Nearshore Americas

Juarez Journal: Is this the New Normal for Mexico Outsourcing?

It might be difficult to find a more complex and troubled metropolitan area anywhere else in the world. Just the name “Juarez” evokes – at least in the mind of the typical CNN-watching American – the thought of unspeakable violence and cruelty. Yet, Juarez is much more than the primary battleground pitting entrenched drug lords against the increasingly vigilant Mexican government. This city of 1.5 million contributes 8% into Mexico’s gross domestic product and has for nearly 40 years become a maquiladora magnet for southbound U.S. manufacturers aiming to leverage lower operating cost and the logistical convenience of crossing easily from El Paso over to Juarez.

In an interview with Genpact’s chief of operations in Juarez, we learn just what it’s like to run an offshore delivery center in arguably one of the riskiest locations on the planet.

Mary Korthuis is Business Leader and Head of Operations at Genpact Juarez and also Guatemala City, Guatemala (along with a very small center in another location along the Mexican border), and also former COO at GE Money. In our interview, Korthuis admitted that while the drug wars are a serious problem, it has had no direct impact on operations or the nearly 1,000 employees that work at the Genpact facility, just over the border from El Paso. “The current situation with the drug cartels is making it very challenging for customers. Once they are here, once they see where the office is located, those worries decrease,” she says.

All about perception

Korthuis identifies one of the most confounding realities that is universally felt among offshore outsourcers in Mexico these days – the negative perceptions of buyers before coming to Mexico is ultimately the biggest challenge. From Guadalajara to Monterrey, and points in between, outsourcers often have credible arguments in favor of their locations being just like any other major metro area in the world in that there are perfectly safe areas and other zones that are completely off limits. “For those customers who have never worked with us before, they are worried about these issues,” says Korthuis.

For Korthuis, she faces the same quandary. She explains that Genpact is in the very northern reaches of Juarez, while the vast majority of violent activity occurs in the southern sections of the city. Genpact keeps a very close eye and conducts regular  internal analysis of any adverse impacts the situation is having on the delivery center as well as the people who work there. Korthuis reports that there have been no instances of violence directed toward any Genpact employee – at least that the company is aware of. She notes the company maintains a strong social responsibility program, which she describes as “one of the most active of any Genpact operation worldwide.” For evening shifts, the company does provide transportation back to the residence of the employee as an extra precaution.

Upside remains

Korthuis says Juarez is stock-full of great talent, and benefits from the presence of over 300 U.S. corporations. (In a recent survey  by the American Chamber of Commerce found that among its 286 corporate members in Juarez, nearly 60 percent said they felt less secure than a year earlier).

Korthuis says Genpact remains firmly supportive of the decision to locate in Juarez.

The trouble other Mexico-based outsourcers are having is that the perception issue is not showing any signs of diminishing. Ovum analyst and Nearshore Americas contributor Peter Ryan commented in this recent post that Monterrey, for example, continues to offer a very compelling package in terms of labor force and technical and language skill.

Yet, with those compelling elements aside, the real attraction these days in Mexico would be some declaration or gesture that the government does not want to let any more outsourcing business fleeing its borders. (BPO player Sutherland is reportedly jumping ship to Colombia.) In other words, Mexico Inc. needs to get behind a core message that the offshoring industry of Mexico can continue its strong emergence. But that will depend on skillful site selection, consistently applied personal safety measures and strong executive leadership that makes sure potential U.S. buyers understand a simple concept: Mexico is still open for business.

Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

2 comments

  • Good article. My company (Infolink) has been providing nearshore outsourcing services from Juarez since 1996. Increasingly, I get questions about Juarez and the level of risk of operating out of there. My answer is always the same: the problems are real, BUT… Juarez is a large place (1.5 M people) and most people lead a fairly normal life; 300 Fortune 500 have operations there; it is a modern, industrial city, one of the most important in the hemisphere (no kiddin'), not a shanty town, and most visitors' perceptions completely change once they visit. The current situation will inevitably improve in the future and Juarez should continue its 40+ year trajectory of growth and economic development.

  • Good article indeed. I am a corporate lawyer living and working in Ciudad Juarez, and I concur with Mr. Gonzalez’ comments above. I just did some research for a conference I gave at the annual meeting of the United States-Mexico Bar Association on the impact that safety issues are having on our foreign investment levels. I was able to confirm my perception that the Maquiladora industry has been truly resilient. These are Ciudad Juarez's year to date Maquiladora figures for 2010:

    Total number of existing Maquiladora programs: 387

    Average during last 10 years: 390

    New Maquiladora programs: 25

    Cancelled programs: 30

    Main reasons for cancellation:

    – Voluntary cancellation by the company due to market reasons.

    – Cancellation by the government due to failure to submit Annual Foreign Trade Report before Ministry of Economy.

    At least officially, not a single Maquiladora company has cancelled its Maquiladora program expressly citing safety issues as the reason for such cancelation.

    This proves that Maquiladora companies continue to be very responsible corporate citizens and that they are committed to staying Ciudad Juarez.