My first column on the race that Canada lost started an interesting discussion about Latin America’s place in the outsourcing industry and how to promote outsourcing in Latin America in our Nearshore Nexus LinkedIn group. The comments made me think that, for outsourcing, it may be wrong to call Latin America a single region – since it is made up of many individual nations, with different competitive advantages, including languages, skills, and cost structures.
No single message
In my mind, a region that includes Brazil and Barbados, and Colombia and Costa Rica, has a real marketing problem simply because no single, compelling message extends across all constituent countries. The “we can be whatever you need” message doesn’t go over very well commercially when other areas can target a sector and highlight their strengths in that area. And very few organizations or governments would be willing to throw money down the “everything and anything” pit. That makes a “Million Dollar Money Drop” seem inconsequential.
Earlier in this decade, India and the Philippines had easier paths to marketing success because there was much more consistency to their appeals to service providers. But in Latin America, there are different strengths across the countries of the region. With more than 200 million people, Portuguese-speaking Brazil built a strong position in IT services and some BPO applications. Brazil can handle most large, highly technical, contracts with ease. Brazil also can handle some Portuguese-language contact center work, but has a hard time competing for either Spanish or English customer services (contact center) work.
On the other hand, Barbados has good English language skills, but a small population of about 280,000, and limited technical resources for IT outsourcing. While customer service is generally done well there, they can’t take a lot of projects which have growth potential, since they are constrained by the lack of qualified resources.
Latin America competing against itself
Each Latin American country competes against neighbors for the limited business available.
Will countries, or the providers who operate in the countries, be willing to support a regional branding campaign rather than promote their own individual niches and local competencies?
And even if they would, could anyone find an effective message that all could support? I doubt it.
A “Go LatAm” message can never become very coherent and comprehensive. And it can’t rise above the efforts of the individual countries and their associations. It will be hard to see the forest through these trees.
From the Caribbean, Central America and South America, country associations landed on US shores to promote their country as outsourcing havens at trade shows and in promotional missions. Touting costs, quality, English language, bilingual skills, service, proximity, stability, safety, education, technical skills, and a range of other characteristics, countries (in many cases through their associations, but in some cases through government officials) have made their case for investment in the US, and to inward delegations that they have hosted in their countries.
Initial successes have allowed them to expand capacity, but there’s little reason for partnerships to develop across the entire region as the countries attempt to maximize their internal investments. Since the high-level messages are relatively similar, and the “devil is in the details”, any regional message is likely to become a blob of hyperbole which may only be able to say “we can be anything to anyone.”
One of the comments in the Nearshore Nexus discussion group suggested that that “LatAm will always survive because of proximity advantages, but to thrive it needs an aggressive, compelling, and consistent message to the market.” Proximity will always be a positive factor when North American companies are looking for outsourcing locations. But proximity is relative.
Each country needs to understand its own core competencies, create its own differentiated value proposition and branding and make its own case for investment by service providers.
Outsourcing fairy tales
If you expect Latin American countries to establish a consistent, compelling and attractive message across the region, you also have to believe in Santa Claus, the Easter Bunny and the Tooth Fairy.
Another writer noted that “Latam might survive more on language (Spanish niche service) than purely on proximity”. There’s no question that the success of some Latin American countries’ efforts in contact center and BPO resulted from the native Spanish-speaking offering. But it is the bilingual populations in those countries that have been the path to success.
In Brazil, the largest Latin American country, Spanish is a non-factor in outsourcing. Countries like Jamaica, Trinidad & Tobago, the Dominican Republic and the aforementioned Barbados, have built their industries on low-cost English language resources, not Spanish. So the “we speak Spanish and can serve growing US Hispanic market requirements” positioning doesn’t extend across the entire region and is unlikely to be agreed to by Brazil, the country with the most at stake.
Competition on all fronts
Each Latam and Caribbean country fights at least three battles simultaneously. First, they’re competing against offshore activities in India, Asia/Pacific, Eastern Europe, and now, Africa – in cases where proximity may be less important than costs. Secondly, they’re competing against homeshore (US) and Canada when proximity is a factor (and they lose only when quality and risk are more important than low costs). And finally, once a provider or company has decided on Latin America, the countries compete against each other.
When Latin America is an option, the question comes down to a variation of: how does Guatemala compete against neighboring Honduras, and against nearby Nicaragua and Costa Rica? At that level, each country must tout its own strengths, its educated workforce, technology infrastructure, access, political stability, quality of life, and other local factors, including government incentives.
Each country needs to understand its own core competencies, create its own differentiated value proposition and branding and make its own case for investment by service providers. And once service providers have bought into a country, they must work with the government, to attract outsourcing buyers based on their own capabilities and capacity.
There are great differences amongst the countries of Latin America, and although there needs to be some macro positioning of Latin America against other offshoring options, only clear and meaningful micro positioning will help individual countries and outsourcers. There will be winners in various segments, but the contenders must understand how to strategically position themselves to create defensible and sustainable niches.
Eric Hochstein is Managing Director of Highstone Associates, Inc., a Barrington, IL-based business and economic development consulting firm, focused on strategy and business development, site selection, and marketing for public and private sector organizations involved in technology and knowledge-based commerce. Between 2003-2010, Highstone Associates represented the province of Ontario for investment attraction in the US in the business services and financial services sectors, including outsourcing.