Kirk LaughlinThree things stand in the way of Latin America-based sourcing providers from taking majority claim of the U.S. outsourcing market, and snatching market share from India-based providers.
Think it’s possible? What on earth could catapult Americas-based providers to suddenly land in the driver’s seat – dictating the future course of the next generation of service delivery. Here are the details.
We sat down recently with David Tapper, Vice President for IDC’s outsourcing group, who has good historical perspective on the ingredients that make up the ‘right stuff’ for countries or regions to become sourcing leaders. Tapper was candid about Latin America and its failings to become a more commanding player in the U.S. market. Of course, that’s slowly beginning to change, but when you really step back, Tapper argues that LatAm has fallen short in three key areas:
1. India Inc. is Now in the Neighborhood
“The players in Latam are realizing that they haven’t succeeded the way they wanted and over time they have witnessed the rise of the India providers who now are in their own backyards,” says Tapper.
As a result, Latam providers need to ask, “What do we need to do differently?” The longstanding argument that Latin America-based players have a time zone advantage and cultural compatibility loses a lot of its fire when India sponsored providers can make the same argument with facilities in Guadalajara, Curitiba, or Santiago.
Without telling more that a few people about successes, how in the world are potential U.S. companies going to notice?
2. Where’s the Aggressiveness?
Tapper’s most astute point, and maybe one that is deceptively simple, is that Latin America providers have frankly not gone after the market in a laser-like, hyper-aggressive way as have their Indian counterparts. Tapper points to the seminal moment when India Inc. seized on Y2K as the premium opportunity to relieve anxieties and deliver value to U.S. customers who had no previous understanding of what could be done by these providers. “Among Latam players, there is still not an ability to focus on a specific space,” says Tapper. “You have to be aggressive.”
Maybe it’s cultural, but there is no question there is less of a tradition of boasting about success in Latin America the way it might be done elsewhere. In fact, a senior executive from a Chile-based sourcing promotion agency told me last week that Chileans just aren’t that comfortable talking about their achievements.
Without telling more that a few people about successes, how in the world are potential U.S. companies going to notice?
3. Academic Rigor
Tapper argues that India has institutions on par with MIT. But what about in Latin America? “I’m not hearing that kind of academic success in LatAm. You need the academic rigor and when you have it, then you can command the technical advantage,” says Tapper.
To be fair – and in opposition of Tapper’s position – many institutions in Latin America are turning the corner and doing some amazing work producing highly trained technical graduates. Universities in Mexico and Argentina come to mind, but there are others.
Final point:
Tapper says the field is wide open for either existing or start-up sourcing providers to capitalize on cloud computing by leveraging the platform-as-a-service model. “The next major software services company is going to come from people who are using Amazon [cloud services],” says Tapper.
Agree with some points. Speaking from experience (I lived and worked in India):
#1. is right, Indian companies are all over the place in Latin America as "locals", so LatAm providers need to show how they are different from them,
#2. is also right … Indian firms know how to boast about success and how to hide failure, in my opinion sometime to the degree of stretching the truth,
#3 is not accurate. In India there are a few really good academic institutions (just like LatinAmerica). Your Indian school below the top schools is no better than your average LatAm school, and in my opinion, the top ones (IITs) are no better than the top LatAm schools. It is all marketing !
So, how do you deal with #1? … several ways – specialization (technical or domain), better quality (eg. Indian companies always have more rotation because of the business model), the way employees are treated,etc. Commodity "java programming" will not cut it!
How do you deal with #2? … aggresiveness, and being very proud about achievements. I know that we LatAm folks are modest, but that does not work in capitalism. What can be seen as a differentiator is if the LatAm company declares upfront that "from us you will always get transparency and straight answers". Also – we should not be affraid to point our our strengths vs. their weaknesses.
I liked the article and I agree with the 3 reasons given, however as you know the incursion of Indian service providers into Latin America is relatively recent, but this will make the local providers to rethink their business models and venues to reach the potential clients.
In addition I would add to add a couple of reasons:
1. Governmental support in Latin America is in its infancy compared to India, as an example Mexico has the Prosoft program, but it is fragmented and it is not focused on developing the ITO industry, on the other side of the spectrum we have Costa Rica, which has made much more progress through CINDE, attracting a large number of US companies looking for BPO, but lacking the budget, reach and scale of India or China
2. Local service providers have relied only into the near shore value proposition, and it is seen as a compliment to the offshore model, not as a direct competition to it. Local service providers have relied on it for too long without having the need to invest in the evolution of their value proposition or trying to compete aggressively with their Asian counterparts
3. Non-Indian Outsourcing providers are also investing in Latin America, a recent example is HP and NSN winning the largest IT outsourcing and Network Managed Services mega deals in the region leaving on the way Asian or regional service providers
In summary, Latin America is waking up to all this new outsourcing activity, driven by global and/or local transactions, and for sure it will change the landscape of the market.
I think the outsourcing industry in Latin America is missing a huge opportunity in not focusing on cloud computing as well as interactive technologies. I have been helping the folks at South by Southwest in Austin put together a new Latin American track, and our focus is to highlight the achievements of some of Latin America's new interactive and social media start-ups. Companies such as Buscapé out of Brazil, Three Melons out of Argentina, and Needish out of Chile, for example, are some of the high profile startups that are emerging from the region. There's a whole "geek" community in Latin America who can develop in PHP, Ruby on Rails, Java, .NET, and mobile technologies. I think we need to look here for solutions instead of at the "big iron" types of outsourcing services that compete directly with the Indian companies.