BPO Brief: Expect Aggressive Growth in the Dominican Republic

The contact center industry in the Dominican Republic is poised to double in size from 10,000 to 20,000 bilingual agents by 2017. This is the message passed on by Eddy Martinez, president of the export and foreign investment agency CEI-RD, as well as key industry insiders during detailed discussions with Nearshore Americas. However, concerns about the availability of high-tech talent suggests that the DR still has some way to go before moving into higher-end software and application development services.The country’s upcoming presidential election could also stall industry growth in 2012, as politically appointed administrative officials are hampered and rotated during the campaign season. Wages and total costs have remained stable over the last five years with Internet costs falling and a devalued peso against the dollar, but operators continue to express frustration over high energy costs and stringent labor laws unbefitting contact center operations.

NSAM: What is your five-year plan and vision for BPO and IT services in the DR?

Martinez: The contact center industry has been a major part of the country’s strategy for economic growth and now employs over 25,000 people. Looking outward, we have an opportunity to grow the industry both in scale and service-level maturity. One main reason is because we have good physical infrastructure, submarine cables, access points; we have among the best telecoms infrastructure in Latin America. The objective is to grow as fast as possible but with a managed growth strategy.

Insiders: There’s still a lot of potential for growth in the DR. The 25,000 agent figure includes the local market and government employees. For commercial bilingual accounts the total number is more like 10,000 agents. The market can grow to 20,000, but that’s where we hit capacity given the current landscape. Being able to ramp up on campaigns is an advantage in the DR compared to other Central American and Caribbean markets. In fact, much of the work coming into the Dominican Republic is from the Philippines and Manila, where the industry has hit a saturation point. Santo Domingo is the hub for CRM services but Santiago is also an option with around 500,000 people and an affluent, bilingual workforce.

NSAM: What has the government done to strengthen the local workforce, particularly in the area of language training and IT skills?

Martinez: The number one constraint has been the availability of talent, particularly bilingual training. In response, we’ve initiated a national program of English immersion incorporating public and private universities with IT and English language training. In the last three years we’ve graduated and certified 31,000 students. We also recently held a job fair specifically for the BPO industry with a turnout of over 9,500 attendees – and in the case of bilingual students – 30 percent of participants submitted their applications in English. Contact center jobs are good paying jobs here, compared to other employment opportunities. In our programs we also stress the BPO industry as more than just a job, but as a career option.

Insiders: The government-run training program that started three to four years ago is extensive but you can only learn so much in the classroom. The real pool of English-speaking talent comes from middle class families that send their children to bilingual schools. There are also a lot of expatriates returning from the US, particularly from New York. In the industry we’ve also seen chat support growing a lot, which doesn’t require as refined spoken English, only reading and writing. Finding experienced IT people in the DR is definitely a challenge. Higher education is affordable, but the quality is poor producing mediocre students. Programming talent is even harder to come by; skilled programmers with any .NET experience often take jobs in other sectors. The Cyber Park of Santo Domingo has been an ambitious project but it has proved difficult to pull in the right talent, primarily because of its location far away from the city center. They do have the CISCO Institute which graduates 30-45 certified engineers per year. France Telecom and RIM are also hosting some IT technology innovation at the Cyber Park developing new applications for the mobile industry. Big opportunities are in CRM, BPO, and tech support. Our clients are happy with tech support. In the DR most are proficient at basic computing.

NSAM: How friendly is the overall business environment for contact centers and IT services firms?

Martinez: Tax zones were traditionally available only to manufacturing and assembly. Now contact centers and IT companies qualify under the Zona Franca Especial, which offers tax advantages and works as a floating trade zone that can be applied irrespective of location. The maturity of our political leadership has also helped. When we started this whole drive for BPO there was a lot of skepticism. Now the two main political parties have pledged support. Larger companies and IT-related services are now on the radar. We’ve been successful in attracting the big contact centers and believe that companies like HP, IBM, and Microsoft could also benefit from our workforce and business environment.

Insiders: The biggest obstacles to the contact center industry here are antiquated labor laws and electricity costs. The Zona Franca regime helps with an exemption from the national profit sharing tax that obligates companies to share 10 percent of company profits across the organization. However, there is still a lot of gray area in the labor laws that are incompatible with call center operators. We’re a 24/7 business and Sundays are double pay, for example. There is also a lack of night time pay differential and reasons for termination are narrowly defined, making things like inappropriate behavior and low performance scores very difficult to prove under the current system. Electricity costs are also quite high. There is a 20 percent discount incentive available, but contact center operators do not meet the five-megawatt usage requirement. At the same time, internet costs have gone down considerably over the last five years – by almost 50 percent. Also, the DR Peso has declined in value relative to the dollar by about 10 percent over the past five years.

NSAM: How will the upcoming presidential election affect efforts to promote and support the BPO industry?

Martinez: We understand that attracting the big players requires a high level of coordination with us [CEI-RD], local governments, the university system and other players. We do believe that the DR offers political stability compared to other countries in the region. Our judicial system has become more institutionalized and our democracy works. The support from our political leadership has helped. On August 1-3 we will be hosting our annual conference (TecDo) intended to let investors know what the DR has to offer, but also to inform the local government and communities of the progress we’ve been making in this industry.

Insiders: The political process is stable and legitimate with Presidential elections held every four years. The major problem is that the campaign season brings most of the local and national administrative functions to a complete stop. Most government jobs in the DR are politically appointed positions so there’s high turnover within administrative roles. This makes it very difficult to process required documentation and applications during election season. We’re opening another call center in Santo Domingo and are rushing to get all of the required paperwork in before elections get underway. Regarding the BPO industry specifically, each contact center must acquire a license from the state-regulated telephone company. This could prove to be a powerful tool in developing a sustained growth strategy for the industry if things heat up, but there is about a 1 percent chance that the government would actual implement such a measure.