For Puerto Rico, the vision of a sought-after and established knowledge service economy is coming to fruition, according to the Puerto Rico Industrial Development Company (PRIDCO). Rumors of the saturation of the IT outsourcing market seem to have been misguided; Puerto Rico’s IT outsourcing sector has evolved to meet the sophisticated needs of its clients.
PRIDCO executive director Antonio Medina explained: “Puerto Rico has been a manufacturing powerhouse for over 70 years, with traditional segments like textiles. Now we are seeing a movement of the economy to a knowledge service economy. We are moving from a focus on software, customer service, and call centers to more complex research and development for the aerospace industry such as the design of engine parts.”
Medina emphasized that Puerto Rico had long been recognized as a destination for software development. Microsoft Corporation, for example, has made Puerto Rico its manufacturing center for all Office and Vista products intended for the U.S. market.
The benefit of Puerto Rico as an IT outsourcing destination is that it is part of the United States and its population are U.S. citizens, but it offers incentives such as tax breaks. “Although we are part of the U.S, we can negotiate tax rates with companies and they do not pay federal tax rates,” he said. While it cannot compete with other nearshore destinations in terms of labor costs, Puerto Rico offers a highly skilled bilingual workforce.
San Juan-based software development and engineering company Wovenware serves mid-sized companies in the U.S, the UK, Canada, the Caribbean, and Latin America. COO Carlos Melendez said: “Offering the lowest price, which happens in other regions around the globe, is no longer enough: companies need offshore IT resources that do more than just follow the spec, but also provide insights and advice about how to best bring a project to life.”
He emphasized that Puerto Rico has emerged as the nearshore resource of choice for IT because of three key factors: technical skills, economic advantage, and cultural alignment. He, too, is seeing interest in the outsourcing of more complex IT projects. “Everyday we see increased interest in more sophisticated developments especially in mobile app development and big data. And Google recently launched its customizable smartphone pilot Project Ara here in Puerto Rico, for all of the reasons I’ve mentioned,” Melendez said.
Aguadilla: Hub For P.R Aerospace Industry
The aerospace industry, in particular, has increasingly recognized Puerto Rico as an important hub – and it is not Puerto Rico’s capital, San Juan, that is attracting attention. Aguadilla with its Rafael Hernández International Airport, a former U.S. Air Force Base on the northwest of the island, is emerging as the center of the aerospace industry in Puerto Rico, and for the IT and knowledge services that support it.
As a U.S. jurisdiction, Puerto Rico is primed to service the aerospace market as it “complies with the regulation that states that defense and military-related technologies may only be accessed by U.S. citizens,” according to PRIDCO.
“We have seen significant growth in aerospace, with a 50% increase in the number of jobs committed in the aerospace segment, and recent expansions by companies like United Technologies. In addition, Lufthansa Technik is building a facility for maintenance, repair and overhaul (MRO) in Aguadilla,” Medina said.
BPO and IT services companies are expanding in Puerto Rico to service this aerospace market. On 9 March, Infosys BPO and PRIDCO opened the new 12,000-square feet, 250-seat site in Aguadilla. Infosys will use the new center to deliver “complex order-to-cash business processes for clients in the aviation sector.”
Anup Uppadhayay, Chief Executive Officer and Managing Director of Infosys BPO, said in a statement : “The new center in Aguadilla, Puerto Rico is a promising regional hub for Infosys BPO. We envision it as a center of excellence for the aviation and aerospace industry.”
He added that the availability of a highly skilled and talented workforce, coupled with the positive business environment fostered by the Puerto Rican government, makes this a favorable destination for Infosys BPO. “Our team here will play a key role in continuing to renew and accelerate process innovation and automation for our clients,” he said.
Honeywell Aerospace is also expanding in Puerto Rico, with a new $35 million electromagnetic compatibility and environmental test laboratory, its second site in the territory. According to Honeywell, the new lab, slated to open in the third quarter of 2015, will support its global aerospace and defense operation in app and software development and aeronautics engineering design. Honeywell’s aerospace technologies are used by commercial and defense aircraft around the world.
In fact, the aerospace industry has set up a number of facilities on the island. According to BusinessInPuertoRico.com, Pratt & Whitney is performing engineering design and analysis for the jet turbine power plants of several aircraft from its InfoTech Aerospace Service‘s division, while Lockheed Martin has more than 60 employees conducting software support services from Puerto Rico for its global operations. The AXON Group and Pratt & Whitney have also established a world-class SAP services center in Puerto Rico, and provide infrastructure services such as information technology security and compliance, and custom application services.
While the focus is on evolving into more sophisticated IT outsourcing offerings to service niche markets, Puerto Rico still benefits from traditional call center investments. Grupo Ferré Rangel and InfoCision, for example launched their CommSense joint venture in Aguadilla in November 2014. According to Five9’s TMCNet, CommSense provides English-Spanish bilingual voice calls, e-mail blasts and social media customer support and marketing.
Medina added that Atento also expanded recently, announcing a $500,000 investment and the creation of 200 new jobs at its Caguas facility.
The evolution from the provision of basic call center and IT services outsourcing to more sophisticated offerings has been both organic and planned. “We are definitely seeing a trend of growth based on the concept of exporting services and exporting knowledge,” Medina said. “With Puerto Rico’s highly-educated human capital with its very strong STEM (science, technology, engineering and mathematics) background combined with a significant industrial base, we see that the knowledge service exporting services continues to become more complex in nature.” Medina added that a company like Honeywell not only offers IT support but also global management, procurement, marketing and legal work as an outsourced service with a center of excellence in Puerto Rico.
“As people became more comfortable with the market and started better understanding the level of capabilities of our human capital, there has been a natural evolution towards sophistication,” he said. “However, within the industrial development strategy we have a very clear focus on these emerging segments including aerospace, IT and KSO, among others. Therefore there is a concerted effort to provide growth in these areas by seeking strategic opportunities and attracting them to Puerto Rico.”
Melendez added that they have seen growth in specific industries as they tackle the challenges of Big Data and increasingly mobile workforces. “Our customers include companies in the healthcare, logistics, and aviation services industries, all of which have unique and exciting opportunities for application development and modernization. Our recent projects include machine learning implementations for big pharmaceutical manufacturing plants, integration initiatives for health insurance claims data, and the transformation of a hard-wired, terminal-based IT infrastructure for baggage handling services into a SaaS-based, fully mobile set of applications that have massively improved accuracy and efficiency for aviation service workers at major global airports,” he said.
For Melendez, the key is in providing not only programming skills, but also strategic counsel on how to transform aging IT infrastructure into flexible, value-creating new applications. “Specifically, the IT executives we work with tell us they struggle with the need to reduce technical debt, which is critical for aligning IT with higher-level business goals. We are also helping companies with their big data initiatives, including the implementation of machine learning algorithms into establish business processes,” he said.
While aerospace and its related industries may be offering opportunities for IT outsourcing companies eager to contribute in the knowledge services economy, it is clear that it is not the only point of innovation and evolution in Puerto Rico’s IT sector. “We foresee continued growth,” said Medina.
The Stats Tell the Story
Population: 3.548 million (2014)
- New jobs committed (since Jan 13 to present): 608 jobs committed
- New jobs created (out of the committed since Jan 13 to present): 253 jobs
- Committed investment (since Jan 13 to present): $12.7 million
Knowledge Process Outsourcing
- New jobs committed (since Jan 13 to present): 4,570 jobs committed
- New jobs created (out of the committed since Jan 13 to present): 950 jobs
- Committed investment (since Jan 13 to present): $16.5 million