By Dan Berthiaume

Everyone seems to have at least one story about a nightmare experience dealing with telephone customer service. The fact that many call center providers are located in countries where language and customs are significantly different from US norms only exacerbates the problem. Some experts recommend that companies outsourcing call center functions attack the problem of poor customer service by focusing more attention on serving the needs of customers. But is that always the best strategy?

Michael D. Brown, a corporate consultant and trainer who specializes in developing professional brands, has a slightly different recommendation. “Step back and take care of the employee first,” Brown says. “They will then take care of the customer. Make the employee number one and the customer number two.”

Brown realizes that his advice to place the frontline employee before the customer amounts to heresy in the eyes of many customer service gurus, but he hastens to explain that this is actually the best way to ensure a top-quality customer experience. “When you look at unfavorable dealings with the end user, there is a rush to judgment to put a band-aid on the situation,” says Brown.

Instead of approaching each individual customer complaint as a separate issue necessitating an on-the-spot fix, Brown says companies should make more effort to understand how the frontline call center employees actually spend their day. “Take a side-by-side walk with your frontline employees,” says Brown. “See what a typical day is like; see what types of calls they’re getting and where the roadblocks are. Then ask, ‘Do I have the right processes in place?’”

Brown says real-time communication technologies such as Skype and FaceTime allow US companies to virtually perform side-by-side walking with call center employees who may be working from distant offshore locations.

After performing side-by-side walking (either in-person or virtual), Brown says companies should then go about “smart tasking” outsourced call center employees. “What do the employees do besides just answering calls?” asks Brown. “To deliver a world-class call center customer experience, look at the sequence of tasks employees perform and see if you can make any changes to enable them to deliver a better customer experience.”

Let Frontline Employees Make it Right

Following smart tasking, Brown says companies should provide outsourced call center employees with what he calls “Make it Right” power, or the ability to solve certain problems on their own. “Often the person answering the call can do nothing other than pass on the call to someone else when there is a problem,” says Brown. The customer becomes even more infuriated when they are passed to person after person.”

Instead, Brown says the employee manual should provide frontline employees specific instructions on how to resolve common issues and that the second person they speak to should have the authority to handle all problems.

“Most customer problems are not rocket science,” comments Brown. “The frontline employees hear the same issues day in, day out. Ask them what they are doing day to day and look for organically developed solutions.” Brown says companies should then compile these solutions into a continually growing “What-If Arsenal” of resolutions to common problems that is built from the bottom-up, guaranteeing employee buy-in.

Brown says is it also important for companies engaged in call center BPO to encourage “bubble up innovation,” or innovative ideas that come from frontline employee brainstorming sessions. “Often we don’t have the answers, but need innovation bubbling up from the bottom,” Brown says. “It gives the frontline employees ownership in the workplace.”

Clued In

Brown says all the steps he recommends to achieve world-class customer service in an outsourced call center will not succeed if everyone involved is not relentlessly focused on the same goal. “Does everyone understand the vision, or are people in different silos?” he asks.

Of course, companies also need to simply follow through and make world-class customer service happen at their outsourced call centers. This includes remaining open to making changes in response to changing needs of customers. “Keep it fresh,” says Brown. “Things will change. Look at what happened to Borders. To take call center customer service to the next level, you need to say enough call centers are giving the industry a bad name, it’s time for us to rise to the top.”

An essential part of making it happen is ensuring frontline employees fully understand what customers expect from products and services. “Too often the call center employees haven’t a clue,” he states. “They must understand how things are made, not necessarily from a technical standpoint but in terms of the promised experience. Often the call center employees don’t know what has been promised to the customer.”

By Rosanne D’Ausilio PhD

There is what we call a moment of truth when a customer makes a decision about you, your company, maybe even all companies in your industry, based on their interaction with anyone from the front lines up to and including your CEO. In those first three sentences, a customer determines whether their interaction will be a good experience, a bad experience, or a waste of their time.

When talking about customer service, customer satisfaction, and customer retention, you often hear that the best way to determine how you’re doing is to ask your customer. And that’s absolutely true. However, if you really want to know how your company is doing, ask your internal customer.

Not many companies do this. Their focus seems to be on the external customer only. But knowing what’s going on with internal customers is key to improving the satisfaction of external ones.

Who is your internal customer? Your employees, your peers, your direct reports, any and every one who has an impact on the customer experience. And how do you assess them? What do we look for when we take the pulse of a company?

• What are the strengths of your people?

• What are their weaknesses?

• What are the commonalities among applications?

• What are the changes currently going on in your organization?

• Hardware
• Software
• Teams
• Rules/Regulations

• What is today’s stress level?

• What doesn’t get communicated powerfully?

• What feels like you’re working with one hand tied behind your back?

• What are the mixed messages that may be rampant at your company?

• Why are your customers calling – do they have a question, a request, a complaint or a problem?

• What is a Typical Call?

• What is a Call from Hell?

• What’s the biggest gripe on the side of the customer?

• What’s the biggest gripe on the side of the employee?

• What gets accelerated and why?

• What empowerment exists, if any?

• What works really well?

• In a perfect world what would you do differently?

When you can answer these questions, you’re really getting to know your company and its people.

How do you accomplish this? We do it by:

1) Interviewing people

2) Monitoring calls

3) Studying the flow

4) Navigation of screens

5) After-call process

However, we don’t want to talk only to the best people or the highest level, but to all of them, whenever possible, and at all productivity levels.

Armed with this information, you can then identify the gaps and with that knowledge in hand, you are best able to present options. These options can fall into one of three categories:

(1) People

(2) Process

(3) Technology

If it is determined that it’s a people issue (which often it is), design customized training sessions to address the gaps and kick it up a notch in the area of customer service. We suggest these classes be delivered over time so that retention is improved and delivery is in real time addressing whatever current challenges exist.

If it is a technology issue, usually it’s caused by silos, the left hand not knowing what the right hand is doing. Many companies because of heavy investment in technology keep trying to make it work. Reminds me of the definition of insanity: Doing the same thing over and over again expecting different results.

If the results show a process issue, ‘be a customer’ and go through the process to see where the gaps are. Stand at the end, what is the result you want and how did you get there? What got in the way? What would make it smoother? Again, what are the gaps and how do you either eliminate them, fill them, or replace what isn’t working?

Rosanne D’Auslio, Ph.D., President of Human Technologies Global, Inc., and known as “the practical champion of the human,” is an industrial psychologist, consultant, master trainer, bestselling author, executive coach, and customer service expert. She also writes the complimentary tips newsletter How To Kick Your Customer Service Up A Notch!

By Patrick Haller

With 2012 in full-swing, a critical look at what lies ahead for Nearshoring  is in order. With a shaky global economy, and some forecasts calling for a sluggish year in IT and BPO sourcing, this is no time to be complacent.  Whether it’s building solid skill sets, creating sufficient scale, matching client’s expectations, managing expansion, or doing business amidst social change and myopic political theater, providers have a lot to confront. We tapped some of the leading experts in the Nearshoring space for their answer to the burning question: What is the single biggest challenge you think the Nearshore outsourcing industry faces in 2012?

David Rutchik

Partner, Pace Harmon, LLC

For outsourcing buyers, Nearshore vendors are often a better buy because of the typically touted travel, time zone, and language benefits, not necessarily the capabilities provided. As Nearshore economies become stronger and currency arbitrage becomes a challenge, Nearshore outsourcing vendors must build out their skill sets so they can stand on their own. For ITO they need to develop a greater breadth of capabilities, and for BPO they need to improve on both the depth and breadth of capabilities.

Anupam Govil

President/Partner, Avasense Inc./Avasant LLC

Globally, 2012 will be an interesting year for outsourcing as technological (cloud) and economic disruptions will shape the future of the industry. Gauging by recession-affected market sentiments, most companies are unlikely to tinker with their current outsourcing strategy (new contracts, change service locations, etc). This would in turn limit new expansion opportunities at a global level.

From a Nearshore point of view it will be a crucial year. While many providers have established significant presence in Latin America, the second stage of scaling-up looks challenging. The key reason for this is the lack of depth in service delivery maturity. Many companies in the region are finding it challenging to replicate quality, and lack maturity models as well as training programs that have been one of the successes in other offshore destinations.

It is imperative for the region to develop a strong mechanism to ensure constant flow of trained professionals and educate middle management on business aspects of remote service delivery (IT management, maturity models, IT security, client relationships, etc.). Some of the smarter providers have achieved this by cross-pollinating resources between their Nearshore and offshore locations.

Atul Vashistha

Chairman/CEO, Neo Group

I think the biggest challenge is the ability to show a value proposition beyond cost at scale. While one can show resources in many locations lower in cost than the USA, one needs to show capability at scale that can show better outcomes: quality and/or speed and/or greater ability to collaborate.

In the end, it’s about credibility.

Peter Ryan

Lead Analyst, Ovum

In my view, the single largest disruptor in the coming 12 months will be political/economic instability in the region. The year has not gotten off to a good start with Daniel Ortega hosting political pariahs Hugo Chavez and Iran’s Ahmadinejad in Managua for Ortega’s inauguration . The optics of this are beyond terrible in the US. Couple that with a Mexican election that no one knows how it will turn out in a country that is facing monumental problems around violence and uncertainty around Argentina’s economic direction, it is possible that American firms may look to other regions, or even domestically. for service delivery alternatives.

Dawn Tiura Evans

CEO, Sourcing Interests Group

The biggest challenge with Nearshore as a “destination,” in my opinion, is that it is truly “many destinations” with few overlapping commonalities, laws, and capabilities. My hope is that 2012 is the year of increased awareness of the issues facing Nearshore, resulting in the initiation of more government support for infrastructure, education, and legal reform. Until Nearshore can start converging as a single destination, it is going to struggle to gain the traction that India or China is capable of creating.

Eric Simonson

Managing Partner of Research, Everest Group

Nearshore outsourcing will face continued concerns about its security risk profile, which may be compounded by rhetoric from the US election cycle. The political spin will potentially heighten the criticism of Nearshore/offshore jobs. More fundamentally, we may see the US questioning its objectives and commitment to projecting itself beyond its own borders. Growth in Nearshoring is likely to face headwinds as uncertainty awaits around most corners.

Jeffrey Sheehan

Senior Vice President, Site Selection Group

To be fair when discussing Nearshoring, it should always be a two-part question:

1.Challenges/Concerns

2. Benefits/Opportunities

This may seem like a broken record regarding the challenges/concerns for Nearshoring, but this is what I believe:

To begin, many companies have gone beyond having concerns for Nearshoring and thus removing the challenge for the growth in Nearshoring. With that being said, we clearly are still seeing companies, when we discuss the opportunities of Nearshoring, having concerns in making a decision to be the pioneer as “they” see it, in making a jump to Nearshore. For many companies, countries such as the Dominican Republic, Costa Rica, and Guatemala are seen as making progress in building their base with a skilled workforce and such but still are a ways away from being ideal to some groups. Countries such as Bolivia and Venezuela are very touchy due to the political environment. With that being said, we are currently looking at sites for various clients in several Central American countries. For manufacturing groups, the economic numbers are too compelling, especially in Mexico; supply chain relief, speed to market, NAFTA, cultural affinity. The challenge for Mexico is simply safety. This has been compounded for the worse with the ongoing perception/reality of the violence….this is a HUGE challenge. The business benefits are great but the perception/reality of doing business there is one that needs to be changed; many companies will not take that risk.

Juan Manuel Gonzalez

Research Manager, Argentina Office & Enterprise Communications Industry Manager,

Frost & Sullivan

I think during 2012 the big challenge that Nearshore providers will face is the pressure from clients for consistent achievement of key performance indicators while keeping costs down, along with the ability to measure customer satisfaction and first-call resolution.

By Rosanne D’Ausilio, Ph.D.

The interaction anyone has at any level with your employees, including you, gives a customer an opportunity to make a judgment about you, your company, and all companies like yours. I’m not just talking about call centers here. All technical support or help desk personnel are included as well. As a matter of fact, anyone who is in the customer service business – period.

The preamble to the United States Constitution begins, ‘We, the people…” I feel strongly that we, the people, are what make the difference in life, both personally and professionally. But how does that relate to customer service?

With continued focus on customer satisfaction, customer retention, and lifetime value of the customer, it is no surprise that contact center operations continue to increase in importance as the primary hub of a customer’s experience. For the customer, the person on the other end of the phone is the company. The contact center is still the most common way that customers get in touch with businesses. In fact, Gartner reports 92% of all contact is through the center. And it’s been reported that 70% to 90% of what happens with customers is driven by human nature, having nothing to do with technology. State-of-the-art technology is a necessity today, but it is meant to enable human endeavors, not to disable them.

I often talk about taking customer service and “kicking it up a notch.” In the food industry, the word “lagniappe” is often used. Its definition is “a small present given to a customer with a purchase.” For example, when you go to the bakery and buy a dozen donuts or bagels, you oftentimes get a free one or a baker’s dozen. That’s what customer service should be about: giving the customer more than they expected! Let’s bring lagniappe into the contact center industry.

Customer service is those activities provided by a company’s employees that enhance the ability of a customer to realize the full potential value of a product or service before and after the sale is made, thereby leading to satisfaction and repurchase.

The First W: Why? 

The state of customer service today is not good, be it over the phone or self-service. Because 92% of people feel their call experience is important in shaping the image of a company, this reinforces the importance of centers in branding the image of their companies.

According to a Mobius Management Systems Survey, here’s what happened because of poor customer service:

• 60% cancelled accounts with banks

• 36% changed insurance providers

• 40% changed telephone companies

• 35% changed credit card providers

• 37% changed Internet service providers

Are you one of these statistics? I certainly am.

In a study done by Purdue University and BenchmarkPortal.com, in answer to (1) how did agents satisfy your needs and handle the call?, and (2) based on any negative experience, would you stop using this company in the future?, the findings reveal a strong correlation between the participant’s age and the tendency to stop using the company after a bad experience.

What does this mean? Younger participants were less tolerant and more likely to move to the competition. People over 65 were found to be more demanding than those in middle age.

What can you do? Give younger callers a “wow” experience – maintain their loyalty. People over 36 probably have more of an “emotional bank account” with the company they are dealing with – maybe had some good experience and therefore are more willing to forgive.

70% of Americans are willing to spend an average of 13% more with companies they believe provide excellent customer service – up from 9% last year. But most feel businesses aren’t measuring up. In countries around the world, a majority of consumers are willing to spend more with companies they believe provide excellent service, with the average amount they are willing to spend ranging from 7% to 22% more.

Average Percentage More Than Consumers Are Willing to Spend

Source: 2011 American Express Global Customer Service Barometer Survey

In a recent study (CRM Magazine/PeopleSoft Webinar on How Usability Helps to Drive a Profitable Contact Center), the number of applications required for agents to access customer inquiries were:

3.7% just 1

81.5% 2 – 5

7.4% 5 – 10

7.4% more than 10

As you can see, the majority of applications are two to five. The goal, of course, is to link every point of contact to one central location for a customer-centric, synchronized approach satisfying customer experiences with every interaction.

Strategies for success for world class service should include:

• Respond promptly

• Handle requests through the customers’ choice of medium

• Be brief and clear

• Reduce back and forth communications (especially in writing, i.e., e-mail; kick it up to a phone call if it goes beyond two messages)

• Personalize the service

• Delight the customer

What does it mean to delight the customer? It means inform and educate them, offer options, and diffuse any anger, if necessary. It also means establishing your expertise and professionalism, and taking ownership of the call.

Remember we’re still on the first W – the Why. Today’s pressures on agents are different than in the past. They are asked to handle more customers, more volume, more complex and/or complicated calls. After all, if we could handle our issues with self-service, we probably would not call. But if we tried self-service and it didn’t work, now we’re upset and it’s an escalated call from the get-go.

Agents are expected to provide more information, do it faster, and be available and accessible. But they are also expected to lower costs, generate revenue, incorporate new technologies, ensure closure and commitment, and deliver great service – yesterday, of course.

The U.S. Centers for Disease Control has concluded that the causes of death for people under 65 are:

21% – environment – war, accidents, crimes

9% – health care system – doctors, hospitals, medications

17% – human biology – not because of lifestyle

53% – because of the way people choose to live their lives!!!

The good news here is that for more than half of us, it’s about choice. There’s something we can do about it.

Who?

Who needs to be involved in the effort to improve customer service? Front-line agents/representatives, supervisors, team leads, managers, assistant managers, internal customers, and other departments – anyone who is a touch point so that he or she can learn to speak the same language, and more importantly, not be in an adversarial position, but rather feels that together they are serving the external customer or end user.

Where?

Certainly it is most cost effective to have training on site. However, distractions are rampant and the participant remains available to other personnel and to solve problems.

Offsite is more costly. However, there are no distractions, and the participants are unavailable to other departments, their managers, or any issues. I believe there is psychic value in taking people away from their workstations and off-site to acknowledge the tough jobs they have.

What?

The following modules provide a robust, powerful, and succinct training curriculum:

I also suggest university certification to up the ante. The more professionally you treat your employees, the more professionally they will treat your customers.

When?

For new hires, training should occur monthly, continually, consistently, whenever change occurs, when stressors increase, and as needed. Each employee should get a minimum of 24 hours per year of ongoing training, spread out over time for the most absorption. We divide our trainings into two four-hour sessions per day and deliver six days per employee. Therefore, 30 people can participate in the training per day. If there has been no ongoing training, we do four days once a month for four months and then a session three months later, and then another three months later. In this manner, training is customized, in real time, and can address whatever challenges are presented when they occur.

Remember, as it reminds us in the preamble of` the US Constitution, “We, the people,” make the difference.

Rosanne D’Auslio, Ph.D., is President of Human Technologies Global, Inc. Known as “the practical champion of the human,” she is an industrial psychologist, consultant, master trainer, bestselling author, executive coach, and customer service expert.

By Clay Browne

Once a sleepy backwater of Central America, and known more for its beautiful beaches than the strength of its economy, English-speaking Belize is beginning to spring to life as a 21st century outsourcing destination.

Belize’s economy has long been dependent on agriculture, but tourism has grown significantly over the last couple of decades to become the largest foreign exchange earner in the country. The BPO industry in Belize is still quite young.  Yet there are clear signs that private industry and public agencies are seriously examining how to create the right ecosystem to foster long term growth.

The call center industry is, not surprisingly, where the action is for Belize. The country employs an estimated 1,500 agents, mostly around Belize City and Belmopan (about 90 minutes from Belize City). Maturity of operations spans from the basic, commodity-driven service provider like Ready Call (among its clients is the notoriously hard driving TracFone) to the more feature rich and high-touch operator like Transparent (described below).

One of the biggest hurdles the country faces is its tumultuous ICT environment where the local telecom player – Belize Telemedia – has been reclaimed by the government after a bruising battle with the former chief investor, and behind the scenes financier,  Lord Micheal Ashcroft . (Much has been written about Ashcroft’s complicated relationship and financial influence in Belize, including this piece in The Guardian.) Critics argue that Belize Telemedia (BTL) has behaved like a predatory monopoly player, shutting out competitors and offering little in the way of ICT innovation.

Upon arriving in office two years ago, Prime Minister Dean Barrow decided enough was enough and took action against BTL, which has resulted in the carrier being nationalized. Despite this change, true telecom service liberalization has yet to occur. Recently an agreement was reached to enable ‘rationalized Bandwidth pricing ‘ to be provided to BPO operators in Belize – substantially reducing service fees.

Belize is one of the most sparsely populated countries in Latin America, with a population of around 350,000. Around one-fifth of the population, upwards of 60,000 people, live in the capital Belize City.

Belize has a reasonably good public school system, with functional literacy estimated to be around 75 percent for the country and above 80 percent in the urban areas. Belize has never had much of an industrial base, so the work force has traditionally been focused on service industries. Belize City has developed an above-average infrastructure over the last decade or two, including reliable Internet and cell phone service throughout the area.

The IT outsourcing industry is just in its infancy in Belize, but BPO companies report that there is already a good supply of entry-level software developers available.

“We are pleased that several local investors have expressed interest in developing Data Parks…our Government is willing to offer attractive incentives to those willing to invest in these facilities” – Prime Minister Dean Barrow

Call Centered

Call centers are by far the largest sector of Belize’s BPO industry, with five operations of varying sizes underway and several more in the exploratory or planning stages. Ready Call opened the first call center in Belize in 2005, and there will be at least ten call centers operations in Belize by the end of 2012. The large pool of native English speaking potential employees is obviously a big plus, and the relative stability and increasingly business-friendly climate of Belize are also attracting attention.

The Belize Trade and Investment Development Service (Beltraide) is a governmental organization founded in 2000 to foster business development and encourage investment in Belize. Malcolm Sobers, a BPO/ITES & Financial Services Industry Specialist for Beltraide, is an eloquent spokesman for the organization who points out how a wide range of recent changes in Belize have made it much easier for call center operations to do business in the country.

“We have undergone a restructuring of Beltraide and have developed a specific division that is focusing on ITES (Information Technology Enabled Services). The BPO industry, along with other services, falls under that umbrella,” Prime Minister Barrow told Nearshore Americas’ Kirk Laughlin, during a recent visit to Belize.

Mr. Barrow went on to say that one of his biggest concerns is the lack of available facilities. “We have been working with many building owners that have empty space, but only some are adequate for housing large numbers of workers,” he said. “We are pleased that several local investors have expressed interest in developing Data Parks…our Government is willing to offer attractive incentives to those willing to invest in these facilities. ”

Also on the plus side, the country has recently liberalized its labor laws. Beltraide, has also launched a BPO Certification Program with support from the Ministry of Education. This program teaches Belizeans the basic technical and customer service skills they need to work in call centers. The initial 80-hour pilot training program was very well received and graduated 160 ready to work employees in just a couple of months, and the full-scale program is expected to produce a minimum of 1500 trainees in 2012. Beltraide works directly with the individual call center companies to provide them with a trained labor pool for their current and future needs.

Sobers also emphasized the financial and tax benefits to doing business in Belize. “Belize does not tax corporate profits on the national or local level, and our laws allow 100 percent repatriation of profits as well as allowing businesses to establish local bank accounts in US dollars.”

Transparent BPO

Scott Newman, CEO of Transparent BPO, is unabashedly enthusiastic about Belize as a place to do business. Transparent BPO is headquartered in Baltimore, Maryland, but has all of its call center operations in Belize. Transparent BPO began with a small 30-seat call center in Belize City in 2009, moved up to a 110-seat operation in 2010 and is now doubling capacity again, with construction of a 220-seat call center underway.

Newman acknowledged that there were some significant issues to be ironed out when they first set up their operation, including a generally negative attitude about the call center industry.

“But the business climate for call centers has improved dramatically since we began,” he continues, “and Belize is a great place to do business today.” Newman credits the establishment of Beltraide as the watershed moment when both the bureaucratic barriers and the negative attitude toward the BPO industry started to break down.

By Luke Bujarski

Given its close proximity to the mainland and ample bilingual workforce, Puerto Rico should stand out as an ideal Nearshore platform for call centers and BPO operators – right? 

Not so fast: Cost arbitrage aside – a lack of coordinated planning around a knowledge economy may have also set Puerto Rico back a long way behind similar Caribbean and Central American (CCA) markets, particularly for knowledge-intensive services. Here, lessons can be drawn from the successes Costa Rica has had in attracting technology-enabled captive operations. And, given the right global market environment, Puerto Rico could see expansion beyond the current 5,000 or so contact center seats. However, with a premium on wages and a solid base of human capital, planning and promotional authorities might be better off looking higher up on the global services value chain.

BPO Market Overview

As a commonwealth of the US, Puerto Ricans are US citizens, which means that this island nation must abide by the same federal minimum wage laws that apply on the mainland. From a pure cost-play perspective, this immediately puts Puerto Rico at a disadvantage to other CCA (and much of the developing world) markets such as the Dominican Republic, Jamaica, and Belize. However, this has not stopped companies like Atento, American Airlines, AT&T and the US federal government (the IRS and the Social Security Administration) from servicing Puerto Rico’s relatively large domestic market, in addition to utilizing its bilingual and bicultural workforce as a platform to service the Americas.

Research and advisory firm Zagada Markets put the 2011 contact center market in Puerto Rico at approximately 5,500 seats and $110 million in revenues. Where Puerto Rico loses out on wage rates, it gains some ground on telecommunications costs. According to Philip Peters from Zagada, “Puerto Rico has one of the most efficient and lowest-cost communications systems in the Caribbean.”

The country has other strengths which have attracted interest in the contact center industry. Estimates from standardized test scores suggest that nearly a quarter of the total population (approximately four million) is completely fluent in both English and Spanish. Likewise, Puerto Rico has a solid education infrastructure relative to other CCA markets. Universities graduate 30,000 students per year, and literacy rates are comparable to US standards.

A focus on manufacturing and failure to position itself in line with knowledge-enabled services such as network management, applications development, IT consulting and software R&D has, for the most part, left Puerto Rico out of the global services equation

Quick Stats on Puerto Rico’s Economy

- Total Population: 3.99 million

- Major Population Center: San Juan – Population: 2.73 million

- GDP per capita: $19,600

- Currency: US Dollar

- GDP real growth: 2010: -5.8 %; 2009: -3.7 %; 2008: -2.8 %

- Literacy Rate: 94.6 %

- Unemployment: 16.5 %

Competitive as a US Location, but Not Ideally Suited for Global Services

The country transitioned from agriculture into manufacturing during the 1950s in an effort to create jobs for this densely populated island. Known as Operation Bootstrap, the US government invested millions to promote the sector, which eventually moved the manufacturing base to more capital-intensive production in pharmaceuticals, chemicals, machinery and electronics. However, growing global competition continues to strain Puerto Rico’s manufacturing base leaving the latest unemployment rate at 16.5 percent. Additional public sector layoffs are expected as Puerto Rico’s economy struggles to regain its footing from the global financial crisis (see GDP growth above). Construction, retail, and the financial sector have also seen significant job cuts over the last two years.

Likewise, a focus on manufacturing and failure to position itself in line with knowledge-enabled services such as network management, applications development, IT consulting and software R&D has, for the most part, left Puerto Rico out of the global services equation. Furthermore, emerging BPO players in the CCA region including Jamaica, Belize, Nicaragua, Guatemala, and Honduras offer cheaper alternatives for contact center operators like Convergys, which recently announced plans to open a 1,000-seat center in Montego Bay, Jamaica.

Puerto Rico Could Learn A Lot From Costa Rica

A heavy focus on manufacturing and a lack of strategic planning around IT and knowledge-driven sectors may have permanently set Puerto Rico behind places like Costa Rica. Costa Rica has a similar-sized market in terms of population and education, but continues to attract technology services operations from companies like IBM and Dell, as well as niche design and digital marketing firms like Possible Worldwide, which currently staffs over two hundred programmers and application developers in their offices in San Juan. Costa Rica has remained competitive in this space despite a relatively small labor pool and rising wages. And when asked whether there is a shortage of IT talent, Possible Worldwide Country Director Yvette Pascua explained quite the contrary. “Many of our most talented designers had previously worked for the big technology companies and come to us trained with a solid knowledge base in IT.”

Costa Rica has managed to create this ecosystem and institutional base around IT services, despite high wages compared to other CCA countries. But developing a culture and infrastructure for IT services takes time, and with a historic commitment to education by the government and investment promotion agencies like CINDE, Costa Rica has steadily built a reputation as a center of excellence in IT-enabled services.

Dating back to 1948 and Operation Bootstrap, Puerto Rico continues to focus its efforts on attracting manufacturing firms, particularly in the pharmaceuticals space – although one would not know it from looking at the country’s premier economic development agency website. Furniture, textiles, and needlework are among the handful of sectors targeted for growth by the Puerto Rico Industrial Development Company (PRIDCO). Ultimately, a stronger long-term vision and coordination at the national level will be needed to pitch global service providers on Puerto Rico and this country’s relatively strong base of human capital. “While the numbers [graduation rates] may be strong, the outcomes have not produced many local firms or have attracted the kind of attention Costa Rica has,” explained Peters from Zagada.

External Factors Will Likely Decide Puerto Rico’s Fate

The future of Puerto Rico’s place in the global services sector will depend heavily on what happens outside its borders. The upcoming 2012 election in the United States has some worried about legislative action set to discourage offshore outsourcing outright, via tax reforms pitted against firms that choose to offshore. While unlikely, this scenario could be a boon for Puerto Rico in the outsourcing space, given its commonwealth status and marginal cost competitiveness over markets on the mainland.

And while Puerto Rico continues to be at a cost disadvantage to other CCA markets, the wage gap could close faster than expected. Unscrupulous contact center operators in countries like Guatemala and Jamaica have been notorious for artificially inflating wage rates in their attempts to maximize short-term profits. If wages continue to go up in these markets, it could make Puerto Rico’s generous tax breaks and duty-free access to the US market much more attractive to multinationals.

Source: Computer World UK

Call centre offshoring comes under bipartisan attack in Congress – Law would penalise companies that move call centres overseas

Four US lawmakers (three Democrats and one Republican) have teamed up to attack call centre outsourcing by introducing a bill that would penalise any company that moves a call centre overseas.

The bill would make any company that moves a call centre offshore ineligible for any federal grants or loans. It would require the US Labour Department to maintain a list of employers who relocate a call centre overseas and force companies to provide at least 120 days’ notice before doing so.

It would also require a call centre worker to disclose his or hers location at the beginning of the call, if the caller request it.

The US Call Centre and Consumer Protection Act (HR 3596), was introduced by US Representative Timothy Bishop and announced at news conference that included representatives of the Communication Workers of America. The measure’s co-sponsors include David McKinley, Gene Green, and Michael Michaud.

“Outsourcing, in my view, is one of the scourges of our economy, and one of the reasons we are struggling so to knock down the unemployment rate,” said Bishop. He said there are 4.7 million call center employees today, while in 2006 there were 5.3 million.

Broadband Helps Local Call Centres

In August, FCC Chairman Julius Genachowski said that broadband deployments are boosting call centre industry employment. He claimed that an average of 4,000 call centre jobs are being created each month.

Alpine Access, a Denver-based call centre provider with a work-from-home business model, has 5,000 agents working in 41 states and said it has added 1,000 since August. It also has agents in Canada, who serve that market.

Christopher Carrington, president and CEO of Alpine, said that 70 percent of his company’s growth over the past three years is the result of companies moving call center work back to the US. “There is definitely a trend of jobs returning [from] offshore back to onshore,” said Carrington. “In reality, without legislation the momentum of the market is already leaning that way.”

Carrington said the move of call center jobs back to the US is largely being driven by consumers.

“The American consumer has become increasingly frustrated with their confidential information being handled outside the United States, and with the difficulty of some phone calls that are handled internationally,” said Carrington, who believes consumers are taking their business to companies that are able to serve them domestically. “You can legislate things, but at end of the day the consumer is the real decision maker as to how companies I think will create their own policies.”

Could Cloud Centres in the Cloud Help?

Carrington expects his company to be near £70.4 million ($110 million) in revenue this year and anticipates 50 percent growth next year.

Bills to discourage call centre outsourcing have been tried before with little success. For instance, last year US Senator Chuck Schumer, pitched the idea of charging a 25-cent excise tax on any customer call that originates domestically but is transferred to an agent in a foreign location.

Frederik Cote, the president of Kunnect, a company that uses Amazon Web services to provide a cloud-based hosted call centre, supports Bishop’s legislation. Cote said that about 90 percent of his clients are in the US.

“A lot of people wrote off the call centre industry many years ago,” said Cote, adding, “I’m happy to see the call centre business is a thriving business, it is still truly an American business.

“I’m happy to see that we’re contemplating laws to protect that,” said Cote.

By Jon Felperin

One of the most pervasive and challenging issues across the Nearshore region is establishing English language training programs that actually do work – and actually produce well-trained professionals.  One country that has been working on this in a sincere way for over ten years in El Salvador – in large part because of the commitments several major contact center players have made. The results of focused collaboration between private industry, federal government and USAID is beginning to show good results.

With recent program successes under Corporate Social Responsibility programs like SUPERATE, and a renewed USAID interest in funding job training in English and technology to increase the labor pool, El Salvador has firmly planted the seeds for future prosperity. In actuality, the first call center initiatives were started back around the year 2000, initially with TACA airlines, and later expanded under the direction of PROESA, El Salvador’s foreign investment agency (then headed by the country’s Vice-President).

To meet the labor needs of such companies as Dell, Sykes, Teleperformance and Transactel, the Saca government helped found a National English Center, currently under the direction of ITCA/FEPADE.

Comes Down to Quality

Quality in education is a perennial theme in the region and much has been written on the need to modernize curricula and improve quality, as reported last year. In the meantime, however, there continues to be a growing need for well-trained personnel due to expansion efforts; and many believe that even greater coordination can help address this on-going shortfall.

One such effort is USAID’s Program of Access to Employment, which is part of an alliance with an initial group of three call centers to “prepare people with English fluency good enough for employment in call centers,” explains Beto Brunn of CARANA/USAID. “These “advanced” speakers receive training for seven to eight weeks, and most of them are immediately hired.”

During the ramp up, USAID developed a tailor-made curriculum, trained teachers in its application, and certified four training organizations as authorized training providers. Call centers nominate persons for training, committing themselves to pay half the cost of the training, with the other half paid by the USAID Program. “The first group started training in February and through early November 2011, 71 persons identified by the Transactel and Teleperformance call centers had completed training at Technological Institute of Central America (ITCA); 51 of these have already been hired or promoted (including 20 women, 41 youths). Moreover, 33 persons are in training now. The target is to generate employment for at least 2,000 persons over three years,” said Brunn.

“Our experience with CARANA has been fantastic. They have been very engaged in understanding the needs of our organization. This has allowed us to work together in making changes were needed in order to provide a better candidate for employment,” said Transactel country director Guillermo Valiente. “The take rate from the program has been close to 70%, making CARANA the most successful program in developing English skills for the call center industry. We are highly committed in making this a sustainable source of new hires for our business.”

Evidence of Success

As reported on Nearshore Americas  in May 2010, “the initiative seeks to improve the link between employers and training providers to improve program quality.” A formal alliance has been created between with the Professional Training Institute (INSAFORP) and the Investment Promotion Agency of El Salvador (PROESA). 

INSAFORP`s programs are already funded by private sector contributions of one percent of payroll expenses, so the call centers, among the companies with largest payrolls in El Salvador, are contributing significantly to INSAFORP. Recently, the call centers have agreed to pay 15 percent of the cost of the expanded INSAFORP-sponsored training. This could mean that the USAID pilot will become a permanent government work force training program.

At the start of this effort last year, the goal, according to Economy Minister Hector Dada, was “to improve the functioning of the Salvadoran labor market.” The minister said they were working to modernize the economy and “the training of the workforce is critical.” The current program has an estimated total funding of $7.5 million for a period of four years.

As late as 2008, when Dell Computers sold its contact center to Stream Global, fewer than 15% of the National English Center graduates were actually employable in the contract center industry. Today, however, that percentage has climbed to over 70% and rising.

Jon Felperin, MA TEFL ( jfelperin@negociosunidos.net ) has over 27 years experience as an educator, teacher trainer and educational consultant.

Chinchilla is at odds with the head of CINDE, Costa Rica's lead investment agency

By Luke Bujarski

Costa Rica’s system of free trade zones may not be “free” for much longer, if a controversial tax on products and services exporters gets bundled into the government’s latest deficit reduction plan. While local authorities, including President Laura Chinchilla, confirmed with Nearshore Americas that the new tax proposal would not affect existing companies, many are worried that a change to current policy would rock the proverbial boat, and send mixed signals to an otherwise bullish foreign investment community. NSAM also notes that a policy which favors existing companies over new entrants could open the door for hostilities between the public and private sector.

New Entrants, Beware of Double Standards

The free zone regime – aka the “zona franca,” is a federal law granting both foreign and domestic companies tax breaks in exchange for new investment, growth in exports, and jobs creation. This incentive structure has been instrumental in attracting global services giants like Dell, IBM,  Telefónica, Stream, and Concentrix to Costa Rica, which have enjoyed generous exemptions on import duties, a zero percent income tax rate, and a zero percent tax rate on dividends.

Not surprisingly, when PAC, the main opposition party to the Chinchilla administration, made legislative concessions in exchange for a tax increase on new zona franca members, Costa Rica’s investment and export promotion community moved aggressively to counter the proposal.

Specifically, the new tax would increase the corporate dividends rate from zero to 15 percent, and would include an annual municipal tax capped at $100,000. When we spoke to Irene Arguedas, Director of the Ministry of Foreign Trade, she stressed that the dividends tax would only affect companies joining the regime after 2015. But when asked about the municipal tax and whether it would affect existing companies, Arguedas said that “this proposal is new and that the exact details are still being worked out.”

A system where some companies are taxed, while others are not, could prove to be an awkward policy that creates additional red tape and a double standard based on grandfathered rate agreements, explained Rafael Gonzalez, Partner at Deloitte Costa Rica tax advisory practice. Gonzalez also stressed that, “while this new proposal is meant to affect only those companies entering after 2015, the change will likely burden existing firms indirectly and in varying degrees, particularly for those looking to reapply for tax breaks after the 12-year expiration date.”

Likewise, considering that the minimum initial investment to participate in the zona franca is $150,000, the new $100,000 municipal tax could place a particularly heavy burden on small-to-medium sized companies.

In the case of Costa Rica, the proposed tax increase is in clear conflict with the country’s ambitious foreign investment agenda

Opposing Views Coming From Investment Community

In a closed-door press conference with President Chinchilla during her visit to New York in September, there was notable disagreement between the President and top foreign investment officials including Jose Rossi of CINDE and Anabel Gonzalez the Minister of Commerce (Comex). The President explained that her main priority is to work with PAC and congress, to pass a fiscal plan that would effectively balance the country’s growing budget deficit. “We want to find the least impactful solution, but when a country faces a deficit like ours (5 percent of GDP), we have to start making some sacrifices.” (In an ironic twist, it was the President herself who emphasized the need to reduce bureaucratic redtape in global services in this exclusive NSAM interview last year.)

During the meeting, Rossi’s was upfront about his stance on this issue and stated that, “we have an obvious difference of opinion and respect the government’s approach, but we believe that any changes to the free zone regime would send mixed messages to the investment community.” Minister Gonzalez from Comex also reminded the press corps that foreign companies today fill almost 60,000 jobs directly, and create many more indirect jobs.

Economic Impact Analysis Supports the Status Quo

While not a done deal, there are signs that the proposal is being taken quite seriously. Last Friday, former President Oscar Arias addressed congress asking members to drop the tax proposal. Likewise, PROCOMER, Cost Rica’s export promotion agency published a detailed study just last week, on the economic benefits of the zona franca regime. While there was no direct mention of the proposed tax increase, we speculate that the study’s timely release was coordinated in line with the current debate.

The report, entitled “Zonas Francas: Net Benefits for Costa Rica 2006 -2010,” highlighted the following impacts to Costa Rica’s economy:

» For every $1 dollar exonerated, $8 in jobs and investment are created

» Total number of companies: 256; 47 percent are services firms

» Total number of jobs: 58,000 direct; 110,000 indirect

» $4.84 billion in goods exports

» $1.33 billion in services exports

» Average monthly salary in 2010; $1,028 (58 percent increase since 2006)

Additional Public Spending Needed, But There Are Alternative Sources

This debate carries bigger lessons on a country’s fiscal and economic health, and how it can affect the broader investment climate. In the case of Costa Rica, the proposed tax increase is in clear conflict with the country’s ambitious foreign investment agenda. Since 1986, investment promotion group CINDE has attracted more than 200 companies, and aims to reign in an additional $10 billion in new investments between 2010 and 2014. In the press conference, CINDE director Jose Rossi also explained that “communicating a favorable and consistent tax policy will be critical to achieving this goal.”

With growing foreign investment, new corporate dollars will have to be matched with new local revenues, particularly for physical infrastructure and education spending. Roberto Gallardo, Minister of Communications for the current Chinchilla administration told us that Costa Rica’s current fiscal woes are due largely in part to increased spending intended to stabilize the economy after the 2008 global financial crisis. “Our economy is tied closely to the global economy and we’ve made considerable investments on recapitalizing banks and creating public sector jobs.”

Mr. Gallardo also noted that Costa Rica is determined not to make cuts in public spending during the global recession, particularly in education. And while Costa Rica’s budget is strained, changing the tax policy on the zona franca regime is “not the only way to go,” he explained. “We are also doing a better job with tax collection and are working to lower administrative costs.”

Knowing When to Say “When”

An anonymous source also suggested that a tax on new companies could indirectly benefit Costa Rica’s existing global services industry. As with other Central American economies, Costa Rica has a relatively small labor pool, which makes it particularly vulnerable to wage inflation. So a tax on new companies would, at least in theory, discourage additional firms from pushing their way into an already tight labor market. Fewer new entrants could also give the public and private sector more time to train skilled workers and to invest in productivity, instead of recruitment and retraining costs.

Ultimately, a fair and consistent tax policy seems to make the most sense in the long term. Regardless of whether taxes are raised or lowered, they should apply evenly and routinely across all zona franca members. Offering special treatment to existing firms could cause a rift between the government and new investors on future policymaking and economic planning. Likewise, giving local authorities the power to haggle with individual companies on an annual basis opens the door for corruption and uncertainty around year-to-year tax obligations.

What direction Costa Rica and the Chinchilla administration goes should be made known by early January of next year.

By Luke Bujarski

“More English, more English, and more English,” exclaimed VP Kapil Rajvanshi from 24/7 Customer during a presentation at this week’s Global Services Summit in Guatemala City. The market here is indeed showing some concerning signs of overheating, as we quickly discovered during talks with the heads of Guatemala’s six BPO families. While saturation and wage inflation is nothing new in Central America, what has Guatemala’s BPO Commission president Herman Lopez deeply worried is the prospect of a race-to-the-bottom price war between the very people put in charge of coordinating a sustainable strategy for the country’s booming BPO cluster.

“Competition is fierce and wages are extremely tight. Some are beginning to play hardball and are outbidding the prevailing market rate,” explained German. The big six – Transactel, Capgemini, Allied Global, 24/7 Customer, Atento, and Genpact – are not the only ones concerned over potential swells in wage rates. “A year ago we used to offer the best pay in town, now we’re at market rate,” explained Avi Meir owner and CEO of Guatecall, one of Guatemala’s boutique agents serving international clients.

Perhaps the biggest threat to the BPO industry in Guatemala will come from within

With the going rate for contact center agents currently at around $600, the potential for cost savings still allows some room for wage increases. This is particularly true for newcomers ready to push their way in with new rules and a higher tolerance for costs. However, the situation in Guatemala is compounded by the severely limited supply of bilingual agents relative to demand. Operations costs shoot up under these conditions, particularly in recruitment, training and retraining of agents rotating through the different providers. “Pick up any daily newspaper and you will see at least two full-page ads from contact center agencies recruiting”, complained Herman who is also the CFO of Allied Global.

This leaves the market vulnerable because one big player has the potential to throw the entire industry into a tailspin, if they decide to ratchet up wages. A palpable lack of coordination through the BPO Commission which is coordinated by the big six also suggests that a standoff is brewing. And while there is a certain level of cautious trust between the incumbents, an aggressive new kid on the block could prove to be a destabilizing force for the market.

Despite these concerns, multinational BPO superstar Capgemini and others are seeing great successes in Guatemala. According to Service Delivery Manager Jose Zamora, Capgemini Guatemala is meeting and beating corporate and client expectations. “Because of this we are being rewarded with additional volume channeled in from our operations in Poland and Chile, where costs can be in upwards of 30 percent higher”. Center Director Christian Lister also confirmed that they have not had to increase wages to keep up with demand. However, this could be due to the fact that Capgemini is under less pressure, since their multinational status allows them to diversify with Spanish-only clients.

24/7 Customer is bullish on Nearshore, but has moved to diversify its operations base with a new facility in Nicaragua in order to meet demand and to hedge against potential wage increases in Guatemala. Wages aside, Guatemala still holds a competitive advantage over its neighbors, given its large population and well-developed physical and telecommunications infrastructure. And while many have openly expressed concern about growing crime, inflexible labor laws, and political shenanigans as major challenges, perhaps the biggest threat to the BPO industry in Guatemala will come from within.

The reality is that the dream for more English speakers will probably not come true here. Guatemala’s K-12 public school system does not offer any English training. Likewise, initiatives coming from joint government and private ventures to coordinate a large-scale training program have lost momentum. With supply-side interventions unlikely, the big players will have to work together to get the demand side of the equation under control, if Guatemala’s contact center industry is to remain sustainable in the long-term.