Nearshore Americas

HP Abandons Medellin Global Center and Has No One to Blame But Itself

With triumphant platitudes and self-congratulatory praise, Hewlett-Packard made history by opening a US$14 million global services captive in Medellin, Colombia back in 2012. Plans called for employing over 1,000 professionals, with the center positioned to become the backbone for HP’s regional back-office, HR and call center operations.

Three years later and the entire project is being dissolved to the utter dismay of staunch supporters in Medellin and Bogota who bent over backwards to “seduce” (the word local media used at the time) HP into selecting Medellin during a highly competitive, global selection process where several other geographies were considered.

Having heard about the closure, Nearshore Americas contacted HP last week, and a company representative confirmed the shut-down:  “These changes are part of a company-wide strategy to foster bigger teams with critical mass and concentrated resources across fewer locations.  This strategy will leverage closer collaboration across the organization.”

The closure may be perceived as a blow to Medellin, but there is little evidence that HP ever really put its heart into the Medellin marriage.  Even after the investment was announced, the company dragged its feet setting up operations in the $50-million, 114 hectares Ruta N facility, which is the centerpiece of Medellin’s plan to transform a neglected district, north of downtown, into a leading-edge incubator for local and international tech  entrepreneurs.

Disingenuous From the Start

“It was the wrong move at the wrong time,” says a top HP executive based in Latin America, who spoke to Nearshore Americas on the condition of anonymity. The source indicated the decision to open in Medellin was significantly influenced by behind-the-scenes pressure placed on the firm by a key power-broker – Condolezza Rice – the former U.S. Secretary of State under President George W. Bush who had developed close ties to leaders of Colombia, including former President Alvaro Uribe. Claims have been made that Rice, at that time, served as a high-paid consultant to support investment attraction in Colombia, but Nearshore Americas has been unable to substantiate that claim.

By abandoning its commitment to Medellin, HP not only has failed to fulfill its big employment promises, but also is reportedly stiffing Ruta N from taking financial responsibility for the full scope of a 15-year lease. Terms of the renegotiation have not been made public, but an entire building within the Ruta N center was earmarked for HP. Local reports indicate HP has been able to sublet some office space. It should be noted that there were suspicions from the start that HP would renege – going back to 2012 when sources indicated the desire for new CEO Meg Whitman to re-prioritize offshore investments and already Medellin looked to be imperiled.

Much has changed in the intervening years. HP has suffered from a variety of ailments including declines in PC sales, a series of bad-choice acquisitions and anemic performance as a global IT consulting partner. The company announced last year that it will split in two, and clearly one of the outcomes of the split has been to pursue a restructuring path that includes rationalization of internal delivery processes and operations.

HP – you owe Colombia one huge apology – and for the rest of the region, be careful how much you surrender to investors making big promises

The decision to pull out of Colombia is particularly dismaying because HP seemed to grasp the fact that Medellin had been overlooked by other major IT players because of its violent past.  “We believe Colombia has untapped potential because of the legacy of violence in the country. That has deterred high-tech companies in recent years. As a result, there’s a high level of talent that has not been allowed to develop,” Andrew Lewis, HP’s former head of strategic locations told Nearshore Americas back in February 2011. Medellin suffers little to no reputational damage from the HP saga, as long as the city is open and honest in explaining to prospective investors that the break-up was all about HP and its own baggage.

For a time, Medellin was heralded as a destination that would eventually replace HP’s global support center in San Jose, Costa Rica. That moment was fleeting, as HP’s Costa Rica center – currently employing over 6,500 professionals – has emerged, at least during the last 12 years – as a bedrock operation, regionally and internationally, being one of only a handful of global operations centers. The center was established in 2003, and continues to provide back office support, including design, engineering and finance and accounting.  HP did move 400 call center-related positions from Costa Rica to Bangalore in 2013, which caused many to wonder if further cuts were imminent.

Fumbling Its Way Through Restructuring

Another HP source, based in Oklahoma, foresees further reductions in Latin America in favor of lower-cost options in India as the company zig-zags its way thru massive restructuring.  “We are always shopping for cheap labor. We’ve moved a lot of our security to Bulgaria, support to India, and essentially no hiring in the U.S. Sure, we show a lot of open positions, but they aren’t real. Not real as in they’re there for show,” the source said.

Given HP’s unsteadiness (some argue that Dell will target acquisition of the enterprise consulting half of HP, post the split), it would not be a shock if the company resumes trimming positions in Costa Rica, a country which continues to lose its competitive edge, due to rising labor and operating costs, declining credit ratings and a notoriously invasive bureaucracy.

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Back in Medellin, HP continues (at least as of two weeks ago) to parade its signage atop the Ruta N building, but inside offices are largely vacant. HP had falsely raised hopes that it would generate a lot of well-paying jobs, and become a longtime fixture in the IT economy of Medellin – a city well deserving of its reputation as a rising star in the Nearshore.

A half-baked strategy from the start, the closure has virtually nothing to do with Medellin and the state of Antioqua and everything to do with an uncoordinated, inept corporate behemoth still struggling to figure out how to clasp the right hand with the left.

For other cities in Latin America courting major IT vendor investment, the HP tale should serve as an object lesson that loads of incentives and highly-placed diplomatic backing still cannot protect a local host from getting royally mistreated. In other words, HP – you owe Colombia one huge apology – and for the rest of the region, be careful how much you surrender to investors making big promises.

Staff Report

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