By Susan Arledge, President/CEO, Arledge Partners Real Estate Group
Latin America is becoming the venue of choice for call center relocations as the industry continues to seek low cost English solutions. So, if you are considering opening operations in LATAM, here are Seven Essential Questions that you should answer before making this type of investment:
- What is the size of the labor pool in the area that I am considering?
- What are the risks of skill shortages and saturation by other call center competitors?
- Is there sufficient bilingual labor in the region?
- Which countries have ongoing English training programs?
- LATAM is not a homogeneous region – each country has cultural differences. What is the working culture?
- What are risks/threats of corruption?
- Large US outsourcing giants such as IBM, EDS, ACS and Accenture tend to dominate LATAM – there are few home grown companies. Is there room for the smaller players?
1. What is the size of the labor pool in the area that I am considering?
It’s not all about the massive amount of population in LATAM. Mexico has over 100 million. Costa Rica has 4.1 million; however, San Jose is so saturated with call center agents that it is no longer wage competitive. In Guatemala, a country that has 14 million inhabitants, the distribution of income is unequally high with approximately 29% of the population living below the poverty line and is still among the 10 poorest countries in Latin America.
2. What are the risks of skill shortages and saturation by other call center competitors?
As the market in Costa Rica has reached a saturation point and competition for qualified bi-lingual agents gets tighter, other countries will begin to prosper. Nicaragua’s young industry and wealth of young, U.S. educated and culture-ized talent, (a result of the children of Nicaragua’s war refugees returning home), is becoming more and more attractive.
According to industry expert Ann Harts, formerly with Sitel, “Any type of cultural affinity to the US helps.”
3. Is there sufficient bilingual labor?
The LATAM region will generally not support large 1,000 seat centers. Also, it is difficult to accurately ascertain the number of potential employees who are fluent in both languages. Data on bilingual workers is incomplete in these countries and statistics are not maintained, either the U.S. or Latin America, on bilingual populations. To find out you need to get on the ground to research and know the labor markets.
4. Which countries have ongoing English training programs?
Bogota, Colombia – “Talk to the World” is a city-funded English training program provided on a part/time or intensive mode for qualified individuals and plans to train/graduate approximately 2,000/year.
Buenos Aires, Argentina has the highest number of bilingual agents serving U.S and European clients with almost sixty (60%) percent of agents being bilingual. Buenos Aires (and suburbs of Cordoba and Rosario) has 94% of the contact centers and agents in all of Argentina. Cordoba has the highest per capita software university graduates in all of Latin America.
Guatemala City, Guatemala has the largest student population in Central America. University students will increasingly need to pass the TOEFL or Elash to graduate, and will improve their English language. There are an estimated 631,000 persons who are taking some form of English learning or improvement programs.
San Jose, Costa Rica’s biggest drawback would be the increased cost to attract bilingual CSRs because of the saturation rate, largely due to the number of US outsourcers currently in the market. Costa Rica announced a major push with a new program, Multilingual Costa Rica, aimed at training 35,000 Costa Ricans to attain various English skill levels. The program requires that 100 percent of the nation’s high school students graduate with these skills by 2017.
Panama City, Panama has instituted several English call center training programs:
OCA Program – administered by the training office of the Ministry of Labor and funded by IDB and Central Government.
English Task Force – An initiative of the Panamanian Chamber of Commerce, dedicated to promote the study of the English Language among young people.
COSPAE programs – Private Sector Council for Educational Assistance, an association of private sector companies dedicated to promoting education that is funded by central government and private sector donations
Managua, Nicaragua – As two bilingual call centers have set up shop in Nicaragua’s tax-free zones, investment-promotion agency ProNicaragua is scrambling to update its database of English-speaking Nicaraguan workers, estimated to be around 10 percent of the country’s working-age population.
5. LATAM is not a homogenous region – each country has cultural differences. What is the working culture?
According to industry expert Ann Harts, formerly with Sitel, “Any type of cultural affinity to the US helps.” In Nicaragua for example, The Nicaraguan English-speaking labor market is being buoyed by the offspring of Nicaraguans who fled the war-torn country in the late 1970s. Now equipped with U.S. educations and strong English skills, many want to return to Nicaragua as jobs become available. “These positions are considered to be professional jobs in Latin America, and we’re seeing a lot more educated applicants,” Harts says.
Harts participated in a job fair to recruit for a new Managua facility. She was impressed that more than 50 percent of applicants qualified as English bilingual. Another speaking aspect of potential employees, accent neutralization, also caught her attention, as did the affinity for U.S. culture.
Harts found that 60% had visited or lived in the U.S. or Canada and 100% watched U.S. television via cable or satellite. She says about 90% preferred to watch TV in English. “I looked at their cell phones and the text is in English. Their favorite places to eat are U.S. restaurants such as Pizza Hut, McDonald’s and Burger King. I asked them to name the top news issues in the U.S. and the answers were better than a survey I did in the U.S.”
6. What is the risk/threat of corruption?
Corruption is a significant obstacle plaguing businesses throughout the Americas, according to a September 2008 survey of over 200 executives in Latin America conducted by Miller & Chevalier Chartered and six regional law firms. Nearly half of all respondents consider corruption a significant obstacle, almost 70% believe that they have lost business to competitors who made illicit payments.
Mexico was rated the most corrupt country, Chile the least. Seventy-seven percent of Mexican, 63 percent of Brazilian, 59 percent of Argentine, 45 percent of Peruvian, 34 percent of Colombian, and 14 percent of Chilean respondents believe their country’s Customs agencies exhibit significant corruption.
7. Large US outsourcing giants such as IBM, EDS, ACS and Accenture tend to dominate LATAM – with few home grown companies. Is there room for the smaller players?
The Latin American market is populated as well as fragmented, with eight global participants sharing about 45% of the total market. Sixteen large regional and local outsourcing companies accounted for 38% of the market, while the other regional and local mid-sized and smaller companies represented the remaining 17%.
Xerox Corp. announced its acquisition of Affiliated Computer Services Inc. (ACS), joining the expensive race among technology companies to broaden their offerings. Xerox said the deal will create a $22 billion business that combines Xerox’s copiers, printers and document management services with the BPO of Dallas-based ACS.
ACS, a $6.5 billion company with about 74,000 employees and profit of $350 million in its last fiscal year, offers a range of services, such as helping companies manage health care plans and accounting, government, transportation, health care and retail. The move takes Xerox deeper into the back-office operations of its business customers with the kind of acquisition that is popping up more and more as technology companies add a greater variety of equipment and services under a single tent.
Dell Inc. recently announced would buy Perot Systems Corp. for $3.9 billion, kick-starting an information-technology services business for the company. This comes soon after rival Hewlett-Packard Co. expanded its own services business with the $13.9 billion buyout of Electronic Data Systems Corp.
Susan G. Arledge, SIOR, is president and CEO of Arledge Partners Real Estate Group, located in Dallas, Texas.
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