When evaluating Nearshore destinations, decision-makers will often gravitate to ‘name brand’ locations, for reasons that are not as obvious as you might think. In recent years, those destinations, capable of supporting the entire range of outsourcing services has included places like Bogota, Colombia; San Jose, Costa Rica; Guadalajara, Mexico and several others.
Of course, there is a significant amount of grey when it comes to placing locations cleanly in one category over another. Professionals responsible for choosing new outsourcing locations are often trying to calculate the efficacy of providers in targeted locations, the soundness of the destination itself and a whole host of other variables that depend heavily on the intended purpose of the exported service. As these professionals try to crack open the secrets to their pursuits, they will often find that securing clear, unequivocal answers is just about impossible. There are reasons ‘on both sides’ why this is challenging.
The Hazards of Inconsistent Data
First off, we have seen throughout the years that data collection is seldom performed consistently or accurately from one country to the next. The outsourcing sector, as we know, has many unique features and considerations. Many countries in Latin America and the Caribbean have had to adapt to a much more intensive line of questioning when it comes to a destination’s readiness and certainly some locations are much more adept than others at delivering a comprehensive pitch that is clear and convincing.
Of course, answering the probing questions of investor decision-makers with a robust answer often requires relevant data. Such data could seek to analyze talent availability according to job profile, churn rates, investment incentives, personal safety metrics and all sorts of cost analyses. As a result, the data that you do obtain – assuming you believe it to be reliable – is often only applicable in the narrowest sense of understanding that particular country or metro-area; taking it and attempting to draw comparisons with other locations is a common mistake. In our book, even if this practice is done all the time, it is still a mistake.
From the perspective of the pursuer, the one trying to chase down facts and insights, disconnects start to surface because of the blind spots that individual or institution brings into the evaluation. Perhaps it is simply human nature, but the majority of investor decision-makers we have met seldom check their prejudices at the door. Instead they carry their baggage boldly, often seeking to confirm previously held views instead of stepping into the process with an unbiased perspective.
Putting the Location Analysis in Motion
The process of location analysis and calculating the appropriateness of destinations is certain not designed to be applied uniformly among all organizations, as if one is taking directions from a revered rulebook. The process should start with a few key steps:
- What is it we’re trying to achieve – both short-term and long-term? Make this process formal enough so you can get a tangible, real-world set of expectations about the objectives the site expansion is intended to serve.
- Is the new operation an extension of ‘us’ or something else? Having a clear grasp of what will constitute the culture of the new operational center is crucial. Transmitting one’s culture into an newly formed entity does not happen organically. It has to be carefully crafted and nurtured.
- Who carries the mandate to see the process through to completion? Committees are useful to gain feedback and consensus on directional and policy matters. But to really move and stay agile, one clear leader needs to be established to lead the process and get things done.
- Where do I plan to gain insight? A common failure in location analysis is reliance on a couple of primary local resources to collect key information. Instead, decision-makers should build a framework, with independent partners, who can gather alternative points of view.
- What institutional knowledge do we possess to inform our journey? Previous trials and tribulations in global outsourcing should be applied in a way that is sufficiently self-reflective so the same mistakes are not made again.
Finally, many investor decision-makers continue to convince themselves that by sticking with a marque, name-brand destination, they are making the safest bet. That logic, in our view, will only hold so much water as a steady stream of newcomers accelerates the erosion effect, where long established operational conditions begin to change shape. Our advice is – pay closer attention to overlooked tier-two and tier-three locations in the Nearshore. Be conscious of the industry’s herd mentality and devise a pathway that is calibrated to the success factors you and your team independently develop.