Nearshore Americas

Why Colombia is the New Philippines

The Philippines has long had appeal as an outsourcing destination. Cost effective, with an abundant workforce and reliable infrastructure, the Asian nation enables providers to deliver an excellent service to customers in North America.

But now there’s a Nearshore location that is meeting the Philippines value proposition head-to-head: Colombia.

“In terms of internet infrastructure penetration, Colombia and the Philippines are nearly on par with each other, at 65% and 67%, respectively,” says Victor Pereda, CEO of Nearsol, a US-headquartered company that provides BPO services from both Colombia and the Philippines. “Colombia’s readiness in information technology is also evidenced by the hundreds of foreign-based companies it has attracted over the last several years, along with the many medium and large international BPOs which have opened operations in the country.”

Further proof of Colombia’s infrastructure capacity is that Amazon, the world’s largest online retailer, chose in 2018 to set up its own contact center in Colombia, serving customers in Spanish, English and Portuguese. 

Price and Culture Positives

Of course, with regard to English-language exposure, decisions like these move beyond infrastructure, and require a thorough assessment of cultural affinity. 

“Both the Philippines and Colombia have what would be considered a positive affinity and understanding of US culture,” says Pereda. “Colombia has the potential advantage of US cultural awareness due to ties and relationships with family and friends that are living in the US.”

Pereda adds that while the Philippines has strong awareness of US culture through movies and TV shows – which can influence higher understanding of norms, verbiage, and mannerisms – Colombian citizens typically have more real-world international experiences and the ability to engage with people from diverse cultures.

In Colombia, the higher rate may potentially be offset by lower attrition – and the higher tenure and better CX that comes from that

“This lends itself to higher awareness and understanding in working with North America-based customers,” he says. “Colombia also has greater US brand awareness due to its closer proximity to the US, and a per capita income nearly double that of the Philippines that drives greater discretionary spending and a wide variety of experiences”

In the context of BPO, however, the wage differential is not as high as some might expect.

“Pricing for bilingual English support in Colombia is about 15-25% higher when compared to the Philippines,” says Pereda. “It’s a great place to diversify solutions from the Philippines without having to break the bank.”

In Colombia, the higher rate may potentially be offset by lower attrition – and the higher tenure and better CX that comes from that – combined with much less travel time for clients that need to regularly check in with their partners. 

Further proof of Colombia’s infrastructure capacity is that Amazon, the world’s largest online retailer, chose in 2018 to set up its own contact center in Colombia

“And when combined with the availability of not only Spanish, but other European languages – including French, Italian, German, and Portuguese – Colombia provides opportunities well beyond other similarly-priced locations,” says Pereda.

In fact, the size and quality of Colombia’s talent pool is often underestimated. The country has a population of about 50 million, and in 2019 the total number of individuals working in Colombia’s BPO industry was estimated at 583,000, with an estimated annual growth of 4% for the next few years. 

A Multi-Hub Market

“Colombia is a country where education is highly prioritized and sponsored by the government, so the availability of quality labor remains high,” says Pereda. “English is regularly spoken in major metropolitan areas, which provides advantages to international companies with significant English needs.”

And while Bogota is the largest metro area, with a population of about 8 million, and is considered an international market, Colombia also has five other regions that have a population of one million people or more – Medellín, Cali, Barranquilla, Bucaramanga, and Cartagena.

“There are multiple options available for a Colombia-based solution, so solution and risk diversity can easily be achieved while staying entirely within Colombia,” says Pereda. “Quality in Colombia is also very high compared to other markets, with literacy rates at over 95%, and English included as a foreign language highly incorporated into the country’s overall education plan.”

Privileged Location

These factors all result in having Colombia line up as a strong competitor to the Philippines. However, where the South American country really wins the day is with its Nearshore location.

“Colombia can be reached from many North American metro areas in eight to ten hours – compared to over 20 hours for the Philippines,” says Pereda. “Several US airlines fly directly to Bogota, Medellin, and Cali. This makes it very attractive for companies who would like to have a hands-on presence with their BPO partner.”

Colombia is also a great place to spend time on the ground. 

“Overall, the food, entertainment and living experience in Colombia is second to none,” says Pereda. “It’s a very attractive location for people who may need to spend time there for train-the-trainer sessions, new product launches or other extended stay activities.”

A Chance Worth Taking

But is it worth the switch? Colombia may be an excellent choice for a greenfield operation, or as a supplemental location, but actually transferring operations from the Philippines comes with a few practical considerations.

“Timing should really be based on the individual clients’ needs and the nature of their business,” says Pereda. “A new team in Colombia should be in place – and well through their learning curve – before the most critical time of the business cycle for the client.”

Pereda notes that some decisions will be industry-specific. For example, most healthcare clients are usually busiest between November and January, so having a new team ending a transition in August or September would give a new team in Colombia a few months of post-training experience before supporting the most critical period in the annual cycle. By comparison, a retail client would have a transition ending a few months earlier than a healthcare client.

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“A solid transition plan will be key, so that all major workstreams are considered,” he says. “Recruiting/Hiring, Training, IT, Legal, and Operations – they all have to work cohesively and in parallel, when needed.”

“A new team in Colombia should be in place – and well through their learning curve – before the most critical time of the business cycle for the client.”

A key element to the transition plan will likely include a support overlap period. This way, there is coverage from a Philippines team while a new team in Colombia is spinning up. The overlap will also help ensure a better onboarding experience for the new team, without a significant drop in the experience or retention of a client’s customers.

“Real estate strategy will also be key,” says Pereda. “A client needs to consider if they want to directly lease space. Or, will this all be handled via their outsourcing partner?”

Pereda notes that another option for real estate is working with an experienced contact center solution leader. The partner can help with market familiarization – including with building selection – while providing the option of leasing workstations, and hiring resources to help support the client in a new market. 

All worth considering when thinking of setting up a BPO operation in the fourth-largest economy in Latin America. If done right, a transition to Colombia can be a low-risk proposition that delivers meaningful, long-term returns. For a modest increase in rate, Colombia is clearly well-suited as a BPO delivery center, either complementing or replacing a Philippines’ solution.

Tim Wilson

Tim has been a contributing analyst to Nearshore Americas since 2012. He is a former Research Analyst with IDC in Toronto and has over 20 years’ experience as a technology and business journalist, including extensive reporting from Latin America. A graduate of McGill University in Montreal, he has received numerous accolades for his writing, including a CBC Literary and a National Magazine award. He divides his time between Canada and Mexico. When not chasing down stories, he is busy writing the Detective Sánchez series of crime novels.

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