Medellin is one of those cities that you never want to leave. Blessed with mountains on all sides,  a Mediterranean climate and some of the best beef dishes anywhere in Colombia (especially when over a barbeque), Medellin is shaking loose from the shackles of its past and putting a remarkable amount of focus on global services. We spent a few days there last week – and got to know how the Paisas people see Colombia’s second biggest city evolving as a hub for innovation and global engagement.

By Kirk Laughlin

Seemingly out of nowhere, Medellin is sweeping onto Latin America outsourcing’s center stage in a dramatic flourish, winning deal after deal and – by beckoning to the world – totally reshaping what the city stands for by openly confronting the wreckage of its darkest days. Medellin’s dramatic transformation is easily one of the most captivating stories in all of Latin America IT.

A City in Bloom

Due to a series of favorable conditions – including highly engaged and deep-pocketed corporate institutions (starting with Bancolombia), a rich array of universities many of which have engineering and computer science programs, the establishment of policies and agencies focused on nurturing the right conditions for BPO/ITO services and a stunning physical environment where “Eternal Spring” and large amounts of greenery make for a lot of happy souls – Medellin may be the ultimate ‘hidden gem’ in the Americas’ sourcing marketplace. Very simply, Medellin functions. Mass transit – including a metro that extends from the south to the north basin of the metro area – is clean and efficient. Traffic is a non-issue, unlike its big brother, Bogota.

But of course there are no guarantees for Medellin. Its positioning as a mountain, interior city has done little to enable international exposure, unlike thriving BPO port cities of Cali and Barranquilla. This is one of several reasons many knowledgeable observers express concerns about the bilingual talent available among the city’s 3.5 million inhabitants (in the larger metro area).

Investment in Full Flow

While much has been made of the watershed decision by HP in 2010 to set up in Medellin, a wave of new investment is potentially setting the stage for a formidable tech ecosystem that in the next few years could mirror – on a smaller scale – the strides of major hubs such as Guadalajara and Sao Paulo. Kimberly Clark recently named Medellin one of three global innovations centers, a huge coup that demonstrates a deep confidence in science/tech human capital. The organization expects to launch a 200-person operation in the next few months in the “Rionegro” area not far from the airport.

Existing operators in the area include multionationals like Tata Consultancy Services, Unisys, Allus, Teleperformance and Infosys, which has a small team focused exclusively on supporting Bancolombia’s core banking / ERP operations. In fact, it was Infosys’s Gita Jayanth, a senior finance executive working in Medellin, who instituted a program to take the 100 top computer science students attending EAFIT university in Medellin every summer to Bangalore for specialized training. The program is now in its third year running. “This is an outstanding program with no strings attached,” said Helmuth Trefftz, Chair of EAFIT’s Computer Science Department.

The timing of HP’s official move into Medellin is producing an increasing amount of head-scratching. The company has started paying month rent on its sparkling new facility in the new “Ruta N” area – as part of a 15-year lease. But sources tell us that the timing of HP’s installation of staff into the offices is still in question while others are skeptical that HP will actually open the facility despite all the planning that has already gone on. The company has maintained a small staff in a building within the EAFIT campus, but many believe that restructuring in the wake of CEO Meg Witman’s late 2011 arrival at HP has shifted its offshore services priorities.

The $50 million Ruta N facility will opens its doors within the next few weeks.

Ruta N is the name of a three building complex in an area of the city that used be blighted by crime. The city financed the project – worth $50 million – which is seen as a symbol of the new focus on global engagement and tech innovation, combining public and private interests.

City leaders are quick to point out that Medellin may look like it’s hell-bent on making a name for itself globally, yet there is still a cautiousness that prevails. The city is extremely aware of how it’s perceived from the outside and still seems somewhat wounded by the global condemnation wrought by years of drug-related violence that tore deep into the heart and culture of the “Paisa” people. The homicide rates of the early 90s, where as many as 500 people were getting killed a month, is nowhere near what it is now. But according to statistics from ACIMedellin, the city’s trade promotion group which facilitated a visit last week by Nearshore Americas, homicides have inched up some from their lowest point – during 2006-2008.

The city remains one of the world’s fifty most violent cities, but it should be pointed out that US cities – New Orleans, Detroit, St. Louis and Baltimore are also in the top 50 ranking by Mexican organization, Consejo Ciudadano para la Seguridad Pública y la Justicia Penal.

Social Inclusion

Medellin’s leaders, grounding their efforts on social inclusion aimed at fostering economic equality, are persistently focused on reaching out to the long-isolated “comunas” to become part of this new, knowledge-driven era. It’s a big and complex job. David Escobar, Medellin’s City Planner is deeply involved with the efforts and sees many signs of change. “The city has reclaimed its self-esteem,” said Escobar who credits much of the city’s transformation to former Mayor Sergio Fajardo (who is now governor of the state of Antioquia) who set in motion heavy spending on education, the arts and the installation of multiple new libraries sitting in once battle-ridden areas.

The call to come to the capital of Antioquia is being heard around the world, including in King of Prussia, Penn. where local company Yuxi Pacific set its sights on Medellin during the last year after seeing its operations in China falter due to rising inflation and hard-to-find English speaking talent.

Medellin is 25% cheaper than labor in Costa Rica, says Michael Puskar, CEO of Yuxi Pacific. (Far right)

“The English ability is way better than I thought,” says CEO Michael Puskar, who runs a 50-person software and Q/A studio for content publishers looking to exploit new “Big Data” management tools. Puskar examined Argentina, Peru, Costa Rica and Mexico before settling on Medellin, which has a city population of 2.5 million. “Salaries here are 25% less than Costa Rica or Mexico. It was a no-brainer,” says Puskar, who does stress that the value proposition of Colombia could be in serious jeopardy if the Peso continues its rise. The currency has risen nearly ten percent since early January, putting pressure on the margins of foreign operators.

The availability of English-speaking talent is potentially one of Medellin’s biggest vulnerabilities. While exciting US-owned firms like Yuxi have had little trouble finding bright, bi-lingual professionals – most Colombian-owned operators worried to us that the demand for English speakers could quickly outstrip supply.

“We have a huge gap with English speaking people. I consider it a big issue,” says Carlos Castro, the CEO Enlace Operativo, a BPO and ITO services company headquartered in Medellin, with 1,700 employees in Bogota and Medellin. Almost all of Castro’s firm relies on Spanish-only speakers, but that could change in the longer term should the firm decide to pursue BPO business in the US. “It’s going to take a lot of years to address the issue,” he says.

In terms of attracting investment, Castro gives credit to the long-term planning focus of the national government. He says the work of ANDI, which is effectively the ‘chamber’ for the country’s BPO / ITO sector, along with Proexport and local investment promotion agencies spread across the country work closely together.

In fact, the close coordination of seemingly ‘rival’ cities shows just how much Colombia is making BPO a priority and continues to reflect back to the long-term thinking of former President Alvaro Uribe who partnered with Minister of Trade and Industry Luis Guillermo Plata to engineer what is looking like one of the best prepared BPO markets in all of the Americas going into the next stages of market expansion.

Michael Cooper, a US native who has lived in Medellin for 30 years said the city’s transformation during the last 8 to ten years has been “unbelievable.” Cooper is executive director of Medellin’s Centro Colombo Americano, a cultural and educational institution, which provides English instruction to over 6,000 students in the Medellin area per year.

Looking to make connections in Medellin or get deeper insight into the market’s potential? Contact Kirk Laughlin

By: Linda Tuck Chapman

Developing and implementing consistent, actionable performance metrics for your Application Development and Maintenance and Testing program is one of the best ways to ensure you get value for money. One of the most important aspects of developing effective metrics is to resist measuring everything that can be measured. Focus only on measuring what matters.

According to CORE (Centre for Outsourcing Research and Education) research conducted in 2011,  one of the largest weaknesses found was that almost half of the organizations struggled to identify a compact set of metrics that aligned with business priorities. Over-abundance of metrics often obscured the core set and made it challenging for clients to aggregate relevant information and derive intelligent insights. Others recognized the issue not as a problem of quantity but of quality; stating that metrics were being tracked, but did not link to the organization’s ultimate goals.

This is an area where there is a tendency to try to measure too many things, often resulting in lots of data, plenty of noise but not much actionable information

No matter how complex or far reaching your metrics are, most managers pay attention to only a few metrics. In addition to simplifying the metrics measurement process, this guide to “best practices” will help you develop metrics that marry the relationship and performance information you really need with the information vendors can readily provide.

There are three types of Metrics that you should consider creating to measure the success of your program and vendor relationships:

1) Relationship level – these Metrics focus on how the relationship between the two companies is working, and how satisfied you are with their responsiveness and your access to their thought leadership and innovation.

2) Customer level – these Metrics focus on how well the vendor is performing tactical, “table stakes” tasks, like invoice accuracy and incident management.

3) Statement of Work (SOW) level – these Metrics focus on how well the vendor is delivering quality outcomes, on time and on budget, against each Statement of Work.

Measuring Performance

Relationship and Customer level Metrics are performance management tools and controls that are not unique to ADM and Testing vendor relationships. A good way to simplify governance processes and reduce workload associated with managing multiple vendors is to develop and deploy a generic set of Relationship and Customer levels across the population.

The primary focus of this article is on the SOW level Metrics. This is an area where there is a tendency to try to measure too many things, often resulting in lots of data, plenty of noise but not much actionable information. The best way to simplify your thinking about what to measure is to establish an overarching framework that addresses expected and important outcomes. By this I mean deciding how to group everything you want to measure into a few overarching categories. Three or four categories are simple to remember, easy to manage and simplify the communication process.

Grouping Metrics

I’d recommend grouping SOW level Metrics into “Quality,” “Efficiency” and “Effectiveness” categories, then creating sub-level metrics that align with each category. When you’re deciding on the sub-level Metrics, which are labeled “Type” in this example, give careful consideration to which metrics are referenced in best practices research coupled with what the vendor already measures internally. If you’re not sure what your vendors measure, just ask. They’ll appreciate your efforts to align your performance reporting requirements with their existing processes.

This is an example of “Quality” Metrics for Application Development and Maintenance. The Type column identifies the type of quality metric being measured; the Description specifies what is being measured; Waterfall or Agile refers to the software development methodology; Reporting periods can be set according to the timing of SOW deliverables, against major milestones or for long term relationships by quarter.

The same approach is taken to develop “Efficiency” and “Effectiveness” Metrics and any other categories you wish to measure. (Click on the chart for an expanded view.)

And here is an example of “Quality” Metrics for Testing: (Click on the chart for an expanded view.)

Conclusion

This approach is extremely useful for managing outcomes for each SOW and every vendor. Over time, you will have a sufficient volume of actual results for each vendor and every SOW. The data can be analyzed for opportunities and issues. You can identify fact-based opportunities for Project Teams and vendors to achieve better quality, higher productivity levels and lower costs. Ultimately, this is the most predictable way to increase the value for money.

Linda Tuck Chapman is a seasoned Outsourcing and Vendor Governance expert. You can reach Linda at (416) 452-4635, lindatuckchapman@ONTALA.com  or visit ONTALA Performance Solutions

By Leonardo Mattiazzi

Agile has been largely regarded as an ideal fit for today’s business challenges (for a reference, check the Forrester Research Feb. 2012 report, “Determine The Business And IT Impact Of Agile Development”).

And, from our experience, the business benefit of using Agile is magnified when it is coupled with the application of Lean principles, such as establishing a continuous flow of constant throughput. This principle, known as heijunka in the Lean vernacular, when applied to software development means creating a continuous delivery model, with a fixed-size team that undertakes several different projects one after another (of course, using Agile methods in each one of them). By doing so, we are able to eliminate several different sources of waste, and significantly decrease the actual cost of these projects (in our estimates, by at least 25% in the long run), as well as the total project timeframe from “Hello” to the application go-live.

Moreover, the ability to adapt during the course of a project (as well as in real life) is a critical part of success. Lean/Agile methods not only accept, but also embrace change. On the other hand, in a fixed-price engagement, the only way to fix price is to also fix the scope, so change becomes an evil enemy. That’s why Agile and fixed-price are intrinsically incompatible.

Still, even when companies are trying to adopt Agile, often times we are faced with an established procurement process that requires a fixed-price, project-by-project model – a model that is directly counter to the flexibility of Agile development and the benefits of a high-performance team working in accord to Lean principles. The irony is that the fixed-price model was designed to generate cost savings (through competition) and predictability, when in reality it only destroys value by creating several sources of waste. If you have been through this situation (or may face it in the future), and feel you need some help on clarifying why your company should break with the status quo and abandon those practices, you may find the following compilation of sources of waste quite useful:

Ramp-ups and ramp-downs

There’s always a learning curve at the beginning of any project. The development team needs to learn about and setup the technical environment, learn the basics of the business and get acquainted with the client’s team. In our experience, the third sprint of a new project has approximately 20 percent higher productivity rate than that of the first sprint. By going through this process every time a new project starts (as opposed to keeping the same team for a flow of projects), the only guarantee is that everything that was learned is thrown in the garbage – making the project more expensive and lengthier.

In addition, during the final phases of a “traditional” or waterfall project, there is a ramp-down, as not all members of the team are needed until the end. And with that ramp-down, resources are assigned to other engagements, so accessibility to valuable knowledge becomes limited. Of course, the remaining team members will eventually figure it out, but only after valuable time and budget have been drained.

Fixed-price embedded risk

In a fixed-price engagement, any provider that wants to maintain a profitable business will embed risk into the project plan. Rather than share goals and risks, the client pushes the financial risk to the provider by requesting a fixed-price, and provider pushes risk back to the client by embedding it into the budget. In these types of engagements, we are already off to a bad start, and the relationship then focuses on risk management rather than driving towards business goals, resulting in mediocre results at a much higher cost.

Management overhead

Due to this risk management behavior, too much time and energy is spent on project management. A project’s price can only be fixed if the scope of work is also fixed. So it then becomes the job of the project manager on the provider’s side to make sure the scope doesn’t change, or if it does, to justify a price alteration by proving that the scope was not clear in the beginning. The client-side project manager is then tasked with making sure the scope is very clear, so the provider cannot later claim otherwise. Time and energy are wasted detailing the scope and formalizing agreements, turning the project into a bureaucratic nightmare. Dollars are, of course, added to the project cost without generating any value.

So with one project manager defending the cost, and the other defending the scope, often they are at odds with one another. If there is a change, no matter how legitimate the business need is, it will create a stressful situation, a negotiation that may distract them from the overall project goal and often times drain their energy to the point of burn-out.

Defensive attitudes

As client and provider project managers have opposite goals, naturally, they become defensive. Instead of moving aggressively toward shared goals, every decision is made from a cost perspective, ignoring value generation. Agility is lost when every decision must be analyzed and then approved. With this defensive attitude, it is virtually impossible to complete a fixed-price project on time and on budget.

Sales and account management overheads

When every project is negotiated on a case-by-case basis, more work is created for the account management team as well. Proposals are lengthened to appear well thought-out and sales reps and account managers are ingrained to look for every opportunity to up-sell. These may not be direct costs to the client or provider, but you can bet they are often returned to the client in the form of higher prices. The time required to start a project also increases dramatically, as a lot of formalization is required. By contrast, in the continuous flow mode, a quick intake is needed for project estimates, which are either approved or not approved by the client, and the project may start just a couple of weeks after the first intake meeting, as the team is already in place.

Legal paperwork

As if commercial paperwork was not enough, there’s also the legal paperwork. Due to the defensive attitude previously described, lawyers from both sides tend to have a more prevalent role than is truly necessary. If nothing else, the timing of the project will be impacted by the multiple rounds of legal changes and approvals required before the project can begin. One can only hope that this doesn’t happen in the middle of the project too!

Of course, no development project will be perfect, but by utilizing Agile methodologies and a Lean, continuous delivery model, we understand how to avoid the waste associated with fixed-price projects. As more clients learn to identify areas of waste that lead to higher prices and lengthier projects, we predict that the continuous delivery model will become the preferred method for contracting and running projects.

By Filipe Pacheco

Genpact is definitely a global leader when it comes to business process and technology management. But, in Brazil, the company`s strategy is to learn with the Brazilians how to be successful in the local market and the intentions are to start to follow a growing path from now on.  “We are a global company with local presence. In Brazil, we knew it was necessary to come up with a Brazilian team that understands the local market very well,” said Affonso Nina, Genpact`s new Brazil`s country manager. “And, with that process, we had to have in mind the word adaptation“. Genpact started operations in Brazil in August 2011. At that time, Tiger Tyagarajan said that the expansion into the country was “in line with our growth strategy to bring our global business practices and expertise to rapidly growing emerging economies, to serve global corporations expanding there as well as local growth companies.”  After 10 months acting in the local market, the Brazilian unit of Genpact already has quite impressive projects going on, which are in line with the widely known potential of the company abroad.

With two operation centers located in São Paulo, the economic and financial heart of Brazil (but also its most expensive city), the company provides mostly back office finance and accounting services to the local units of Astra Zeneca, a global biopharmaceutical firm, and General Electric, which are services very closely related to the creation of the company.

Growing Local Business

On another front, Genpact also provides consulting services in different parts of the country to two other multinational companies with operations in Brazil. One of them is a supplier to Nissan, the Japanese automaker, in Curitiba, Paraná; and the other is Anglo Gold Ashanti, one of the biggest gold producers in the world, in Minas Gerais.

“The intention is to grow more and more in both fields, processing services and consulting from now on. The Brazilian market has a strong demand for both,” said Nina, who emphasized that companies from different segments in the country are expanding and demand business process services of different kinds. “And we can do that well.” 

“Since the launch of our operations in August up to now, we have been prospecting the Brazilian market, and have been learning with it. Now, from the second semester on, we are ready to act more aggressively seeking growth, we are ready”, say Nina, a Brazilian who coordinates about 50 employees in the country; he aims to grow that number in the near future. The company does not disclose numbers regarding the operations in the country so far.

BPO Taking Advantage of Country Growth

By the end of 2012, the number of employees working for the American giant might grow considerably. Nina told Sourcing Brazil that the company is already looking for another Brazilian city to launch a third office. It will be taken into consideration, before making the decision of where to go, the access to qualified workforce more than anything else, explains the CEO. The decision to come to São Paulo first was made mostly considering the close contact to clients, which should influence on the new destination as well.

According to Nina, this is a moment in which Brazil is growing considerably, and BPO services naturally can take advantage on that. “It is not like the contact center industry, which is very well established in the country already. We have room to grow.” He reinforced that the strategy implemented since the launch of the operations in the country is mainly to grow with local clients, who can be Brazilian companies or local multinationals. “That is why we need to hire people with local expertise that know the local market well.”

Red tape, scalability, labor analysis, financial incentives and investment risk are among the burning issues for a Nexus panel joining together Ann Harts, Kevin Parikh and Fabrizio Opertti

By Dan Berthiaume

If you are a BPO professional and have had a sneaking suspicion in the past five to 10 years that contracts are getting more complex, it’s more than a hunch. For reasons including the growing importance of IT to the BPO equation, increased sophistication of BPO buyers, and the evolution of BPO beyond a means of lowering transactional labor costs, BPO contracts are growing more and more complicated.

To find out more details about the situation regarding complexity of BPO contracts, Nearshore Americas recently spoke with two BPO contract experts: Marc Tanowitz, principal at outsourcing advisory firm Pace Harmon, and Stan Lepeak, director of global research, management consulting at KPMG. Tanowitz and Lepeak discussed exactly why and how BPO contracts have become more complex, the effect this increased contractual complexity is having on the BPO industry, and how vendors and buyers can collaborate to reduce contractual complexity while preserving the integrity of BPO projects.

BPO Grows Up

The most basic contributor to the complexity of BPO contracts is the simple fact that as BPO matures, users want to do more with it. “Five to seven years ago, BPO was focused on labor arbitrage,” says Tanowitz. “It was about finding resources in low-cost locations to do what they were told.” Tanowitz says this earlier iteration of BPO mostly dealt with broad transactional work such as accounts payable (AP) and general ledger.

However, according to Lepeak, more recently BPO has become a vehicle for delivering more sophisticated services. “There is now a more broad scope,” he says. “Multiple processes are pulled together and there is an offshore element.”

Technology Creeps In

Another major factor Tanowitz and Lepeak both cite was the growing importance of IT to outsourcing, even to BPO projects that don’t primarily focus on outsourcing technology systems. The increasing role of IT in BPO is also a reflection of outsourcing’s growing scope and sophistication.

“Now you often find IT bundled with business processes,” says Lepeak. “Companies also outsource the infrastructure supporting processes.”

Tanowitz’s commentary echoes that of Lepeak. “The BPO market shifted from labor deals to deals with a large IT component,” he says. “Providers deliver analytical support for discrete business processes, such as a collection tool.”

BPO Buyers Want More

Tanowitz and Lepeak both also refer to a maturing of BPO buyers along with a maturing of the BPO market. “BPO contracts were originally fairly simple, some were even written on vendors’ contract paper,” says Tanowitz. As a result, contracts were heavily skewed in favor of vendors, providing them with protections while not giving buyers the same level of protection or options for adding services or changing scale as their needs changed through the life of the contract.

However, Tanowitz said that eventually BPO buyers became more savvy and started demanding service level agreements (SLAs), price benchmarks, and other considerations which better protected them in the event of changes in project scope, currency value or vendor performance, but also greatly added to contract complexity.

Lepeak says buyers actually became “unrealistic” in their demands. “For example, BPO buyers wanted big cost savings, but no offshoring,” he explains. “Or they wanted to put in an ERP system but not change their processes.”

Lepeak vendors who did not have experience in delivering these types of sophisticated BPO services agreed to unrealistic contracts, “Which is why most of the big BPO deals of six to seven years ago were flops.”

Finding a Contractual Balance

Tanowitz and Lepeak both agree that the worst days of BPO projects being held up or resulting in vendor-buyer disputes due to contractual complexity are over, but the industry can still do much more to relieve complexity without damaging the quality of service delivery. Lepeak says buyers need to find a balance between pushing too hard and settling for too little, while having realistic expectations of BPO innovation.

“In reality, it is difficult to create a contractual arrangement that guarantees innovation,” he says. “Innovation comes from taking risks and doing things outside the box, which are hard to put in a contract.”

Instead, Lepeak says buyers should understand that lawyers and risk managers representing both parties in a BPO contract will likely nix anything that seems too risky, and accept the fact that well-written BPO contracts “offer less innovation but fewer failed deals.”

Tanowitz offers what at first sounds like a counterintuitive strategy of making contracts more complex upfront to provide more flexibility later in the life of the contract. “Do it right, do it once,” he says. “Deals change. Service levels may need to increase or be relaxed. Put in the mechanisms upfront to enable changes (without having to renegotiate the entire contract).”

By Steve Mezak

The emerging HTML5 standard will make it a lot easier to deliver more graphical and attractive Web pages to more and more devices (especially mobile devices). That makes it a big boon for Web developers, and also a great fit for Nearshore developers with an eye for good design and local tastes.

HTML5 Defined

HTML5, which most browsers already support, is the next step in the evolution of the hypertext markup language that controls how information is presented in Web browsers. It will make it easier for users to access audio and video by integrating audio and video support into the browser, rather than requiring the user to download and install plug-ins. The HTML page essentially becomes a container for other containers, which contains other containers, and so forth; JavaScript can easily access those containers, modifying, updating, and moving them around.

Another capability of HTML5 is that it gives developers greater control over presenting information from different sources on the same Web page. Conceivably, if you have multiple Web apps running on different servers or different sites, you have the capability to select bits of information and then reintegrate and display that information together using HTML5.

Use Cases

Why is that important? On the consumer side, for example, you would have the ability to present a news, entertainment, gaming, shopping or social site to mobile consumers that aggregates content in a new way from multiple sources. On the business side, you could create a Web site for, say, corporate real estate managers that gives them instant updates on demographic, zoning, traffic flow and other information to comparing potential retail sites.

You need graphic designers as well as programmers – two different kinds of skills – that need to work well together when creating a web application.

Such capabilities are especially valuable when they’re available on mobile devices, and this is another area where HTML5 shines. Rather than forcing developers to write a native application for every mobile platform (i.e., Apple vs. Android vs. Blackberry) HTML5 can automatically recognize variables such as screen size and automatically tailor the display to the device. With mobile devices rapidly becoming the “screen of choice” for business users and consumers, that’s a huge benefit.

You need graphic designers as well as programmers – two different kinds of skills – that need to work well together when creating a web application. Good user experience and graphics design requires a cultural component — that is, an awareness of the visual images and metaphors that will be instantly recognizable to the end-user of the web app.

The ability and willingness for a Nearshore developer to assemble a team that has both kinds of talent is critical. The good news is that, if they can create such a team, the Nearshore cultural affinity with the U.S. makes Nearshore developers well-suited to these demands, compared to other places around the world.

Steve Mezak is founder and CEO of Accelerance, Inc., which helps customers engage the right offshore/nearshore software development team to create high-quality software. Read more about HTML5 on the Accelerance blog.

By Bertha Leal
Walking through the doors of Cafe Havana is like walking through the doors of time and stepping into the Cuba we all love and remember.

Operated by owners Mauricio Aimone and Gabriel Mas and located on the corner of Calle de la Media Luna con Calle del Guerrero, right in the heart of Cartagena, Cafe Havana is known as “La Esquina del Movimiento” which roughly translates into The Street Corner of Dancing. It doesn’t fail to do its name justice. Plastered on the walls are the photos of some of the greatest legends of the Cuban music heritage like Benny More and Antonio Machin. Take it to the dance floor and dance the night away to the beats of a live band playing anything from jazz, to rumba, to salsa and the occasional sweet bolero for the romanticos.

After you’re done sweating up a storm on the dance floor make your way to the bar and let the guayabera-clad bartenders whip you up a freshly made mojito, garnished to perfection with sprigs of mint. The shelves are stocked with brands of rum, brandy, whisky, vodka, and beer. You must try their Cuba Libre which at only 15,000 pesos a pop you can afford to get two! With your chilled glass in hand close your eyes and lean back. In the palpable heat you can almost feel the breeze from the palm trees, the waves from El Malecon. Your body may be in Cartagena but your soul will be in Havana.

On any given night you never know who might just wander in. Regulars and locals can shake their hips along with some very prominent guests. Secretary of State, Hillary Clinton, was recently seen at the establishment. Pictures immortalizing her visit show a Hillary with her hair down, a thin film of sweat on her brow and hands high up in the air. It is a picture that so entirely captures the true spirit of the bar as a place where you leave your worries at the door and succumb to the rhythm of the bongos. And if it’s good enough for Hillary, it’s good enough for us. Take it as a high recommendation, you cannot leave Colombia before you visit Havana.

For more information on Café Havana you can visit their website cafehavanacartagena.com or call 57 314 5196745 for reservations.

By Luke Bujarski

 Mexico’s telecoms sector has gained a bad reputation for under investment, poor quality and high costs. Fixed line and mobile telephony rates are among the most expensive across the OECD and bandwidth is subpar compared to download speeds in other LATAM markets.  While government initiatives poised to foster competition continue to hit roadblocks, America Movil is feeling the heat and things are slowly changing.  New carriers like Nextel are building stronger brand loyalty especially within the enterprise market.  Pressure from the Federal Competition Commission has also pushed telecoms czar Carlos Slim to pledge greater investment in ICT infrastructure and more fair pricing strategies.  We spoke with Ernesto Piedras the CEO of CIU – a Mexico-based telecommunications industry consulting firm to give us a breakout of the current landscape and how things might play out over the next two-three years.

 NSAM:  Can you give us an overview of Mexico’s current telecoms landscape?

Piedras:  Mexico is a very dynamic market especially in the mobile sector where we have 98.7 million open lines and see 10 percent annual growth.  Last year’s revenues for mobile services were 17.7 billion dollars – out of 35 billion for the entire sector including fixed lines and internet.  Seventy percent of the mobile market is held by Telcel.  Movistar controls 35 percent and Nextel holds 3.9 percent of total lines. Nextel is a growing competitor as it has become the image of good service particularly with the business community.  Nextel actually accounts for 12 percent of total mobility revenues. Virgin Mobile America is also set to enter the market this year.

NSAM:  What about fixed lines?

Piedras:  The fixed line segment is 19.5 million lines which is very little under any standards considering the country’s large population.  What’s interesting is that traditional fixed line players including Telmex are losing customers to the cable companies that offer bundled phone services to their 11 million paid TV subscribers.  Cost for a dedicated fixed line tends to be high and doesn’t make much sense to consumers that have mobile phone options, but people are willing to pay for premium television which also offers telephone services.

 NSAM:  How does quality and bandwidth in Mexico measure up?

Piedras:  Mexico is 2.5G as a whole with major cities well covered, but rural areas and small towns have virtually no service.  Until recently infrastructure investments have focused on coverage expansion and not so much on increasing bandwidth.  Telcel recently announced a very important investment for 3G services and Nextel will be launching 3G as well.  When you talk about broadband internet you also have to distinguish between what is considered broadband in the world and what is broadband in Mexico.  The OECD says that you cannot call it ‘broadband’ unless download speeds are at least 2megs per second.  In Mexico download speeds are much lower.  When I travel it’s always a shock to come back to Mexico compared to download speeds in places like London.   Essentially you are paying top dollar for minimal service.

NSAM:  Are Mexico’s telecoms costs as expensive as experts claim?

Piedras:  Mexico has the highest telecoms costs across the OECD.  Also remember that Mexico has a relatively low GDP/capita compared to other OECD countries [10 thousand USD] so mobile services are very expensive for the Mexican consumer.   Out of 98 million lines only 16 percent are contract while 84 percent is prepaid services.  However, the smart phone market is growing rapidly and people are willing to pay top dollar for the latest technology.

NSAM:  Will government be able to bring additional competition into the market?   

Piedras:  Overall I am optimistic about the future and what’s coming in terms of competition and alternatives for customers.  In the past we had absolute regulatory capture with government authorities controlled by the main telecoms companies.  In the current administration there has been more independence of the regulators but government still lacks ‘teeth’ when it comes to antitrust regulation.  Last week’s decision to drop the $1 billion dollar fine against America Movil for unfair pricing practices demonstrates the limited power of the Federal Competition Commission, the main regulatory body in Mexico.  Lack of competition is also negatively impacting infrastructure investments.  Although the main companies [America Movil & Movistar] comprise 90 percent of the market, they only invest about 40 percent of total investment.  Every year they come out with generous announcements but when you look at actual investments they don’t commit.