Back in 2007, global outsourcing and consultancy firm Capgemini ran the sort of Guatemalan BPO operation that convention would expect from a small, developing Central American location – a couple of hundred seats providing low-level customer service work. However, merely a year later, the company’s operation had more than doubled in size and was providing high-value finance and accounting services for a major international client, setting Capgemini on a path of expansion that has challenged standard thinking on the outsourcing potential of one of the Nearshore region’s often over-looked corners.
Capgemini first arrived in Guatemala in 2006, establishing a 20-seat operation working with a local partner – Transactel – to provide customer service for a handful of U.S. utility firms. However, the turning point in the company’s relationship with Guatemala came with a bid to provide F&A services to Coca-Cola, who had told prospective service providers they were interested in a nearshore presence.
After the initial stages, bidding for the contract came down to Capgemini, IBM and Genpact. While IBM had no clear Nearshore solution, Genpact pitched Juarez in Mexico, a suggestion met with concerns over accent neutrality and attrition rates from the client.
With the basics in place, Capgemini’s research turned to an analysis of the comparative cost of doing business in Guatemala.
Capgemini meanwhile, decided to investigate Guatemala’s F&A potential to see if they could build on the positive customer service experience of working with Transactel. “We did some studies before (to see if we) could find people with enough background and deep knowledge of finance and accounting,” said Hansjoerg Siber, the global head of Capgemini BPO delivery. “(When) this was shown to be positive we knew they had good language capabilities so we bought the two things together and that made us confident that Guatemala was the right place.”
Capgemini’s Research on Guatemala
The company’s research showed that a full 30 percent of Guatemala’s 170,000 university students are studying finance related degrees. Even more finance graduates are coming through the country’s technical schools, where 40 percent of the 310,000 students are pursuing a Finance and Accounting degree and in 2010 alone, there were 40,500 accounting graduates. “The catchment area was very strong on the finance side to grow the F&A operations,” said Steve Rudderham, until recently the company’s VP – Global Transitions, and Global Delivery Excellence Leader.
Capgemini’s researchers also turned to the issue of language skills to ensure the quality found in their existing operation came from a labor pool of English-speakers large enough to cater for the new Coca-Cola operation and to scale up in the future. “(The decision) was also very deep into English language and accent neutrality,” said Rudderham.
Guatemala has an immediate advantage over its immediate neighbors in the area of language skills through its size alone – it has the largest population of any country in Central America with 14 million people – nearly double that of its closest rivals (Honduras with 8 million and El Salvador with 7 million.)
However, it was the education system that really caught the company’s eye, as every one of Guatemala’s university students must take the demanding TOEFL English exam. Every year 28,000 students leave university with an average 7.5/10 score – Capgemini requires scores of 9/10 for call centers and 6/10 for BPO and FAO. Approximately 30% of these graduates have knowledge of Finance and Accounting.
Which to Choose From?
With the basics in place, Capgemini’s research turned to an analysis of the comparative cost of doing business in Guatemala. According to their assessment, Costa Rica and Panama have costs 23% higher than Guatemala – a byproduct of the market saturation that also contributes to high attrition levels. Mexico was also rated as high-cost and with better infrastructure for IT than finance.
El Salvador ranked as only 7% more expensive than Guatemala but the company felt the labor pool of English-speakers was lacking in depth and the communications infrastructure was comparatively limited.
On the other side, Honduras ranked as 5% cheaper while Nicaragua had 10% lower costs. However, the company identified Honduras as an immature market shackled by restrictive bureaucracy while Nicaragua was written off as a small market saturated by call center giants 24/7 Customer.
However, for Rudderham, once the region of Central America was targeted, cost was always a secondary factor in the decision. “There was not a lot to choose between them in terms of rates,” he said. “Nobody was drastically undercutting another so what was driving us was the infrastructure that was set up for telecoms and hiring and recruiting [and] the knowledge that was out there of BPO and F&A.”
Guatemala & Coca-Cola
Confident they had put together a strong proposal, Capgemini then had to convince the client that Guatemala – operating in tandem with a Chennai-based center – was the right choice. When Coca-Cola representatives visited the country to see for themselves they were impressed not only by the human capital potential but also by the possibility of taking a hands-on role in establishing a new operation and by the chance to be the first large-scale outsourced F&A customer to be catered for in the country.
Since then, Capgemini’s Guatemala operations have continued to expand at an impressive rate. The company currently provides F&A services from Guatemala to ten clients, including Nokia Siemens, Warner Brothers, Office Depot and Unilever, and at the start of the new year will inaugurate a new site with space for 2,500 seats.
This rapid expansion has caught many in the sector by surprise, as Guatemala still struggles to shake off the reputation as being an outsourcing backwater only suitable for the call center scraps that fall from Tier-1 destinations’ tables. Hansjoerg Siber, though, balks at the suggestion that Guatemala is a second rate destination. “It is not a Tier 2 or Tier 3 destination,” he said. “For us, it is absolutely a Tier 1 location.”