for the next mission to Silicon Valley  and there are hopes that in addition to a new group, the 24 companies who participated in this round will attend again.

By Marc Tanowitz

As outsourcing buyers use service levels to measure the performance of a provider, service level agreements (SLAs) are one of the buyer’s fundamental vendor-performance management activities. An SLA’s agreed-upon quantitative provider requirements establish the baseline performance levels and define the monetary credits or other remedies associated with a provider’s failure to meet the standards. The principal role of an SLA is to align buyer and provider objectives.

First Things First: Constructing a Relevant Service Level Portfolio

Developing an effective SLA starts with creating service levels that relate as closely as possible to the buyer’s key business imperatives. After determining those imperatives, the buyer can effectively construct individual service levels.

Here are a few tips on setting truly relevant service levels:

• Service levels should focus the provider on understanding and meeting the buyer’s desired business outcomes.

• Service level design should be driven by requirements, not data. Just because a parameter is easily measured doesn’t make it suitable as a service level, and relating provider performance to its impact on the buyer’s business is more relevant than focusing on commodity transaction counts.

• An ideal set of service levels should be both collectively exhaustive – meaning a provider cannot fail to meet expectations without failing to meet at least one service level – and mutually exclusive, meaning no two SLAs measure different aspects of the same symptom.

• In general, eight to 10 service levels should be sufficient to align the overall goals of the buyer and the provider.

Keep the Structure Flexible

When initially designing an SLA framework, the buyer should keep its structure flexible enough to be substituted with alternative metrics as their needs change, especially in the case of broad, complex, and/or long-term service relationships. These metrics should include key performance indicators (KPIs), which are additional meaningful metrics not initially considered as critical as service levels. Each metric has a performance target but no associated credit, although credits may be implemented for missing an aggregate number of KPIs.

In addition, alternative metrics should include reports, metrics against which the provider is required to report to inform of potential issues, but which carry no explicit performance targets or credits/remedies. The circumstances under which a buyer can exchange SLAs and KPIs should be defined, such as a cap on the number of exchanges per year and the automatic promotion of KPIs to service levels if a provider fails to meet the prescribed performance a certain number of times in a specific period.

Building Individual Service Levels

Once the service level portfolio is defined, focus shifts to making individual service levels measurable and relevant. The effort expended to define and implement high-quality service levels will be repaid many times through the contract period.

Following are three key pointers on how buyers can properly construct individual service levels:

1. Take time to ensure the service levels are as unambiguous and quantitative as possible. While “user satisfaction” might seem to be the ultimate expression of a desired business outcome, the details of implementation typically make it meaningless in practice. With sufficient effort, the buyer can generally define what “user satisfaction” really means and convert that to measurable parameters, such as responsiveness or availability.

2. Do not be bound by convention in making service levels closely reflect the user experience across the entire scope of the provider’s responsibilities. For example, SaaS vendors (to the extent that they offer SLAs) will typically measure availability, response time, etc., from within their data centers. This methodology excludes the performance of the provider’s Internet connection, routers, and security/VPN termination infrastructure.

3. To minimize ambiguity, include the following components: Short name reference (for manageability and ease of reference), a full definition (description of the measurement, points of demarcation), measurement parameters (data sources and data fields used, frequency of measurement), calculation (calculation frequency, averaging approach used ‐ preferably in form of a formula), required performance from the provider, and specific exceptions/exclusions (beyond broad exclusions dealt with in the master agreement such as Force Majeure), with performance excused only to the extent affected by, and only for the duration of, the exception circumstance.

Provided by Pace Harmon

In BPO agreements where services are often labor-based, service levels relating to the timeliness (productivity) or quality (data entry accuracy) of execution provide meaningful measures of delivery performance.

Marc Tanowitz is a principal at outsourcing advisory firm Pace Harmon.

This article was originally published on BPO Outcomes

By Patrick Haller

Landlocked between heavy-hitters Argentina, Brazil and capped by Peru, Paraguay is not yet a viable Nearshore destination. Yet, with over 80% of the population below 30 and an appealing tax regime – Paraguay is not the backwater many people might assume. To get a real world perspective, we checked in with a fast-growing digital media agency with A-list US clients, that belies the typical stereotype of this often overlooked South American nation.

Making Dreams Reality

Rodrigo Weiberlen, General Director of ONIRIA/TBWA

Rodrigo Weiberlen, General Director of ONIRIA/TBWA a unique marketing and branding company, reported that “Paraguay is having a great time of economic and social awakening,” in a recent interview.

“We started the company when we were 21 and 22 years old. We both lived with our parents and we didn’t have many obligations,” said Weiberlen. “Those first five years were tough and hard to understand the business, but it was at a comfortable time. It was like a little laboratory and we learned more about the business with small clients and then attracted larger clients.”

Camilo Guanes, General Director - Creative of ONIRIA/TBWA

Weiberlen and his business partner Camilo Guanes chose the name ONIRIA/TBWA as it is derived from the word “oneiric,” meaning the ideal state of dreams. “We are a group of dreamers, people who follow dreams and make them real,” he explained. “Our vision is to make the things we never believed we could do. That’s our goal, that’s the idea that makes us think differently, to look for new answers and try to see the future in every project we take.” This philosophy has attracted clients like Coca Cola, the World Wildlife Fund, Nivea, the Red Cross and T-Mobile who have responded to ONIRIA/TBWA’s success with forming connections through their unique design approach and understanding of the consumer market.

Sustainable and Fruitful Growth

“During the past 11 years we have had sustainable growth,” said Weiberlen, “now we have 40 employees. Our vision of the business is that advertising must reach beyond production and we take the place of strategic partners within the client’s business. We give ideas to the clients to grow their business.” In order to provide services they aren’t able to, such as mobile apps and digital technology, ONIRIA/TBWA partners with other companies. However, given the limited Paraguayan market for products like Iphones, there has been very little call for them to develop such products and the agency concentrates on social media, web platforms, websites and online videos.

This year ONIRIA/TBWA started working with an educational NGO that didn’t know how to communicate everything they do to the public. When they approached ONIRIA/TBWA for a traditional campaign, the creatives at the agency went to the street to find out exactly what people knew about their client. While some did know about the work, they didn’t know what they did with the money. Rather than launch a standard advertising campaign, ONIRIA/TBWA created a TV program for the NGO which was funded through sponsorships. “Now they have good positioning, a good time slot and money,” said Weiberlen.

ONIRIA/TBWA also takes an innovative approach to employee recruitment. In addition to trying to get the best local talent who know the brands and who are able to contribute “ideas that seduce people,” Weiberlen explained they also look at the bigger creative picture that encompasses not only designers but also musicians, artists, writers for a great mix of people from different disciplines. They also hire people from other countries and currently have representatives of seven different nationalities working in the agency, including France, Mexico, Argentina, Brazil and Colombia.

“The other thing that is important for us is that the person must have a hobby, a life outside of the company.” Weiberlen stressed, “They must have something that inspires them because we want people who have a life outside of the company and a hobby is something that you do from passion. Maybe it is a very little thing for the world, but it something important for them and for us. It keeps them motivated.”

ONIRIA/TBWA is also working on a campaign for the Paraguayan government to attract investment and tourism while promoting a creative economy derived from web development and design services that will be exported to other countries.

 (This story – like many we do – was generated through the extensive reach of the Nearshore Americas’  professional network. We thank Fabrizio Opertti, an executive with the InterAmerican Development Bank for enlightening us on Paraguay’s assets.)

SOURCE: FOLIOMAG

Woodland Hills, California-based Advanstar Communications—the trade publisher that reduced its debt by $385 million last fall—said Tuesday it has struck an agreement to outsource its production-related functions for the company’s magazines and directories to global IT services company HCL Technologies.

The agreement, Advanstar said, will result in the elimination of approximately 100 employees at its Duluth, Minnesota facility. Those staffers are expected to be offered temporary employment of at least four months with HCL and will be eligible to receive severance from Advanstar at the conclusion of their employment with HCL.

Advanstar will continue to employ roughly 75 people in Duluth, the company said.

According to Advanstar CEO Joe Loggia [pictured], the decision to outsource production was not “made lightly.” “Given the many challenges facing the business-to-business print industry, we must change the way we do business in order to continue to provide maximum value and service to our customers,” he said in a statement. “In this highly competitive media marketplace, we need to focus on the things that we do well, creating a valuable platform for our clients, while handling other functions through partnerships or outsourcing agreements that will provide the economies of scale we need to operate more efficiently.”

Last fall, Advanstar reached an agreement with its lenders to eliminate approximately $385 million in second lien and mezzanine debt. As of September, the company still carried $505 million in first lien debt. Its investors agreed to inject about $35 million of new capital into the company.

Serving the fashion, life sciences and powersports industries, Advanstar was acquired in 2007 by a consortium led by private equity firm Veronis Suhler Stevenson for $1.1 billion. Today, hedge fund sponsor Anchorage Advisors is a majority stakeholder along with VSS.