The keynote panel at Nexus 2014 saw four prominent CXOs discuss the best means of minimizing currency risk and engage in a rigorous debate on whether big companies will continue to dominate the IT outsourcing market in Latin America and the Caribbean.
Moderated by Kevington Advisors CEO Toby Redshaw, the panel was comprised of Ankur Prakash, Vice President and COO for TCS Latin American Operations; Robin Shahani, Chief Procurement Officer at TD Ameritrade; and Jose Carlos Lopez Alvear, CFO for IT at Banamex.
Prakash advocated a joint-responsibility approach to risk reduction, while also avoiding more volatile markets. “You cannot have a situation where the financial risk is 100% taken by the buyer or 100% taken by the customer – we need to find a common ground,” Prakash said. “And for the win-win situation to continue and succeed we need to ensure that we abstain from choosing countries where hyper-inflation is a risk, like Venezuela, Argentina, etc.”
Changing market conditions mean it is also important to constantly reassess your business plan, Shahani added: “I think people do the business case and then stick it in the cupboard with the contract and the problem with that of course is that three years ahead this business case may be underwater because the cost of living or inflation have gone a way that no one expected.”
Wage inflation can be as important a factor as currency fluctuation, Redshaw added. “While the wage inflation may not show up in the bills that you get and it may not aggravate the contract you’ve got, what will happen is you’ll get lower quality people and the program will get spread out because (your providers) are a business,” he explained.
The panelists disagreed over the future of the ITO market, with Prakash arguing that it will not be dominated by big companies: “If you look specifically at Latin America at least 80% of the workforce in the IT sector is working in companies which are not considered big companies.”
On the contrary, Shahani argued that smaller competitors will simply be bought out by bigger rivals: “I do think that the large players will continue to dominate. The reason for that is that we’re seeing an uptake in mergers and acquisitions activity … as smaller firms come up and become more and more viable, they will be targets for takeovers.”