Nearshore Americas

Nearshore Outsourcing Investment: The Real Winners are Today’s Risk Takers

It’s not hard to remember back to 1995-1997, when the Internet boom began to gather some real traction. Firms like Netscape, Lucent and Cisco were suddenly red hot darlings that became emblematic of a new generation of  Wall Street investment targets. There were plenty of skeptics of course who didn’t like the price-per-earnings ratios of these companies or didn’t believe the aggressive forecasts of top executives. And then there were the very real concerns about risks and the seeming intangibility of the Internet, backbone buildouts and why broadband mattered. Back then, Google had yet to be born and the eye-ball grabbing power of search was not really well understood.

So, what does the investment climate of the mid-90s have to do with 2010 investment in Nearshore outsourcing? Plenty and I’ll explain why.

What’s We Have in Common

Fifteen years ago, investing in Internet and next-generation tech firms took some guts. Some part of you had to believe in a vision, and that explains why those who look at the world in purely rational, beancounter terms would never touch investments that had to do with the Web. They’d be happy investing in stalwart companies like Caterpillar (who revealed its HRO nearshoring journey to Panama last year) or Sears, with proven track records, miles and miles of history and the appearance of rock-solid foundations.

When you look at investment options in Nearshore outsourcing, you are seeing – from a very broad perspective – a group of countries and suppliers who have a lot in common with the Ciscos of 1995. Sure, there are plenty of Sofftek’s and Avantica’s who have been delivering Nearshore services for more than a generation, but the ‘newness’ of this industry can’t be understated. Tens of thousands of U.S. enterprises don’t know the first thing about delivering professional services out of Chile, El Salvador, Panama or Guatemala. In other words, the raw material to ignite the Nearshore firestorm has barely been gathered. But when you combine the technology underpinnings of the Internet, VoIP, and real-time collaboration tools along with the tectonic shifts going on with globalization and increasing exports out of lower cost nations, there is clearly a major upside ahead for this industry.

But you might be thinking, of course you would say that, your online business (Nearhore Americas) is built mostly around the emergence of Nearshore outsourcing. And that point would be valid. But I’m also an investor and one who is willing to take some risk for long-term reward. (I began investing in Emerging Markets back in 1997 after several trips to Vietnam, China and Thailand where it became evident that with the right governance, capital, rule of law and talent, sustained growth will naturally follow.)

Those who are currently sealing deals are destined to maximize their investments over the next five to ten years vs. those who still are waiting for a big seal of approval to appear somewhere so they are fully and absolutely confident the deal should go forward.

Risk: Front and Center

I speak to investors and outsourcing buyers all the time – and it’s remarkable how similar they sound when confronted with whether or not to take steps to invest in the Nearshore growth story. It’s almost as if they have to whip clear decades of conceived notions about Latin America and the Caribbean and, from scratch, embrace a new vision of the region that is based on 201o and beyond. In addition to recognizing the value of doing work in the region, they also have to confront the issue of fear. What are my risks? How do I know I can trust the privacy protection laws? Can I take my clients down to there on a regular basis? And what is my long term payoff?

The process of examining whether to invest should naturally involve in-depth  scrutiny. But that scrutiny should also very much include analyzing the level of risk you as an nearshore outsourcing customer are truly willing to take on. Page upon page of information within Nearshore Americas will – if we’re doing our jobs right – get you much of the basic information you would require about the markets themselves, the key in-country industry leaders and how to initiate and manage your engagements. But the next step – the one that involves committing to investing in Latin America or the Caribbean wholly depends on just how willing you are to “get in” at a time when the value is still significant.

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The Real Winners

It’s interesting to recognize the fact that once buyers are active in the Nearshore market, they may actually find new providers or decide to switch county destinations. They are able to make these changes because they have achieved material advantages through first-hand experience that will drive them deeper into more value-based relationships. Those who are currently sealing deals are destined to maximize their investments over the next five to ten years vs. those who still are waiting for a big seal of approval to appear somewhere so they are fully and absolutely confident the deal should go forward.

I’m here to say that day will never come. The risk takers are those jumping on planes now to fly down to Jamaica, Costa Rica, Brazil and Mexico to get projects up and running by the fall. Fifteen years from now, who we will look back on as the real winners in the Nearshore outsourcing boom?

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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