The past decade has seen business process outsourcing grow into a major global industry. In so doing, BPO has spread productivity gains to the world’s largest economies, while simultaneously enriching select hubs—India, the Philippines, South Africa and Mexico, among others—that offered tech-savvy labor for significantly less than what similar operations would cost if based in the U.S. or Western Europe.
During this time Mexico established itself as a player in the BPO scene, with clear-cut advantages for companies looking to serve the North American market. Mexico has the telecom infrastructure to host the full array of BPO demands and it is a quick flight from the U.S. Same or similar time zones help ensure deadlines are clearly understood and calls don’t go unanswered. The neighboring countries also enjoy a cultural familiarity that soothes business negotiations and avoids lurches from worker breaks during unexpected holidays.
Moreover, Mexico boasts a large population with a high proportion of engineers and other ICT professionals. This has allowed Mexico to establish mature outsourcing capabilities in IT strategy, transition and vendor management, lifecycles, and a host of other necessary domains. As a result, the number of IT and electronics companies operating in Guadalajara alone has increased from 60 to over 650 in the past decade.
Shifts in the Global BPO Market
Dramatic shifts are altering the global BPO landscape. For one, the Asian BPO market has fragmented in recent years, as China, Malaysia and the Philippines take greater and greater shares of business from India. India’s BPO industry has been declared dead before, only to reassert itself. Now though the Philippines, where BPO has expanded at a 20% per annum pace for the past five years, looks to distinguish itself as a choice BPO destination, thanks in part to generous enticements rolled out by the government. In doing so it will cut deeper into India’s share of the industry, according to an analysis from Oxford Business Group. And regardless of the regional competition, BPO in China and India will struggle in a macroeconomic environment that is likely to feature slower growth and higher inflation than was the case in the 2000s.
At the same time, the erstwhile fast emerging Eastern European BPO regions has slowed of late, due in part to ongoing frictions between Ukraine and Russia. Poland’s BPO industry continues to expand, but the current hurdles to delivery of back-end operations look so daunting for companies that A.T. Kearney suggests entrepreneurial techies may instead opt to offer their individual services on a project-by-project basis, perhaps even launching a “freelance outsourcing revolution.”
Yet, as a BPO destination Mexico remains unharmed from the shifts afoot in Asia and Eastern Europe. Its geographical advantage isn’t about to change, and the hospitable business environment will continue to make Mexico a promising locale for BPO. If anything, Mexico looks to draw more BPO investment.
Mexico’s Budding BPO Advantages
Mexico’s status as a global BPO hub is today being bolstered by a renewed appreciation on behalf of U.S.-based businesses. As the Latino population in the U.S. increases, there is growing demand among U.S.-based companies for Spanish language needs in realms such as customer support.
David Borowski, principal at the IT and BPO consulting firm Pace Harmon, points to another advantage: “Mexico can effectively serve as a regional business or technical services hub for Latin American entities in multinational companies.” As a launching pad for investment throughout the region, Borowski says Mexico will factor heavily into any provider calculation regarding expanding service delivery locations across Latin America, as well as a base for developing the capabilities of BPO operations elsewhere in Latin America.
Meanwhile, Mexico’s IT workforce has only strengthened in recent years, as highlighted by Duncan Tucker’s ongoing series for Global Delivery Report on Guadalajara’s leading universities. Add to that, a spate of reforms in recent years, such as laws streamlining financial reporting and mandating greater competition in the telecom market, are now taking hold, promising faster flows of information. In these respects, Mexico is outpacing many of its BPO peers in Asia.
Given the offshore changes, Mexico’s solid standing and proximity will only become more valued, notes Borowski: “Especially as more mature buyers of outsourced services begin to invest more in supplier relationship management capabilities to fully capture the value of the outsourced relationship.” U.S. businesses are realizing, as Borowski puts it, “That distance matters when managing a relationship.”
International business dynamics are changing fast, and lingering uncertainties in the global economy may well check the growth rate of BPO in certain locales. Yet Mexico continues to deliver value and efficiency as a host for BPO. Indeed, based on its fundamental strengths, the spry pace of economic growth across North America, and the renewed appreciation of Mexico’s full-service offerings, we may just be approaching the heyday of BPO in Mexico.
This article was originally appeared on NSAM sister publication Global Delivery Report.