As local currencies depreciate against the U.S. dollar, Latin America’s contact center outsourcing (CCO) services market is continuing its steady growth, especially in countries more geared toward foreign markets than domestic clients. According to the most recent analysis by Frost & Sullivan, the market attained $10.96 billion in 2014, a 0.9% increase compared to 2013. Even if this growth may seem too slow at a first glance, it is a positive trend considering the overall strong devaluation of the regional currencies against the dollar in 2014, which had a direct impact in the revenue figure measured in dollars. The overall good performance experienced by Latin America can also be witnessed in the job-generation and capacity metrics: In 2014, the region surpassed 730,000 CCO agents (not including supervisors and administrative personal) and 530,000 workstations, which indicates healthy growth in both cases.
When we take a look at 2015, most of the LATAM currencies are projected to devaluate between 8% and 30% against the dollar, which is making nearshoring more and more cost-competitive against other offshore alternatives, such as India and the Philippines (which are not expected to devaluate as much). This is an important driver that is expected to lead U.S. companies to increase the volume of contact center outsourcing services placed in LATAM countries.
If we take the analysis to the country level, the countries that are mostly focused on their domestic markets – Argentina, Brazil and Chile – showed poorer performances. And in all cases, the revenue generated in these markets decreased in 2014. On the other hand, the regions that have a more balanced split between domestic and offshore markets – such as Colombia, Mexico and Peru – managed to end 2014 with positive numbers and revenue growth.
Meanwhile, Central America and the Caribbean (CaCar) – a region almost entirely focused on the U.S. market – was the fastest growing region in LATAM, proving that nearshoring is still experiencing a good momentum. In fact, looking ahead Frost & Sullivan expects that this market segment will continue to experience very positive growth rates in the 2015-2020 period. Why? Cultural affinity, similar time zones and geographical proximity are the usual suspects and are in fact the key reasons why nearshoring is probably the best option for U.S. companies. However, on top of that, LATAM CCO service providers are becoming more and more aware of the importance of providing a satisfying customer experience, thus continuously improving the quality of their services.
Another strong market segment that continues to gain track in the region is the LATAM-shoring: CCO service providers located in one LATAM country and serving customers in others. This segment is a US$300 million business in the region and since 2013 has overcome Spain as the second major offshore market for Latin America. The LATAM-shoring includes not only companies placing their CCO operations in other Latin American countries (i.e. a service provider in Peru taking calls from Argentinean customers), but also big retail chains and airlines that serve their regionally disperse customers from one country.
Peru and Colombia are the two main countries serving other LATAM countries. In fact, the LATAM-shoring segment has represented a fair share of their growth in the last five years and has helped balancing these markets due to the big amount of Spanish businesses that left them during this period. In terms of served markets, Argentina and Chile have consolidated as the two major buyers, but Mexico and other smaller countries also generate a significant amount of business within the LATAM-shoring sector.
Finding New Locations
As a general trend for the region, service providers continue to look for alternative locations such as Tier II cities to place their delivery centers, as wages and attrition levels grow in the capital cities. Argentina, Brazil, Colombia and Mexico have shown success in placing centers in Tier II cities in the last two to five years, while Peru has achieved some progress in 2014. In CaCar, service providers are directing their attention to smaller countries with limited development in the contact center industry, such as Guyana, Belize and Surinam (i.s. Qualfon expanding its operations in Guayana, and Teleperformance entering Guyana and Surinam). It is true that these locations often offer challenges related to infrastructure (telecom, electric, real estate, etc), but the service providers have proven that the challenges can be overcome with enough investment.
Finally, another key trend is that CCO – and services outsourcing in general – is gaining more acceptance in LATAM countries as an important economic activity and contributor to national economies. Many private and public associations within the region are proactively growing the best conditions for the CCO industry, especially in countries such as Colombia, Costa Rica, Mexico, and El Salvador. These associations play an important role in lobbying for and offering better tax and legal environments, as well as providing free courses for workers to learn languages or technical skills that are key for the industry’s growth. Overall, Latin America is improving the scenario for CCO, hence more growth in this space is to come.