Market statistics and industry data can sometimes be alluring during a BPO’s site selection process, but this information can mean next to nothing without a bedrock of collaboration between the local government and the public and private sectors.
Jeff Aldaz, Senior Vice President of Global Services and Business Process Integration at Alorica, lends his insight into the company’s site selection considerations, as well as addressing some of the lesser-known operational challenges that come with choosing a new location.
Nearshore Americas: Alongside cost of operations, scalability, and quality of labor, how are other considerations influencing your site selection process when looking at Nearshore locations?
Jeff Aldaz: We look at this from a couple of different angles. We start with desktop studies with partners to assess the high level information that’s available in the market. This includes the size of the labor market, the size of the population, and the number of graduates produced each year, among other things. Alongside the things you mentioned, we also look at the stability, efficiency, and availability of local infrastructure, such as electric power, energy, and telecoms providers.
We then do field visits in order to look a little closer, especially in terms of how many competitors are in that space and the relationship between the government, public sector, and private sector – if this “triangle” of public-private-government is not in balance, you find that some markets can quickly get saturated.
Local FDI agencies, finance ministers, and education ministers need to display their ability to read how many jobs are being created in the country, and can often get excited about the prospect of industry expansion or new market entrants, but if they don’t react accordingly then labor wages start to float up, and employees become more scare. What they should be doing is partnering with search firms, contractors, and companies that are moving into the market.
There has to be an ecosystem where like practitioners are working together, despite being competitors. For example, if we were to go into a market and raise wages by a dollar and hire a thousand people, other companies would have to make an adjustment, which ends up raising labor costs altogether.
Finding that hybrid ecosystem between government, private sector, and public sector is hugely important.
Nearshore Americas: IPAs and the public sector often don’t have good enough data to paint an accurate picture of the market. Has Alorica come up across this problem, and how has it affected your decisions?
Jeff Aldaz: It depends on the market. Some of the more established markets went through an initial phase of reacting to interest by securing as much business as possible, but as the pressure intensified to provide accurate information they would have to modify it to meet demand.
What they will often provide is data that is not really valuable after the initial rush, but it becomes valuable when they can start to include up-to-date information from general contractors and universities. By approaching schools and explaining that BPO and call center providers are bringing in jobs in things like customer service, finance, and technology, they can persuade them to center their programs on internship programs, on-the-job training, and ultimately producing candidates to fill those roles.
Nearshore Americas: When it comes to selecting a new facility or location, what are the big challenges you have faced during expansions and market entries?
Jeff Aldaz: Brokers will try to point you toward areas of development with promises of multi-purpose centers that have loads of amenities, potential to be connected to public transportation, and that can house thousands of employees. You have to make the right bet on either choosing an established location or taking a risk on something that is still in development.
In most cases, you’re entering the market with a small- to medium-sized opportunity, and you need the ability to expand, but not by necessarily making a huge commitment from the offset. On the other hand, you might take one floor in a full building and then the customer requests to double the opportunity, in which case you’re stuck.
It’s a combination of working with brokers on what they’re speculating, finding established space, ensuring harmony between public transportation, and a good standard of amenities. The reality is that most competitors in this space are within around 5% of each other when it comes to wages, so it’s the ability to combine all those non-direct compensation components that allow us to retain our people. It’s vital to have a backup plan, a strategy for expansion, and the ability to expand and contract, which is more of an art than a science.
We do have blueprints from other Alorica sites, but they are more like cousins than twins – we can’t take the exact format we use in the Philippines and apply that to Costa Rica, for example, mainly because market size dictates the size and layout of our facilities and our customer profiles vary. However, we will usually take 70% of the formula and then make local modifications.
Nearshore Americas: When entering an established building for a new operation, what kind of things does Alorcia generally have to smooth over before operations can begin?
Jeff Aldaz: It’s a mixed bag. You could go into an established building and have to do a substantial amount of retrofitting, or you may have to deal with the size of the elevators, or the size of the lobby, or maybe the electromechanical equipment that is already there. If you designed the perfect building yourself it might be 1,500 to 2,000 square meters with a center spine and everything is interconnected, but the problem is that it takes time and there are often delays, so it really is case dependent.
In many Nearshore markets, companies will move into established facilities that are designed for businesses like law firms, or basic offices, but the density of a call center requires a different approach. Hence, as the industry starts to expand, general contractors will start to build facilities that are more designed for the sector, which in turn helps the whole market expand.
As an example, we may go into a market with a small operation of 500 people and if it goes well with the first client then we start to build other clients into the portfolio, creating a need for a much larger footprint, so you have to be able to manage that.
Nearshore Americas: Once the company is in the facility and jumping into operations, what are the key challenges in ensuring that different departments are aligned, and what tactics do you use to overcome them?
Jeff Aldaz: The big challenge there is having clear accountability and coordination. We’re doing a much better job of having leaders that are committed to operational excellence and balancing the matrix of departments that are in play. This includes HR, IT, facilities, operations, and legal, among others. The ability to ensure that all those departments are working in harmony is probably the largest challenge.
To combat this, we assign enterprise-grade project managers and transition managers that act as the quarterbacks for navigating those types of deals. Each of those stakeholder groups have different needs for who they are serving, and things like excitement levels and setting correct expectations with clients also play a part in the strategy. Clients may commit to certain dates, but will sometimes want to slow them down or accelerate, or make modifications to the plan, so our ability to react and adapt to that is really important – the plan you make at the time of proposal, and when you launch the site, never looks the same at the end.
Alorica has been successfully using technology and platforms, such as Power BI (a business analytics service provided by Microsoft) and Microsoft Project, which help to ensure there is clear coordination between internal stakeholders and clients. We create multiple views, so the tactical project plan that the facilities and operations teams may see on a daily basis are not necessarily shared with executives or clients, but we can create summarized executive views that are distilled down to the critical points. That way, dedicated information flows to everybody across one consistent platform.
Nearshore Americas: Finally, how should these factors play into the Nearshore ecosystem as a whole?
Jeff Aldaz: In some of the medium-sized markets, it will be important to keep the industry ecosystems balanced, while in larger markets like Mexico, Colombia, and Brazil we will continue to see aggressive growth. With the rest of the region, it will depend on that local market’s ability to continue to develop in a way that they can absorb that type of growth.
At the moment, Latin America is a high-growth market, so it’s really about evaluating all the elements we discussed and load balancing appropriately.
Note: Some questions and responses may have been edited for brevity and clarity.
What are your site selection tips? What trends have been defining your choice to enter new markets, and what challenges are you facing when you arrive? Let us know specifics in the comments.