By Luke Bujarski
Convergys has officially postponed its 1,000 seat expansion into Montego Bay, approximately one year after officials – from both Jamaica and Convergys – publicly announced the project. According to local and U.S. sources, the decision was based on a combination of factors, both internal on the part of Convergys, as well as Jamaica’s immediate infrastructure readiness to host the multinational IT/BPO services vendor.
The decision by Convergys to move to Jamaica was heralded as major step forward for Jamaica, which has seen a sharp upswing in BPO commitments over the last year, winning new agreements with firms such as Sutherland Global Services and Hinduja. In an exclusive interview with Nearshore Americas earlier this year in Montego Bay, Helena Lawson Brooks, a Convergys senior vice president told us that in moving in to Jamaica, the firm had surveyed available real estate and decided to build its own facility. She remarked: “Our goal is to become an employer of choice” and suggested that Kingston would be a targeted for possible expansion by the close of 2013.
However, that goal has to wait. The availability of ready-to-lease commercial real estate remains a soft spot in Jamaica’s total value proposition – particularly for nimble outsourcers constantly revising their global sourcing strategy. Insiders assert that various space options have since become available and that public-private initiatives are underway to improve the overall commercial real estate stock. However, sources also suggest that the missing goldilocks leasing option during the initial negotiation stage did in fact sway Convergys’ decision to stall the project.
Convergys is back to evaluating Jamaica on a quarterly basis. “Our decision had nothing to do with the Jamaica market – we build capacity where and when our clients need it,” said Krista Boyle, PR Chief of Staff at Convergys. “Right now we just don’t have demand for that specific market.”
But a central question is what kept the company from closing on Jamaica twelve months ago, when the project was made public by investment promotion agency JAMPRO.
Both primary and secondary accounts point to inadequate commercial real estate options as the snag that stalled the deal. Nearshore Americas’ top government sources specified that “unfortunately space of a quality and size was not available in [Montego Bay] to meet their immediate requirements.” Sources from local news publication the Jamaica Observer also pointed to inadequate office space as the deal killer.
Traditionally Jamaica has leaned on tourism, remittances, domestic services, agriculture, mining, and light manufacturing as the main economic activity. More recently Jamaica has aggressively promoted the country’s ‘knowledge’ services industry. This shift toward modern white-collar jobs has pushed operators and public officials to play catch-up in developing commercial real estate options with adequate square footage, but also with appropriate power and telecoms redundancies needed for modern BPO operators.
Currently, space is available in two of Montego Bay’s Free Zones and projects are underway to build additional capacity. According to Mark Kerr-Jarrett, owner and Managing Director of the Barnett Tech Park just outside of Montego Bay, they are in the final round of securing funding from the Development Bank of Jamaica for a modern 50,000 square foot facility to be ready for lease in 12-18 months. Furthermore, both the Cazoumar Free Zone and the Montego Bay Free Zone each have one 20,000 square foot facility ready for lease.
With regard to Convergys, Nearshore Americas surmises that leasing options came on line too late. This opened time for Convergys to revise the company’s overall global delivery strategy. “Our business is always evolving to meet client demand,” stated Boyle of Convergys.
Sources confirmed that the company was “seriously” evaluating the option of building a new facility, but eventually decided against it (for the time being), presumably as a result of changing client demand – but, not necessarily for the nearshore. In coming weeks, Convergys will announce some significant “positive” news regarding their operations in Costa Rica. While JAMPRO representatives are confident that Convergys will eventually commit to Jamaica, no official date has been established.
Jamaica BPO Incumbents
The industry currently employs about 12,000 Jamaicans with operators ACS, Minacs, Sutherland Global, Teleperformance, VistaPrint, and a host of local CRM players like Island Outsourcers comprising the bulk of the market. Official estimates valuate the industry at 200 Million USD.
Despite the Convergys setback, Jamaica has many of the necessary ingredients to grow as a nearshore platform for global services. With a native speaking population (1.3 million English speaking labor force) Jamaica has an inherent advantage over other LAC nearshore locales, particularly for voice-based BPO.
Wage rates (7K-9K USD annually for entry-level CRM agents) will likely remain competitive for the mid to longer-term, considering the country’s high unemployment (14%) and underemployment rates, and slower growth of other sectors, including financial services that have yet to recover from a mid-to-late nineties banking collapse.
Jamaica outsourcing also received a competitive boost in 2008-‘09 when the Jamaican dollar suddenly depreciated by 20-25 percent relative to the US dollar. According to Yoni Epstein the Chairman of the Business Process Industry Association of Jamaica, telecommunications costs have also gone down significantly over the last six months after ICT provider Cable & Wireless lost its monopoly on servicing Jamaica’s free Zones. “Telecommunications costs have fallen by 50 percent”, expressed Epstein.
Existing operators are expanding their operations in both Montego Bay and Kingston. Vista Print moved into their brand-new modern facility in Barnett Tech Park this September and is now fully operational running two shifts with approximately 600 employees.
Sutherland Global will also shortly commence operations in Kingston. In partnership with the University of West Indies, which already employs 500 contact center representatives, Sutherland the Indian BPO company could soon create as many as 3,000 new jobs for UWI students and Kingston residents alike. Although uncorroborated, sources hinted that ACS/Xerox is scouting around for new space in Montego Bay, after relinquishing their contract with Jamaica ICT provider Lime, to Telus International last August.
Expansion of existing operators demonstrates that the inherent challenges to the Jamaica market, including commercial real estate availability, can and are being overcome. Yet, the Convergys decision also denotes the growing market competition for new investors, and overall maturity of the global outsourcing industry.
In a recent Nearshore Americas Guest Post, Peter Ryan Practice Lead at Ovum emphasizes the growing competition in the industry and the sensitive balancing act of matching investor needs with local resources. “Viable sites now range from North Africa to Vietnam, with all these locations positioned to deliver offshore services and join the ever growing cluster of offshoring locations. The key to sparking and maintaining the interest of international investors is a complex, multipronged balancing act that ensures consistent delivery at all stages of the “wooing” process”, explains Ryan.
Likewise, the most recent Market Vista Briefing from research and consulting firm the Everest Group pointed to a general slowdown in both outsourcing transaction volume and global in-house center (captives) market activity since Q2 of 2011. In a recent webinar Eric Simonson, Partner at Everest Group, said that “companies are focusing more on optimization and on strengthening existing outsourcing relationships, rather than reworking their country location strategy”.