Nearshore Americas

A Traumatic Past Sets Medellin Ablaze with Global Ambitions

Seemingly out of nowhere, Medellin is sweeping onto Latin America outsourcing’s center stage in a dramatic flourish, winning deal after deal and – by beckoning to the world – totally reshaping what the city stands for by openly confronting the wreckage of its darkest days. Medellin’s dramatic transformation is easily one of the most captivating stories in all of Latin America IT.

A City in Bloom

Due to a series of favorable conditions – including highly engaged and deep-pocketed corporate institutions (starting with Bancolombia), a rich array of universities many of which have engineering and computer science programs, the establishment of policies and agencies focused on nurturing the right conditions for BPO/ITO services and a stunning physical environment where “Eternal Spring” and large amounts of greenery make for a lot of happy souls – Medellin may be the ultimate ‘hidden gem’ in the Americas’ sourcing marketplace. Very simply, Medellin functions. Mass transit – including a metro that extends from the south to the north basin of the metro area – is clean and efficient. Traffic is a non-issue, unlike its big brother, Bogota.

But of course there are no guarantees for Medellin. Its positioning as a mountain, interior city has done little to enable international exposure, unlike thriving BPO port cities of Cali and Barranquilla. This is one of several reasons many knowledgeable observers express concerns about the bilingual talent available among the city’s 3.5 million inhabitants (in the larger metro area).

Investment in Full Flow

While much has been made of the watershed decision by HP in 2010 to set up in Medellin, a wave of new investment is potentially setting the stage for a formidable tech ecosystem that in the next few years could mirror – on a smaller scale – the strides of major hubs such as Guadalajara and Sao Paulo. Kimberly Clark recently named Medellin one of three global innovations centers, a huge coup that demonstrates a deep confidence in science/tech human capital. The organization expects to launch a 200-person operation in the next few months in the “Rionegro” area not far from the airport.

Existing operators in the area include multionationals like Tata Consultancy Services, Unisys, Allus, Teleperformance and Infosys, which has a small team focused exclusively on supporting Bancolombia’s core banking / ERP operations. In fact, it was Infosys’s Gita Jayanth, a senior finance executive working in Medellin, who instituted a program to take the 100 top computer science students attending EAFIT university in Medellin every summer to Bangalore for specialized training. The program is now in its third year running. “This is an outstanding program with no strings attached,” said Helmuth Trefftz, Chair of EAFIT’s Computer Science Department.

The timing of HP’s official move into Medellin is producing an increasing amount of head-scratching. The company has started paying month rent on its sparkling new facility in the new “Ruta N” area – as part of a 15-year lease. But sources tell us that the timing of HP’s installation of staff into the offices is still in question while others are skeptical that HP will actually open the facility despite all the planning that has already gone on. The company has maintained a small staff in a building within the EAFIT campus, but many believe that restructuring in the wake of CEO Meg Witman’s late 2011 arrival at HP has shifted its offshore services priorities.

The $50 million Ruta N facility will opens its doors within the next few weeks.

Ruta N is the name of a three building complex in an area of the city that used be blighted by crime. The city financed the project – worth $50 million – which is seen as a symbol of the new focus on global engagement and tech innovation, combining public and private interests.

City leaders are quick to point out that Medellin may look like it’s hell-bent on making a name for itself globally, yet there is still a cautiousness that prevails. The city is extremely aware of how it’s perceived from the outside and still seems somewhat wounded by the global condemnation wrought by years of drug-related violence that tore deep into the heart and culture of the “Paisa” people. The homicide rates of the early 90s, where as many as 500 people were getting killed a month, is nowhere near what it is now. But according to statistics from ACIMedellin, the city’s trade promotion group which facilitated a visit last week by Nearshore Americas, homicides have inched up some from their lowest point – during 2006-2008.

The city remains one of the world’s fifty most violent cities, but it should be pointed out that US cities – New Orleans, Detroit, St. Louis and Baltimore are also in the top 50 ranking by Mexican organization, Consejo Ciudadano para la Seguridad Pública y la Justicia Penal.

Social Inclusion

Medellin’s leaders, grounding their efforts on social inclusion aimed at fostering economic equality, are persistently focused on reaching out to the long-isolated “comunas” to become part of this new, knowledge-driven era. It’s a big and complex job. David Escobar, Medellin’s City Planner is deeply involved with the efforts and sees many signs of change. “The city has reclaimed its self-esteem,” said Escobar who credits much of the city’s transformation to former Mayor Sergio Fajardo (who is now governor of the state of Antioquia) who set in motion heavy spending on education, the arts and the installation of multiple new libraries sitting in once battle-ridden areas.

The call to come to the capital of Antioquia is being heard around the world, including in King of Prussia, Penn. where local company Yuxi Pacific set its sights on Medellin during the last year after seeing its operations in China falter due to rising inflation and hard-to-find English speaking talent.

Medellin is 25% cheaper than labor in Costa Rica, says Michael Puscar, CEO of Yuxi Pacific. (Far right)

“The English ability is way better than I thought,” says CEO Michael Puscar, who runs a 50-person software and Q/A studio for content publishers looking to exploit new “Big Data” management tools. Puscar examined Argentina, Peru, Costa Rica and Mexico before settling on Medellin, which has a city population of 2.5 million. “Salaries here are 25% less than Costa Rica or Mexico. It was a no-brainer,” says Puskar, who does stress that the value proposition of Colombia could be in serious jeopardy if the Peso continues its rise. The currency has risen nearly ten percent since early January, putting pressure on the margins of foreign operators.

The availability of English-speaking talent is potentially one of Medellin’s biggest vulnerabilities. While exciting US-owned firms like Yuxi have had little trouble finding bright, bi-lingual professionals – most Colombian-owned operators worried to us that the demand for English speakers could quickly outstrip supply.

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“We have a huge gap with English speaking people. I consider it a big issue,” says Carlos Castro, the CEO Enlace Operativo, a BPO and ITO services company headquartered in Medellin, with 1,700 employees in Bogota and Medellin. Almost all of Castro’s firm relies on Spanish-only speakers, but that could change in the longer term should the firm decide to pursue BPO business in the US. “It’s going to take a lot of years to address the issue,” he says.

In terms of attracting investment, Castro gives credit to the long-term planning focus of the national government. He says the work of ANDI, which is effectively the ‘chamber’ for the country’s BPO / ITO sector, along with Proexport and local investment promotion agencies spread across the country work closely together.

In fact, the close coordination of seemingly ‘rival’ cities shows just how much Colombia is making BPO a priority and continues to reflect back to the long-term thinking of former President Alvaro Uribe who partnered with Minister of Trade and Industry Luis Guillermo Plata to engineer what is looking like one of the best prepared BPO markets in all of the Americas going into the next stages of market expansion.

Michael Cooper, a US native who has lived in Medellin for 30 years said the city’s transformation during the last 8 to ten years has been “unbelievable.” Cooper is executive director of Medellin’s Centro Colombo Americano, a cultural and educational institution, which provides English instruction to over 6,000 students in the Medellin area per year.

Looking to make connections in Medellin or get deeper insight into the market’s potential? Contact Kirk Laughlin

Kirk Laughlin

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

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