While the European BPO market stagnates, business in the Americas is booming, with LATAM recording a 60% rise in signings so far this year. The telecoms sector continues to drive much of the growth, while the region is providing an increasing number of transformative services to the United States, particularly multi-channel customer management services aimed at the growing Hispanic population, Mike Cook, CMS analyst at NelsonHall, tells Nearshore Americas.
Nearshore Americas: NelsonHall research shows total contract value for BPO bookings is up 29% in North America this year but only 3% in Europe. Why is this?
Mike Cook: Because of the way the global economy is right now we’ve seen positive and negative pull on contract value in outsourcing. What we have seen right now in North America is both an upswing in the economy and a downfall in debt so that’s been the main driver for growth. But in Europe general economic downturns right now are causing the stagnation in growth. We’ve seen massive closures of delivery centers in France, and a few in Belgium. The Nordic countries haven’t been growing quite as rapidly as people would have liked, Spain’s going through its own issues right now and Italy’s not especially healthy. Of course we are seeing a lot of growth coming out of countries like Germany and Portugal, but the big guys like France and Belgium are suffering major, major downturns.
NSAM: How is Latin America doing in comparison?
Cook: In Latin America we’ve seen a lot of growth among the domestic markets. The best examples are definitely Mexico and Brazil, with Brazil being far and away the biggest out of the two of them. Then, in terms of being viable nearshore destinations for the US, Argentina, Colombia and to a lesser degree, Peru, are all up there. In ITO we’ve seen a fairly sharp drop in signings in LATAM this year, but this is augmented to a large degree by BPO signings. We’ve seen an uptake of 60% in BPO signings this year rising to US$500 million. So we’ve seen a lot of growth in that sector right now and that’s just a result of the general economic uptake and the increasing acceptance of LATAM as a viable nearshore destination to the US.
NSAM: So why has there been more BPO activity and less ITO activity this year?
Cook: There were a few very large ITO signings last year that weren’t repeated this year, hence the discrepancy between ITO and BPO. The uptick in BPO is largely due to the economic situation within the region.
NSAM: What are the latest BPO trends you’re seeing in Latin America?
Cook: We’ve seen a lot of large-scale transformative contracts with larger BPO providers, for example Accenture has just been awarded a seven-year contract with Oi in the Brazilian telecoms sector. And if you recall the IBM contract with Cemex last year was a $1billion ITO contract. This was basically an acquisition by IBM and hostile takeovers are the main driver for a lot of these contracts right now in the domestic market.
Another thing we are seeing is a lot of transformative services coming up from Latin America to serve North America. These have included multi-channel customer management services, mainly in support of the US Hispanic population. Evidence has shown that the telecoms vertical has been the largest adopter of these services from LATAM. Brief example includes Teleperformance’s US$22 million investment in two further centers in Colombia this year, in support of clients including a major U.S. telecom provider.
There are also a lot of high-quality voice interactions coming out of Brazil right now. For example, Teleperformance has opened a data multi-channel center of excellence in Brazil. A lot of their service is based on high-end customer voice support to parts of Europe. As soon as you see that Teleperformance are opening up a center like that you can be assured that you’ll see a lot of their competitors following suit over the next 6, 12 or 18 months.
We’re also seeing a lot of social media and web chat coming out of that region right now.
NSAM: What other segments or services are currently most in demand in the region?
Cook: We’re seeing a lot of multi-tiered contracts around F&A (finance and accounting), CMS (content management systems), and HRO (human resources outsourcing). We’ve also seen a lot of mobile payments contracts coming out of LATAM. In terms of CMS, if you break that market down, we’re seeing a lot of multi-channel e-commerce services are being provided out of Brazil right now. For example, Amazon has just moved into Brazil. That’s obviously a huge, huge move. Among the verticals, banking, transportation, education, health and public services are all seeing a lot of uptake, but of course the biggest one, as usual, is the telecoms sector. Both the domestic telecoms sector within LATAM, as well as support for nearshore destinations in the US. A lot of their contracts are driven by the telecoms sector right now.
NSAM: What changes do you expect to see in the LATAM market in the near future?
Cook: We do expect rapid growth in this sector for at least the next three or four months, before it starts to reach a slight level of maturity. The economic situation is definitely favorable. We’ve seen growth there and the increasing demand for offshore services. You’re going to see the bigger players in the marketplace – like IBM, Accenture and HP – moving in to make acquisitions and also to establish new centers. And if you look from the customer services perspective, you are going to see growth in viable nearshore destinations for the US market, maybe in your lower cost areas, like Colombia and Peru.