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 Jerry Durant

Everybody wants ROI from their outsourcing projects. Many (on both the buy and the sell side) claim it. But relatively few have the knowledge or background to calculate it correctly. This not only makes it harder to make good decisions, but saps the credibility of whoever is doing the calculations.

Far too many operations and procurement professionals try to calculate ROI without a sufficient understanding of it.

They also try to convert subjective value measures to quantifiable numbers and fail to relate ROI to business objectives that might not relate to money, but to harder-to-measure benefits such as innovation or the delivery of new products and services to customers.

First, one must understand what ROI is not. Consider a typical outsourcing decision, such as whether to outsource your e-mail infrastructure. Just because Option A costs less than Option B, while delivering similar service levels, does not demonstrate ROI. It just means you have lowered the cost of doing business – the cost of operations. You cannot claim ROI because you have not done anything to generate more revenue.

ROI is the result of the Gain from Investment less the Cost of the Investment all divided by the Cost of Investment. You achieve ROI when, and only when, it supports the operation of a profit center, rather than a support center where any savings are likely to be consumed by other areas.

So where do we stand?

1. Distinguish between investment and operating costs. An investment will produce a yield, in the form of an improvement in a profit-making operation, while operating costs allow you to keep the lights on for less than you otherwise would.

2. Know your objective. If it’s labor arbitrage then a simple comparison will reveal the spread between domestic and foreign labor costs.

3. Ensure ‘like’ comparisons. Are the processes you are comparing both fully optimized? All too often, the function you’re considering for outsourcing is not in best operating form. If it’s a simple “lift-and-drop” situation then cost comparisons would be OK, but if the provider is making changes you need to factor that in. So facilitate process improvement/optimization at some point in the relationship, whether pre- or post-engagement, measure the results and take them into account

4. Take into account all costs. It’s not simply a matter of contract cost vs. prior in-house costs. Take into account other costs that must be amortized over the duration of the contract, such as to transition the function to the provider. Remember new, in-house costs such as for a project management office (PMO) that oversees the outsourced relationship, as well as the need to monitor the quality of the outsourced work.

5. Make sure that you have systems in place that can track operating costs against the estimates you used to make your decision. In some ways this is a bold step because you may wind up finding flaws in your decision making. Don’t use this as an opportunity to find fault, but to improve your estimation and sourcing management skills.

6. Factor in whether you’re getting everything from your service provider you were getting in-house, such as a commitment to environmental efforts or working conditions. This is another way of saying “compare apples to apples,” but in an area that can cause big public embarrassment if you ignore it.

Bottom line: When calculating ROI keep in mind the difference between reducing operating costs and actually improving in business. And, when you’re comparing costs and benefits, make sure you’re doing a fair comparison that takes into account both everything you’re spending and everything you’re getting (or not getting.) The health of your organization – and of your own credibility – depends on it.

Jerry Durant is founder and chairman emeritus of The International Institute for Outsource Management, a trade organization dedicated to the assessment, development, and guidance of outsource service providers in the ITO, BPO, call center, and KPO domain areas.

Source: Business Week

Billionaire Carlos Slim was out of context and off the mark in his criticism of a study finding a lack of competition in Mexico’s phone industry, the Organization for Economic Cooperation and Development said.

Slim told reporters yesterday that the group’s report, released earlier this week, seemed to use data “pulled out of thin air.” The 72-year-old, who controls Mexico’s largest wireless and landline-phone companies, denied the study’s claims that Mexican carriers overcharged consumers $13.4 billion a year for phone and Internet services from 2005 to 2009.

Mexico’s government, which commissioned the study, is using it to validate efforts to create more competition in telecommunications. The findings support the government’s plan to auction off fiber-optic lines owned by the state power company and contracts to push high-speed Internet into communities where it’s not available, Communications and Transportation Minister Dionisio Perez-Jacome said this week.

“The OECD stands by its report in full,” the group said today in an e-mailed statement.

In addition to $13.4 billion a year in overcharges, the study concluded that Mexican phone companies missed out on $12.4 billion in sales a year because their prices weren’t low enough. Adding up those figures, the OECD said Mexico’s phone market had an “opportunity cost” of $25.8 billion a year.

Purchasing Power Parity

Slim dismissed that $25.8 billion figure, saying that the OECD was implying that the industry, which generates sales of $30 billion a year, should give up most of its revenue.

Instead, the OECD said, its report showed that if companies had offered lower prices, the decrease in sales would have been almost completely offset by an increase in new subscriptions.

Slim also criticized the use of a method called “purchasing power parity” used by the OECD to compare prices in different countries. He gave reporters copies of a separate OECD document that said the method wasn’t appropriate “to undertake price level comparisons at low levels of aggregation.”

The statisticians that developed the method endorse the way the OECD used it in the Mexico study, the group said today. Using simple price comparisons based on foreign exchange, the method Slim endorsed to show that Mexico’s prices are lower than in most other OECD member countries, is too vulnerable to currency swings, the OECD said.

Lower Broadband Adoption

Slim also took issue with the OECD’s conclusion that Mexico’s rate of broadband adoption, at 10.5 high-speed Internet subscribers per 100 habitants in 2010, was near the bottom of the rankings of its 34 member countries. It would have been more fair to divide those rates by the per-capita gross domestic product of each country, a measure which would make Mexico compare much more favorably, Slim said.

The report took GDP into account in its calculations of how lower prices would affect subscriptions, the OECD said today.

The OECD met with Slim’s America Movil SAB and with other carriers last year, the group said. Representatives of all 34 member countries reviewed the study in an October 2011 meeting in which America Movil had a representative present, the OECD said. Afterward, America Movil submitted comments on the study that were “given serious consideration” as the report was being finished, the OECD said.

An official at America Movil’s Telefonos de Mexico SAB fixed-line unit didn’t have an immediate comment today.

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 Bill Huber, Partner, ISG, and Kristen Elvinger, Research Associate

Concerns exist over the capacity of Latin American service providers to absorb rapid growth. Several global providers currently have a presence in Latin America, and tax and other trade incentives will help attract more outsourcers to the region. And, many Latin American countries are positioned to further develop emerging areas of specialization. Indeed, lessons learned from India, China, and some Eastern European countries suggest that specialization and quality-focused differentiation will be the keys to success, especially for countries with small populations.

Following is a review of major outsourcing destinations in Latin America, including assessments of strengths and business environments.

Mexico’s Head Start

Mexico benefits from a ten-year or so head start in the outsourcing business (primarily in call centers), proximity to the United States, membership in NAFTA, and a large pool of English speakers. Additional pluses: high-quality telecom infrastructure, good quality road and railway networks, and many airports. Mexico’s growing IT and BPO offerings are expected to increase 10% year-on-year, according to a study by HfS. Several cities offer a variety of trade incentives, including cash grants of up to 50% of total investments, and tax credits up to 30% of R&D expenses. Indeed, competition between states and cities to attract clients is helping to drive Mexico’s outsourcing maturity. While some have expressed concern about Mexico’s ability to develop higher value offerings, a number of initiatives – such as the Programa para el Desarrollo de la Industria del Software (PROSOFT) – are in place to develop skills for the workplace. On the downside, myriad security risks, both real and perceived, have hurt Mexico’s reputation.

Brazil Is Bigger

With the largest IT market in Latin America and the world’s second largest pool of COBOL programmers, Brazil boasts formidable outsourcing resources, characterized by a the presence of several global providers, well-established call center business, many R&D development centers, and a strong global services industry. While English fluency rates are low at 5%, that figure still represents approximately 10 million people, meaning Brazil has the ability to scale. Brazil also has very good telecommunications infrastructure, wide use of broadband, and the second highest number of airports in the world.

With a history as a quick adopter of new technology and methods, Brazil anticipates significant growth in high-value BPO and ITO in the next two years. Labor and export regulations, however, are a negative. And while incentives such as reduction in social security contributions and tax deductions for technology transfers are attractive to IT companies, exports of services are taxed heavily. Moreover, unfavorable labor laws and associated employment costs can be a concern. This paired with their large potential talent base gives them the opportunity to become a large nearshore destination if the government can create better trade incentives and bureaucracy.

Argentina’s Infrastructure and Bilingualism

Argentina boasts the best telecommunications infrastructure, the second-largest IT market, and the largest pool of bilingual employees in Latin America. Following the devaluation of the peso in 2001, Argentina took an economic hit that drove down wages and office real estate, which in turn attracted outsourcers. Responding to the opportunity, the government implemented a plan to develop the IT industry, focusing on software development and technical call centers. The initiative was characterized by a range of incentives for IT companies, including a 60% income tax exemption for software companies, 70% reduction on social contributions, and no restrictions on wiring foreign currencies for imports.

Argentina’s more progressive standards and data protection laws, moreover, are attractive. While Argentina is well-positioned to attract further outsourcing activity, bureaucratic hurdles are an obstacle, as with many other Latin American countries. Also, Argentina is implementing new trade restrictions . To address the challenges, many foreign companies are initially partnering with local providers when entering Argentina’s market.

Chile Seeks Higher Value

Chile’s stable government and currency, well-developed telecommunications infrastructure, and easy immigration policies make for an attractive destination for outsourcers. Recognizing that its small size requires a quality-rather-than-quantity-focused approach, Chile has created longer, more extensive IT education programs geared to high-value KPO, ITO, and shared services. The Chilean Economic Development Agency (CORFO) created InvestChile to provide investment incentives in more high-tech fields. Free trade agreements with the US, Canada, Australia, and China, as well as agreements to avoid double taxation on exports, are also attractive. Although approximately a ten-hour flight from the US, Chile shares time zones with the US. ChileiT is also actively working to promote its members to the international market.

Other Nations on the Rise

Other Latin American countries growing their outsourcing offerings include Costa Rica, Panama, Uruguay, El Salvador, Colombia, and Nicaragua. Most offer a few tax incentives and relatively good language skills. Key requirements will be to improve telecommunications infrastructure, grow English speaking populations, and develop IT skills. At present, most activity is in call centers, with a focus on specialization as a differentiating factor. Costa Rica, for example, touts its expertise in financial services.

Latin American countries are working hard to gain market share and raise their profiles as outsourcing destinations. Years of developing workforces, improving trade incentives, and building political stability are paying off. Concerns over scale are being addressed through pooling across multiple locations. Providers who are pursuing this strategy include Accenture, Capgemini, IBM, TCS, HCL, Cognizant, and Wipro.

Specialization can help Latin countries gain further advantage aside from being a nearshore destination. Although this strategy includes some risk, as outsourcing trends can change, many large destinations got their start using this approach. So far, Latin America has taken great steps in developing better skilled workforces and better business environments to support their Nearshore advantages of shared time zones, cultural affinity with the US, and more accent-neutral English skills. With proper identification of processes to outsource and the appropriate matchup of location and company, US companies can benefit greatly from Nearshoring to Latin America.

Bill Huber is Partner with ISG, a leading technology insights, market intelligence, and advisory services company. Kristen Elvinger is a research associate.

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!

Jamaica’s growing reputation as a top Caribbean destination for investment in Information and Communication Technology (ICT) and other key growth sectors is set to take centre stage on March 1-2, 2012, as the island lays out the red carpet for investors seeking opportunities in the region’s largest English-speaking economy.

The Jamaica Investment Forum 2012, which will be staged at the new Montego Bay Convention Centre, will focus on the business opportunities that exist in ICT, as well as other priority areas such as Tourism, Manufacturing and major privatization and development projects.

The Prime Minister of Jamaica, the Most Hon. Portia Simpson Miller, will head a high profile slate of local and international speakers at the Forum, which is being organized by JAMPRO, the country’s investment promotion agency, in partnership with the Inter-American Development Bank (IDB) and the Compete Caribbean Programme. The opening of the event will feature presentations from Anthony Hylton, the Minister of Industry, Investment and Commerce, and a high-level representative from the IDB.

The sectoral session on ICT will focus on opportunities in Business Process Outsourcing (BPO) and IT Export Services (ITES) and will feature a mix of information and testimonials from expert panellists and existing investors. Among the confirmed speakers for this session are Connie Harvey, EVP, COO, Commercial Solutions, ACS, A Xerox Company; Dr. Harsh Muthal, CEO Tholons Inc.; Ambassador Patrick Casserly, Special Envoy for ICT; and Helena Lawson Brooks, SVP- Specialty Operations, Convergys Corporation. Phillip Vandervoort, Head of Business and Marketing Operations, Microsoft, is scheduled to deliver a presentation during the investment climate plenary.

Participants will have the opportunity to see first-hand some of the select investment projects on specially arranged JAMPRO site visits and private meetings. Prime Minister Simpson Miller will also host a welcome reception at which participants will be able to meet members of the Jamaican Government and senior leaders in the private and public sectors. A special “Jamaica Night” reception will cap off a comprehensive social programme that will offer participants, diverse opportunities for leisure, tours and sightseeing.

Jamaica is home to four of the world’s top 10 outsourcing companies, and currently has over 11,000 full-time agents in the offshore business process outsourcing (BPO) sector. With nearshore access to the United States, a neutral English accent, low attrition rates and high labour force availability among secondary and university graduates, Jamaica continues to offer a very strong value proposition for BPO investors.

Most recently, Jamaica landed a major investment from Convergys Corporation, one of the largest agent-assisted customer service companies in the world. The company is projected to employ nearly 1,000 persons when its first call centre slated for Montego Bay becomes fully staffed in 2012.

The Jamaica Investment Forum will provide potential investors with insightful information pertaining to the Government of Jamaica’s investment policies and incentive regimes; and networking opportunities among existing investors and leaders in the local business community. The Forum has received strong backing from the local business community. Among the many local sponsors are: FLOW/Columbus Communications, LIME, Digicel, Jamaica Public Service Company, and the Bank of Nova Scotia.

By Reshaad Durgahee

Lima, Peru: Surprisingly emerging.

In the period 2003 through 2010, Europe and Asia were the largest recipient regions of foreign investment projects in shared services and BPO activities, accounting for 46% and 29% respectively. Meanwhile, interest in Latin America has clearly been growing. The number of shared services and BPO foreign investment projects in Latin America rose year on year until 2010, when the total number of projects entering the region decreased by 15%.

However, in terms of jobs created by these investment projects in shared services and BPO, 2010 saw the highest number in the Nearshore region since 2006, increasing by almost 10% over 2009.

After the Asia-Pacific region, Latin America is now seeing the largest-size centers being set up, and indeed, the region continues to be characterized by a number of labor-intensive shared-services projects, with on average 350 announced jobs per center in 2010.

General trends in announced shared services jobs by world region, 2003-2010

Typical destinations for shared-services establishments in Latin America, such as Colombia and Costa Rica, continued to lead the rankings in 2010, representing 22% and 14% of regional shared-services job announcements. Brazil and Argentina – as dominant markets in the region – also continue to attract their share of investments.

Top ranking SSC/BPO destinations in Latin America & the Caribbean by estimated jobs, 2003-2010

However, it is the emergence of newcomers in the rankings, such as Nicaragua and Peru, that piques the interest of the observer of the outsourcing industry. These two countries attracted large-scale investments in shared services, demonstrating the widening of investor confidence across the region. Companies are now seeing the potential of previously untapped labor markets. Countries such as Nicaragua and Peru offer companies that are willing to take risks a first-mover advantage in terms of potentially lower labor costs, lower levels of competition from similar operations, and the opportunity to become the major player in a new market.

This would be in contrast to already well established shared-services locations in the region, which offer a more experienced labor pool and potentially higher-quality level of infrastructure, but are also starting to experience side effects such as increased levels of competition and elevated attrition rates.

The Rise of the Second Tier

In 2010, leading agglomerations in Latin America in terms of job creation through foreign investment in shared services and BPO included Bogota, Lima, San José, Guadalajara, Managua, and Medellin, the first four of which make the Global Top 20 ranking. Examples of new investments include Sitel, which announced 450 jobs at its new contact center in Managua; National Instruments, which has announced the establishment of a shared service center in San José creating 200 jobs in CRM, finance, IT, and sales; and Convergys, which has established a bilingual contact center and back-office support site in Bogota, creating up to 1,000 jobs.

The appearance of Bogota and San José, as now-seasoned shared services destinations comes perhaps as no surprise. The Mexican city of Guadalajara and Colombia’s second city Medellin highlight the potential of such second-tier cities in the region to operate shared services at lower cost than their capital cities, whilst still maintaining suitable operating environments desired by investing companies. Recent investments include West Customer Management’s bilingual contact center in Guadalajara and HP in Medellin.

Function-wise, investment in this sector into Latin America has been focused on contact centers (primarily to serve the local market and Spain, but also increasingly bilingual centers to serve the United States). In addition, in recent years, more and more companies have seen the potential for more value-added shared services operations in the region’s more mature locations, where there are now multiple finance and IT shared services, for example.

Sources of Investment

By far and away the largest source country of foreign investment in shared services operations in Latin America is the United States, which between 2003 and 2010 accounted for more than half of the jobs created in the region in this activity, generating almost 70,000 positions. Although Europe and Asia remain the most popular regions for US companies setting up shared services and BPO operations, Latin America remains a key market, in particular for nearshoring activities due to factors including timezone advantages and natural availability of Spanish language skills.

Between 2003 and 2009 Spanish companies (such as Telefonica and Banco Santander) accounted for about 20% of jobs created in shared services and BPO in the region, solidifying Spain’s position as the second largest investing country in this sector in Latin America.

Top source countries for SSC/BPO foreign investment into Latin America & the Caribbean, 2003-2010

Much has been written on the rise and dominance of India as a destination for shared services and BPO, but it is also interesting to note the rise of India as a source of such activities. Globally, Indian companies created over 15,000 jobs in this sector in 2010, continuing the year-on-year growth witnessed since 2005, accounting for 12% of all jobs created worldwide by foreign investors in this sector. From a Latin American perspective, in 2010, Indian companies such as Wipro, Genpact, and 24/7 Customer created just over 10% of shared services and BPO-related jobs announced by foreign investors in the region – a 60% increase from the previous year. It all represents a move to get closer to customers in a new market, highlighting the rise of India as an outward investor in shared services and BPO activities.

Profusion of Possibilities

Latin America continues to succeed at offering attractive options for companies wishing to establish shared services and BPO activities, as demonstrated by the increasing number of jobs created in the sector from foreign companies in recent years. These options come not only in the form of mature, well-established destinations, but also up-and-coming locations that companies are now finding worth investigating for outsourcing activities.

That is not to say that the mature shared services locations of the region are in decline. On the contrary, mature locations such as Costa Rica, Colombia, Argentina, and Brazil continue to attract their fair share of investment. In today’s economic climate, many companies have become increasingly risk-averse, and are content with opting for tried-and-tested options in the region, where costs may be slightly higher but where there is an availability of highly experienced shared-services profiles to recruit from. On the other hand, emerging Nearshore destinations offer those companies willing to be pioneers the opportunity to tap into new sources of talent and at a lower cost base, resulting in these locations now appearing next to traditional shared services locations in our global rankings.

Latin America’s profusion of location possibilities – both mature and emerging – means that it continues to develop as a strategic region that companies are considering for their shared services and BPO operations. Be it North American firms using the region as a nearshoring solution, Spanish companies cementing their presence in countries with similar linguistic and cultural affinities, or companies from emerging countries such as India wishing to extend their global footprint and gain a foothold in a new market, Latin America is sure to remain “on radar” for companies for the foreseeable future.

Reshaad Durgahee is a Senior Consultant at IBM Global Business Services’ Plant Location International (PLI) division. More analysis of location trends is available by download here.

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 Patrick Haller

Positioned in Colombia’s lush Coffee Triangle region, the city of Pereira has been called “Paradise.” However, it has probably not seemed that way to some of the local population. In 2009 the city was hit by the highest unemployment in the nation at 24%, despite being home to a Suzuki motorbike plant, Busscor (the main manufacturer of vehicles for Colombian mass transit systems), textile plants and, of course, coffee production. As a possible remedy to that situation, the government of Pereira – like that of its smaller sister-city Manizales – has created a stream of incentives to attract IT companies and call centers.

Starting with Spanish call center Telmark, which established operations there in 2009, the BPO sector has begun to take root, employing 2,000 people from the burgeoning metro area of an estimated one million residents, according to Santiago Angel Jaramillo, Director of Invest in Pereira (IIP). With an average age falling between 25 and 35 years old, a respected higher education system that currently serves 37,000 students, low operational costs, solid infrastructure, and an eager workforce, Pereira would appear to be paradise for call centers.

In addition to the government offering attractive financial incentives such as property tax deductions, waiving of the Industry and Commerce tax for a ten-year period (if certain criteria are met), and employee training credits, Jaramillo points out, the World Bank ranked Pereira as one of the easiest Colombian cities to do business in.

Those are all indicators of a potential outsourcing paradise, but if the location lures more providers, fully bilingual English-Spanish workers are in danger of becoming scarce. Local IT professionals are already in short supply.

English Is a Must

As more companies such as American Assist (formed in Mexico 20 years ago to provide emergency assistance to travelers) show an interest in Pereira, bilingual capability has become an urgent issue. “We have to set up the right strategy to provide the BPO sector with bilingual talent,” Jaramillo says. Part of this strategy is working hand-in-hand with the companies in order to understand their specific needs. IIP is partnering with public schools in order to improve English education at the primary level, and universities to develop specialized courses. “Most investors for call centers need to receive special training depending on the operation (outbound, in-bound, etc.),” Jaramillo says. “SENA normally works on this and we tailor-make the program to meet the investor’s needs.”

The majority of universities in Pereira, including the University Tecnologia de Pereira, considered one of the best in Colombia, already require students to be fluent in English in order to graduate, Jaramillo says. IIP is also studying policies established by other investment agencies like Invest in Bogota, which implemented the Talk to the World program, and ProBarranquilla, which links public schools with the BPOs that work in English to provide intense language training. Jaramillo says that IIP has recently confirmed that a new ITO and a call center have committed to establishing centers in Pereira.

The outsourcing services in Pereira also include IT development and website design. One example: With a staff of 250 (and a target to scale up to 400), UK-based Yell Adworks builds 2,000 websites daily, in addition to ads for yellow pages.

Pereira is open to foreign workers, and has an international population that includes people from North America, Japan, Spain, Venezuela, Mexico, and the UK. Around 1988, the city saw an emigration of its citizens due to the increased violence in the region and the majority of Pereirans went to the Northeast US and Spain. Now, as the economic tides turn, Pereira – and Colombia in general – is seeing a return of those people or their children who have been educated abroad.

Group Effort

American Assist, which has offices in 18 countries, including across Latin America, changed its operation model two years ago when it closed its individual country headquarters and consolidated. An Argentine firm that specializes in call center functions did a study of several countries and advised American Assist to create its new center in Colombia. “Once the decision was taken, we went through various cities in Colombia looking at the possibilities,” says Mauricio Vega, President of American Assist – Colombia, “and it coincided that the best location would be Pereira.”

An accord was signed by the Governor of Risaralda, the Mayor of Pereira, Invest in Pereira, the Chamber of Commerce, SENA, the Technical University of Pereira, ANDI and American Assist’s corporate managers. “Each of these parties brought something to the table,” Vega says. Among the incentives were tax exemptions and specialized training provided by the university and SENA. “An entire city made itself available for the international investment to take place,” says Vega. “One of the Argentine advisors said, ‘This is the promised land.’”

Today the company employs over 400 people in a telemarketing call center where they assist callers from the 18 countries in which American Assist has locations. The center operates out of a 3,500-square-meter building that was adapted to its specifications. Vega said there are plans to fill all 700 workstations and add 300 more by the end of 2012, and to possibly open a second location in Pereira in about four years. The costs are very different than those found in Bogota, and the building is located right next to a Megabus (mass transport) station, making it very convenient for employees.

Sourcing Employees

For now, qualified contact-center workers are available. “It was much easier than we thought to find qualified people,” Vega says. “We needed 20 people who were completely bilingual to attend to US callers and we found them very easily.” Being in a second-tier market also helps from a cost standpoint. “Given the high unemployment, compared to Bogota or Lima, we found qualified people at lower cost.” The talent pool and related costs enabled American Assist to start operations with 100 people and to scale-up from there.

Vega says he has found that the universities and the national training school, SENA, are good recruitment sources, in addition to traditional methods. Most favorably, SENA provides people who have already been trained in call center work. According to Vega, in Pereira the attrition is no higher than 5% whereas in other Colombian cities it is over 20%.

Connectivity and Competition

Connectivity is especially important for a company like American Assist that provides emergency services. Fortunately, Pereira has an extensive fiber-optic network and has redundancy set up in Lima.

“Finding expert technological personnel has been difficult,” says Vega, “but we found professionals from other cities who are happy to move to Pereira. There are no other problems that you wouldn’t find in other cities.”

That said, if more English-speaking call centers enter the market here, the competition for qualified candidates will heat up, putting the pressure on the primary schools and universities to increase their language curricula. The area would be smart to also boost its number of IT professionals, which are already in short supply. If there are not enough people, attrition rates will likely rise, and the ability to scale will be hindered further. Pereira needs to manage the growth of the call center sector carefully in order to avoid falling into a hole that would be difficult to climb out of.