Nashville, Tennessee-based BPO provider Sitel expects global sourcing to become a US$500 billion industry by 2020. Relatively few outsourcers have truly global capabilities, but with demand for multi-shore services rising among the largest clients in the industry, Sitel believes it is becoming increasingly important for major service providers to offer a broad portfolio of delivery options, including offshore, nearshore, onshore and work-at-home in order to claim the largest possible slice of this lucrative market.
A balanced-shore approach that blends the capabilities of these different delivery models enables clients to “strike a balance between costs, quality and the risk associated with concentration of service,” Sitel’s Chief Marketing and Infrastructure Officer, Sean Erickson, told Nearshore Americas.
“Today clients are going to have different needs for a portfolio that includes offshore, nearshore, onshore and work-at-home, which is growing four or five times faster than the traditional brick-and-mortar business,” he added. “One of the trends that we see is that many first-time customers use onshore as an entry point to outsourcing. They use it as a way to get established with a service provider and then over time they want to be able to transition for various reasons, such as cost or language. So having that portfolio ability is really important as you maintain those relationships. It also provides a cost balance and diversity for disaster recovery.”
As an example, Erickson said, “We’re providing support for a leading U.S.-based cable company with the same transaction time in the United States in brick-and-mortar and work-at-home and in Latin America. This gives them redundancy if there’s some kind of outage or anything that affects their operations.”
Sitel, which supports over 225 clients in 40 languages from 108 facilities in 21 countries, sees offshore delivery as essential for scale, while nearshore is key for business continuity and critical language support. Onshore remains vital for setting a benchmark for global operations and establishing standards, while work-at-home agents are critical for staffing scalability and flexibility during market high-and-low points.
The multi-shore or balanced-shore approach has become increasingly popular in recent years, especially for Fortune 500 companies, for whom an understanding of local cultures and the ability to provide service in local languages is particularly important, Erickson said. “It’s definitely resonating,” he noted. “Our sales pipeline right now is the biggest that it’s been in at least five years.”
While it is difficult to provide general advice to clients that are interested in this model because of differences in each buyer’s specific needs, Erickson said first-time buyers should always “make sure you’re working with someone that can provide global consistency, based on language needs, and has a robust technology infrastructure in all of these regions.”
Softtek’s ‘Global Nearshoring’ Model
Mexican ITO and BPO provider Softtek was a pioneer of the balanced-shore model and remains one of the only major Latin American vendors to have established a truly global set of delivery centers.
“Initially we focused on providing services from Mexico to the U.S. as a complement or an alternative to India-centric outsourcing models. But we were always conscious that nearshore was a component of a global delivery model. Not everything can be done out of India and obviously not everything can be done from a nearshore perspective,” Alex Camino, Vice President of Marketing and Communications at Softtek, told Nearshore Americas. “Most of our clients who had global operations also needed nearshore components for their operations in India and Europe. So we opened a center in Spain to support our clients’ global operations in Europe. We’ve since complemented that with delivery centers in China and India, plus the centers that we have in Mexico, Brazil and Argentina and the local presence we have in the US.”
This model enables Softtek to offer clients greater scale and a wider variety of skill sets. “We can offer our clients the right-place component, allocating the work wherever it makes the most sense for the client and the specific project. And we can leverage the benefits of Indian talent wherever it makes sense, but wherever it doesn’t fit very well, whether because of cultural affinity or language, that’s where the nearshore model kicks in,” Camino explained.
Buyers of certain IT services have been increasingly drawn to this model in recent years, Camino noted. “We have seen a significant increase in everything that has to do with digital,” he said. “Digital technologies go hand-in-hand with agile capabilities. And agile capabilities require by default a great degree of interaction. That’s where we have seen an increase in demand for proximity-based services.” Regarding the advantages of this model, Camino said, “One is to have the ability to serve the customers in the daytime from the same or a very similar time zone. That brings a lot of advantages because of communication. It also gives us the ability to have our personnel on demand with one or two days’ notice at the client’s premises, which is also a huge advantage.”
While follow-the-sun BPO models are fairly straightforward, Softtek can, in certain circumstances, offer a similar model for software development and testing. Having teams in India and the Americas, enables Softtek to offer 24/7 around-the-globe capabilities for such tasks, Camino said, with the caveat that “it’s not an easy task because it requires a lot of maturity and a lot of definitions.” Sometimes software development and testing will be too complex to work under such conditions, he explained, but “when you’re talking about things that do not require a lot of interaction and are very well defined then it’s a very productive model… you can leverage the capabilities of an India-based programmer who can work ‘overnight’ and then an American-based programmer can pick it up at the next stage, without the need for anyone to work a night shift.”
LATAM’s Regional Differences
Given the size and diversity of Latin America, it remains important to have delivery centers in different locations within the region, Camino said. “During the winter there’s a four-hour time difference between Mexico and Argentina. That’s a huge differential. You need to have that proximity and understanding of the local culture.” he noted. Brazil, on the other hand, requires a different approach. Like China, it is a vast domestic market that “requires a huge amount of knowledge” but from which Softtek provides few export services, Camino explained.
The relative shortage of human talent in Latin America also requires Softtek to run multiple operations across the region. “The problem that we face in Latin America compared to India is a matter of demographics,” Camino said. “In order to achieve the scale that we need within Latin America we need to have different locations. It would be very hard for us to scale to the size of engagement that we pursue if we only had one location in the region.”
Sitel, which has operations in Mexico, Nicaragua, Panama, Colombia and Brazil, has found that scale is an issue that can be overcome by leveraging multiple locations within Latin America. “It’s hard to get scale in any particular country, but you can get scale in the region if you know where to go,” Eriskon said. Nonetheless, this remains the region’s biggest shortcoming and the reason why it works best as a complement to operations in Asia where this a greater capacity for scale. “The region just doesn’t have enough capacity,” Eriskon added. “We’re full in most countries in Latin America right now.”
Why So Few Global Providers?
Despite Softtek’s success as an early proponent of the global nearshoring model, no other service providers from the region have followed their example, Camino noted. “I haven’t seen any other vendors from Latin America that have really committed to building global capabilities outside of the region. Some may have some operations for their clients in Europe, the Middle East or Asia, but these are very transactional operations mainly focused on a single buyer,” he said.
“We’ve seen a lot of the Indian vendors establishing locations in Latin America, mainly driven by their customers. But for most Indian vendors Latin America is out of their comfort zone. They’re not very familiar with the region and we’ve seen promises from several Indian vendors to open shop in Latin America and create thousands of jobs but that has not been the case,” Camino added. “I think the only Indian provider that really gets it is TCS. They have established a very robust operation in Latin America and they also have the vision to understand that Latin America also represents a very good opportunity as a market and not just a delivery destination.”
Erickson agreed that despite the advantages of the model, there are very few companies with the “sophisticated global footprint” needed to make balanced-shoring work. “Many have the size but often their concentration is on one region or one shore,” he noted. Eriskson puts this down to the complexities inherent in becoming a truly global service provider: “It’s hard to establish yourself as a service provider in new regions because you have to understand the economic trends that are taking place, the local tax laws, the employee relations environment, and you have to have credibility at a local level, with local management, not expats. You have to have the right infrastructure, particularly if you’re supporting a client in multiple regions and you have to have the ability for consistency.”
He added: “It’s not easy. To be able to understand how to be global is very unique. It’s hard to even generalize talking about trends, needs or capabilities in a region like Europe, for example, when you really have to understand the nuances of operating in Spain, the UK, France and Germany. So in order to be global you have to be local in your understanding of each location.”