Nearshore Americas

Central America Summit Needs to Produce Results

The upcoming Central American Nearshore Summit taking place in Nicaragua at the start of November is an excellent opportunity for investment agencies in the region to showcase their locations to prospective outsourcing investors seeking new delivery options. However, the conference will need to address both industry trends (for both vendors and buyers) and macro-level issues if it is to be considered a success. Further, the summit will indicate the extent to which Central America can speak with one voice when promoting regional investment, which will no doubt be on the minds of outsourcing vendors that are invested in multiple participating countries.

Regional Promotion is Crucial

The near-unprecedented coming together of investment promotion agencies for Nicaragua, El Salvador, Costa Rica, Honduras, and Guatemala to sponsor a regional nearshoring conference bodes well for outsourcing development in the region. Several success stories highlight Central America’s emergence as a region of choice for outsourcers to house delivery centers for nearshore projects. A salient example is the rapid growth of Honduras’s contact center delivery space since 2010, which has attracted Stream Global Services, StarTek, and KM2 in San Pedro Sula and an LL Contact Center in Tegucigalpa.

Investment agencies in Central America are looking beyond front-office BPO into higher-value business services and information technology, and this demonstrates the collective ambition of both industry and government players in the region. The conference will need to impart to prospective investors the functional sweet spots that can realistically be found in each participating country, and explain the extent to which those services can be scaled. This will be a delicate task for each of these countries, which to date have not moved much beyond basic contact center provision for nearshore clients. Equally, each country will need to highlight the long-term educational initiatives that will enable them to move beyond front-office outsourcing.

Key is Overcoming Misconceptions

Participating countries need to mitigate the negative perceptions many executives in North America and Western Europe hold in relation to Central America. This task will not be easy by any stretch. In Ovum’s most recent CRM Outsourcing Business Trends Survey (published in 2Q13), enterprises responded negatively to most Central American locations when asked where they would consider locating their offshore contact center delivery operations, with four of the five countries participating in the conference being ranked among the bottom third of delivery locations. Costa Rica was the exception, being rated considerably higher than the other locations. Much of this negative perception relates to fear of instability, which survey respondents overwhelmingly classed as the primary inhibitor to choosing Central America for offshoring work.

However, it is possible to change these perceptions. Less than a decade ago, Colombia was very poorly viewed by outsourcing executives, but it is now one of the most sought-after front-office BPO delivery centers in the world. This transformation is largely due to perseverance in informing the world of the ongoing political, public security, and economic reforms being supported by the country’s industry players and investment promotion bodies. This approach needs to be championed across Central America, and the region’s respective investment promotion agencies must prioritize this if the summit and the industry are to succeed.

Coordinated Policies Required

The extent to which participating countries are prepared to coordinate cross-border policies relating to the BPO and IT services space is also something prospective outsourcers and enterprises should consider. Labor mobility, corporate taxation, and import/export provisions are all areas where Central American governments could look for common points of direction, and where these commonalities do exist, they could provide an immediate competitive advantage. By pushing such agendas, the summit would set a strong precedent and pressure other regions seeking investment to follow suit. However, the broader question of how willing countries are to adopt a coordinated regional outsourcing policy versus a more individual approach looms large, and with political orientations (and timing) varying widely across the region, it is unlikely that such a policy would be adopted easily.

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This article is reprinted upon permission of the author.

Peter Ryan

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