“More English, more English, and more English,” exclaimed VP Kapil Rajvanshi from 24/7 Customer during a presentation at this week’s Global Services Summit in Guatemala City. The market here is indeed showing some concerning signs of overheating, as we quickly discovered during talks with the heads of Guatemala’s six BPO families. While saturation and wage inflation is nothing new in Central America, what has Guatemala’s BPO Commission president Herman Lopez deeply worried is the prospect of a race-to-the-bottom price war between the very people put in charge of coordinating a sustainable strategy for the country’s booming BPO cluster.
“Competition is fierce and wages are extremely tight. Some are beginning to play hardball and are outbidding the prevailing market rate,” explained German. The big six – Transactel, Capgemini, Allied Global, 24/7 Customer, Atento, and Genpact – are not the only ones concerned over potential swells in wage rates. “A year ago we used to offer the best pay in town, now we’re at market rate,” explained Avi Meir owner and CEO of Guatecall, one of Guatemala’s boutique agents serving international clients.
Perhaps the biggest threat to the BPO industry in Guatemala will come from within
With the going rate for contact center agents currently at around $600, the potential for cost savings still allows some room for wage increases. This is particularly true for newcomers ready to push their way in with new rules and a higher tolerance for costs. However, the situation in Guatemala is compounded by the severely limited supply of bilingual agents relative to demand. Operations costs shoot up under these conditions, particularly in recruitment, training and retraining of agents rotating through the different providers. “Pick up any daily newspaper and you will see at least two full-page ads from contact center agencies recruiting”, complained Herman who is also the CFO of Allied Global.
This leaves the market vulnerable because one big player has the potential to throw the entire industry into a tailspin, if they decide to ratchet up wages. A palpable lack of coordination through the BPO Commission which is coordinated by the big six also suggests that a standoff is brewing. And while there is a certain level of cautious trust between the incumbents, an aggressive new kid on the block could prove to be a destabilizing force for the market.
Despite these concerns, multinational BPO superstar Capgemini and others are seeing great successes in Guatemala. According to Service Delivery Manager Jose Zamora, Capgemini Guatemala is meeting and beating corporate and client expectations. “Because of this we are being rewarded with additional volume channeled in from our operations in Poland and Chile, where costs can be in upwards of 30 percent higher”. Center Director Christian Lister also confirmed that they have not had to increase wages to keep up with demand. However, this could be due to the fact that Capgemini is under less pressure, since their multinational status allows them to diversify with Spanish-only clients.
24/7 Customer is bullish on Nearshore, but has moved to diversify its operations base with a new facility in Nicaragua in order to meet demand and to hedge against potential wage increases in Guatemala. Wages aside, Guatemala still holds a competitive advantage over its neighbors, given its large population and well-developed physical and telecommunications infrastructure. And while many have openly expressed concern about growing crime, inflexible labor laws, and political shenanigans as major challenges, perhaps the biggest threat to the BPO industry in Guatemala will come from within.
The reality is that the dream for more English speakers will probably not come true here. Guatemala’s K-12 public school system does not offer any English training. Likewise, initiatives coming from joint government and private ventures to coordinate a large-scale training program have lost momentum. With supply-side interventions unlikely, the big players will have to work together to get the demand side of the equation under control, if Guatemala’s contact center industry is to remain sustainable in the long-term.