Nearshore Americas

Putting Governance First

By Anupam Govil, Chairman, Global Sourcing Forum + Expo
Latin America and the Caribbean have emerged as attractive sourcing destinations for North American companies because they are geographically close, have compatible time zones, and can provide strong bilingual capabilities. Recent reports by Zagada Research on Contact Center industry in Caribbean and Central American have shown a dramatic growth of almost 300% over the last four years.AnupamGovil
However this rapid growth has stretched the middle management talent available in the region, giving rise to increasing concerns about quality control, risk management and governance. When choosing a partner in Latin America or the Caribbean it is important for North American firms to carefully consider local laws, regulations and business practices which may either impede or help with effective governance and enforcement of contracts and SLAs.
Varying Strength, Varying Quality
Quality assurance metrics, timeline and deliverables as well as overall goals are typical and intuitive to include in an SLA, but having provisions for service credits built in if the partner is late or misses a goal is not.
Latin America and the Caribbean, comprising over a dozen countries with outsourcing offerings have very different economies and strengths. Given the emerging nature of some of these markets and the relative immaturity of some vendors, there is less familiarity with governance mandates and reporting requirements for the United States. Therefore,  it is vital for companies wishing to outsource to vendors in this region to do a careful evaluation work of the governance controls in place in a particular country as well as their partner’s ability to mirror their reporting needs.
Governance, risk management and quality assurance go hand in hand. The recent financial services industry crisis has resulted in more stringent applications of regulatory and reporting procedures as well as new controls related to offshore operations. Every aspect of a company’s business, including sourcing agreements, will be under increased scrutiny, and the companies need to make sure that they understand the governance practices, regulatory and policy environment of the country before entering into an agreement.

Quality assurance metrics, timeline and deliverables as well as overall goals are typical and intuitive to include in an SLA, but having provisions for service credits built in if the partner is late or misses a goal is not.

Review Vendor’s Legal Awareness
The majority of the countries in Latin America and the Caribbean that are promoting the outsourcing industry have enacted legislation or enforced corporate governance standards that are amenable to US companies. However there is still variance from vendor to vendor and implementation of these standards is sometimes lacking. In Latin America, especially, there is a focus on protecting shareholder rights and developing effective boards of directors, given the high concentration of family-owned businesses. These laws are at varying levels of maturity, with some having legal precedent and others still in the recommendation phase. A close review of the individual vendor’s adherence to these governance standards is therefore critical.
A company should understand the reporting structures of the company they are partnering with and the exposure and experience they have had with data capture, protection, billing and placing information in SOX and other compliance measures. Additionally, they should be aware of legislative practices. For example, a US credit card company discovered that some of the agents from one of its nearshore outsourcers were stealing client information and selling it on the market. The vendor was able to apprehend the culprit agents and the US company wanted to prosecute them.
However it turned out that the country’s laws predicated that since the victim was outside the country, hence the crime couldn’t be prosecuted. Nevertheless, this resulted in a swift enactment of special legislation in the country to enforce these types of digital crimes.
Set Realistic SLAs
On the quality assurance and performance side – companies should look to put measures in the SLA that are pragmatic and achievable. Quality assurance metrics, timeline and deliverables as well as overall goals are typical and intuitive to include in an SLA, but having provisions for service credits built in if the partner is late or misses a goal is not.
Similarly, provisions can be made to an SLA so that a provider is rewarded for exceeding the goals.  It is also important to schedule regular “health checks” for your vendor and to continually review the SLA and the overall outcome of the outsourcing initiative. These are recommendations that sourcing professionals are giving for every location – not just Latin America and the Caribbean. The good news is that the geographical closeness of both areas should make SLA management more simple in these locations.
For example, recently a US telecom company that was launching a new “Visual Voicemail” service decided to outsource the voicemail transcription work to a  Latin American country. Despite having run a successful pilot, once the project went live they realized that the turnaround time and reject rate was unacceptable, but couldn’t figure out the reason. They were able to send their team over to the  vendor overnight and rectified the issue next day. It turned out that though the contract was for transcribing Spanish calls, a large number of voicemails in the queue were English calls which the agents were rejecting rather than passing to a different queue.
Don’t Forget Business Continuity
Finally, risk management is a key factor when outsourcing to an emerging region. It is important to ensure that the vendors have financial stability, adequate insurance cover, follow the US regulations with relation to DNC and other provisions. This has to be part of the vendor due diligence check list. Disaster Recovery and Redundancy is another area that is often overlooked or underestimated. Realistically speaking, geological, social, political and weather-related disasters affect every part of the world. What makes the difference is the country’s and vendor’s capability to manage business continuity and redundant connectivity.
Despite the global economic downturn, outsourcing levels have not risen as expected based on Analyst firm Gartner’s estimates. One reason cited was buyer hesitation in committing to long-term contracts. For Latin America as well the Caribbean – with their nearshore proximity and very attractive BPO offerings  – there is an opportunity of providing shorter term contracts with more transparency.  However in order to sustain long term relationships, governance has always got to be a front burner topic and not something that gets swept under the rug.
Anupam Govil, Chairman, Global Sourcing Forum + Expo,  is a leading globalization advocate who has advised major corporations, outsourcing regions and service providers across Asia, Middle East, Europe, Latin and North America on optimizing offshore strategies and leveraging global delivery models. He is the founder and CEO of Global Equations, a leading Globalization Advisory firm providing Offshore strategy, sourcing and advisory services.

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