Nearshore Americas

How Will Latin America’s Fragmented Landscape Impact Multi-Country RPO?

Latin America’s sizable yet fragmented Recruitment Process Outsourcing (RPO) market is pushing vendors to grow capabilities across multiple country locations.

That’s according to Zachary Misko, VP of Workforce Strategy at Kelly OCG, who says that local presence is critical when it comes to recruitment outsourcing.  As an aggregate market, Latin America is roughly China’s equivalent in GDP terms, but there are numerous legal and compensatory environments to overcome.  In response, RPO outsourcers will look to diversify their LatAm country operations primarily as they grow in sync with their client partners, but also strategically as they look to strengthen their position in an increasingly competitive RPO landscape.

Upward Trend in Multi-country RPO

New technologies and trends in HR best practices have opened doors for RPO outsourcers to deliver increasing value when managing client talent supply chains.  According to research & advisory firm Everest Group, the global RPO market more than doubled to reach $1.4 billion USD between 2008 and 2011.  Companies like the Chrysler Group, Eli Lilly, and Nestle have recently announced new RPO partnerships.

Likewise, enterprises have increasingly leaned on RPO vendors like Kelly OCG, Future Step, and Hudson to help manage cross-border workflows and to standardize their recruitment processes worldwide.   Known as multi-country RPO (MCRPO), the practice is gaining momentum as a nascent outsourcing model.

In an interview with Nearshore Americas, Misko of Kelly OCG stressed that “as our clients globalize local capability and presence throughout the region is critical.  We definitely see multi-country RPO as an upward trend here.”  According to Misko, “we function as an extension of a company’s HR team which means that local capability is all about understanding how labor markets can meet our clients’ requirements.”

RPO vendors expanding into regions with numerous mid-sized markets like Latin America and Eastern Europe will need to diversify their country coverage to gain market share.

But while multi-country RPO arrangements have become more common, Rajesh Ranjan with Everest Group warns about the supply and buy-side challenges that are keeping multi-country deals from growing with the same vigor as domestic deals.  “Multi-country RPO adoption lags behind single-country RPO mostly due to cultural and organizational challenges and a lack of service providers with integrated capabilities; nevertheless, we’re seeing increasing interest from regions beyond the traditional strongholds of the United States and United Kingdom”, said Ranjan in a recent press release.

RPO in Latin America

RPO vendors expanding into regions with numerous mid-sized markets like Latin America and Eastern Europe will need to diversify their country coverage to gain market share. Latin America is a big market, roughly the equivalent of China in terms of GDP.  However, business activity and the labor force span multiple operational and regulatory landscapes – see chart.  Misko with Kelly pointed to Brazil and Mexico as Latin America’s two largest RPO opportunities.  However, if the RPO model continues to grow in line with multi-country arrangements, the smaller rapidly growing markets like Chile, Colombia, and Peru could also gain significant momentum as competition between RPO vendors intensifies.

Multi-Country RPO is still in its nascent stages as an outsourcing model.  As a general trend, Everest noted that multinationals first focus on markets with the highest volumes of recruitment, rather than taking on a simultaneous multi-country strategy.  This staggered approach will have big implications for Latin America where international companies and domestic multinationals, also known as “multilatinas”, often operate across numerous country markets.

The Boston Consulting Group tracks the growing influence of multilatinas including the big airlines like Avianca and Taca, Mexico’s Telmex, Brazil’s America Latina Logistica (ALL) and Colombia’s Argos.    Mexican telecoms giant Telmex has over 50,000 employees distributed across the United States, Mexico, Argentina, Brazil, Colombia and other countries in Latin America.  Multilatinas will likely create big opportunities for RPO providers, particularly for those that can provide broad multi-country coverage.  Misko from Kelly pointed to financial services, oil and gas, pharmaceuticals, retail, and automotive as the hot industry verticals to track.

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Lessons Learned From Europe

MCRPO deals originating in EMEA average the highest number of countries covered, according to research from Everest.  Europe’s higher rate of MCRPO adoption may come as no surprise given the diverse political and economic landscape of the region.  Operators in Latin America should pay particularly close attention to their counterparts in Europe.  While Latin America remains divided politically, the region continues to integrate economically through free trade agreements and as multinationals and multilatinas transcend country borders.

Likewise, language and cultural affinities across Latin America could facilitate multi-country RPO deals to an even greater degree than in Europe.  So while Latin America’s fractured market currently creates obstacles for growing RPO operators, the region could turn into a hotbed of multi-country RPO activity, particularly as enterprises embrace the MCRPO model.

Luke Bujarski

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