The BPO sector in the Philippines was thrown into crisis by government lockdown measures and work-from-home (WFH) logistical complications in response to the Covid-19 pandemic. In a recent interview with Outsource Accelerator, a Philippines-based publication, Kirk Laughlin, the founder and Managing Director of Nearshore Americas, shared his views on why Latin America has become such a hotly pursued geography, citing a persistent desire to ‘de-risk’ from locations seen as too far from the United States or too cumbersome to excel given current demands of outsourcing clients.
In the interview with host Derek Gallimore, Laughlin pointed to some of the key strengths of the Nearshore model, and why Nearshore Americas called the recent crisis in the Philippines a “meltdown’. Below are some of the highlights from the interview.
What is the Nearshore?
“We have about 12 or 15 countries [in the region] with very viable export service capabilities and platforms. There are some leading lights, such as Mexico, Brazil, Costa Rica, and Colombia. Brazil is a bit more complicated because that’s a country generally focused on its internal market. Other stars on this list are Argentina and Uruguay. When it comes to the BPO customer experience portion, it would be the Caribbean and Central America standing out.”
What is different and unique about Latin America?
“One shouldn’t underestimate the unique features of some of these [Latin American] countries. Their labor laws are not all the same, the appetite to support foreign clients is not all the same, issues like personal safety, telecommunications, office parks, airlift, on and on.”
Is Latin America really capitalizing on the opportunity?
“Certain countries in the region have taken a very serious approach to this [global services] opportunity. Government institutions, investment agencies all have really focused on the [BPO] conversation and become competent in regard to knowing how this industry works. It takes a while to understand for those on the outside. It’s a little more complicated. But I have to give a lot of credit to certain countries which really developed their expertise in the conversation.”
“I definitely don’t want to overlook the fact that we have a whole lot of interesting companies that have emerged and have done extremely well with this Nearshore premise. Some of them are exclusively still Nearshore. Others have actually grown up and graduated out of that concept.”
Can you outline a Nearshore success story?
“One of our favorite companies to talk about is a company called Globant, which was started in a bar room in Argentina probably close to 20 years ago by five founders, who were former consultants. They created Globant. It went out and got Google as the first client and managed to get all the way to NASDAQ. Now they’re a publicly-traded company. It is a very impressive story.”
“We undertook an investigation [into the Philippines BPO industry] and contacted services providers with specific questions, asking them to explain why they were moving thousands of positions out of the Philippines.
What does Nearshore Americas do?
“We felt that there’s definitely a place for a business to be a truly balanced and neutral observer of what goes on in a business sector like this and we take that responsibility very seriously.”
“We continue to turn out a lot of really good independently-written content. We also have lots of resources and guidance, and insights, such as white papers, webinars, and all kinds of products and resources to help the decision-makers gain and accelerate their understanding of what this part of the region can do and what the partners in Latin America can do for those clients.”
“Our entire mission is to ensure we’re doing a competent job of thoroughly analyzing and scrutinizing this concept of Nearshore. That’s really job number one for us.”
What are the key differences between the Nearshore and India or the Philippines?
“This [Nearshore] market started much later than India or the Philippines. There is a certain amount of catch up. The industry is undergoing tremendous changes amid the Covid-19 pandemic… When it comes to number of employees and business growth, there’s a long way to go before anyone (India, Philippines, Nearshore or Eastern Europe) claims to be the leader in the race.
Why did you recently look into the issues facing the BPO sector in the Philippines?
“We undertook an investigation [into the Philippines BPO industry] and contacted services providers with specific questions, asking them to explain why they were moving a couple thousand positions out of the Philippines. That’s really the basis for the story titled “The Philippines BPO Meltdown: What Went Wrong?”
“Every organization has a different set of justifications. The one I think I’ve heard most consistently is that this entire experience has really intensified with the question of location and diversifying one’s footprint.”
Are exploitative practices a problem in the BPO industry?
“We’ve heard of instances where a provider will go into a country and seek to seal some kind of agreement with the government itself, getting some assurance that they will be the only BPO permitted to do business.”
“We see other variations on that theme. There is a very large well-known outsourcing client who’s set up some very interesting limitations on competitors being within a certain number of miles of where they send their work. What I’m getting at is these are indications of it’s all about our needs as the client. I find that to be exploitative and I don’t think it’s really the norm… There needs to be a reasonable trade-off for the expectations those organizations have.”
How could Covid-19 benefit some Nearshore locations?
“I think this particular crisis [Covid-19] did put much greater pressure on individual companies and enterprises to say… Well… Wait a minute. We’ve got opportunities, locations and partners three hours south by plane. Why haven’t you investigated Costa Rica, Colombia, which by the way are both on fire as destinations. Some of these countries have dealt with some sort of biases for many years.”
“Colombia, consistently over the last three or four years, has been a real darling of our industry. It’s a country of 49 million people… And it has really come a long way from some of the more darker times.”
Is remote-working sustainable?
“I am pretty surprised by the willingness of so many clients to basically put their faith in the work-from-home model. What I’m hearing is it’s been very successful for the most part. There are potential flaws for sure. You know, processing credit cards at home.”
“People will try to tell you that it can be foolproof and fully protected. I’m not fully sold on that personally. But I think there’s a whole other bunch of clients who say ‘wait a minute,’ I’m just not comfortable with that kind of setup.”
Will President Donald Trump’s ‘America First’ policy harm outsourcing?
“Much of what we are hearing is noise. We have a president who probably cannot name five capital cities in Latin America. I’m not joking. Presumably, the next president will know where Haiti is and how to find Honduras and have a much greater understanding of what the region offers.”
“We really went off the rails with Cuba since the current president came to office. That’s really unfortunate from both sides. Cuba is a tremendously interesting country with a whole lot of very well-educated people, who would love to be part of the global commercial scene and bring their talents to the market. The relationship we have with Cuba is really complicated and it stood in the way of progress.”
Narayan, it is inconceivable that “nearshore” outsourcing would seem a newsworthy item at this point. Our company had a presence in Central and South America – as well as in Bangalore and Limerick, Ireland – roughly twenty five years ago. In fact, the term was coined by our partner in Monterrey, Mexico. It would serve your readers well, it seems, to provide a historical perspective on the subject than to imply that this is a new-found phenomenon. It isn’t. It is well worn.
Narayan, thank you for such an interesting article. How about the Dominican Republic?, there are more than 10 million people residing in the DR, and many are highly educated with complete understanding of North American culture and business.