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The Outspoken Professor: The Best and Worst Things About Nearshoring

The Outspoken Professor: The Best and Worst Things About Nearshoring

By Patrick Haller

You can count on one hand the number of professors across the Americas that are teaching the subject of Nearshore Outsourcing at the university graduate level. One of those people is Carlos Baradello, Associate Dean at the School of Business and Management, University of San Francisco,whose mix of corporate, engineering and academic experience puts him at the center of some of the most important discussions focused on the future of the Nearshore ‘movement.” With deep business and academic connections in tech hubs like Cordoba, Argentina; Guadalajara, Mexico and Silicon Valley, Baradello has a unique perspective on the market – and usually he doesn’t hold back from sharing his views.

In your view, what are the top Nearshoring destinations in Latin America?

Baradello: It depends on what area of the value pyramid they’re in. The pyramid is divided into four areas:

Commodity services – Argentina used to be a wonderful place for call centers, now it’s too expensive. Look in Peru, Bolivia, Ecuador then go to Guatemala. Commodity services tend to be highly mobile. Stay loose, you will be moving fast when it becomes too expensive.

BPO – Argentina, Uruguay and Chile are in the running because they have very good human capital. I like Colombia a lot.

KPO – It is less price sensitive, it’s quality sensitive because you want the top human capital. Buenos Aires and Cordoba are good places, also Montevideo in Uruguay. I like what I see in Colombia.

IPO – To have quantity and quality depends on the educational system and historical legacy. Anyone can be trained to be a call center agent, but I’m not going to train people to become animators or plastic surgeons. Is there a tradition in the country for those types of skills?

I haven’t mentioned the two big elephants in the room: Brazil and Mexico. My personal consideration is that Brazil is too big of a beast, too complex. I love Mexico and have been to many places there. The Narco situation is very bad. Monterrey was the center of industry, finance, commerce – now it’s in the toilet. Guadalajara is better.

Where do you think the most dynamic and innovative software is being developed?

Baradello: That is correlated with human capital in Argentina, Uruguay and Colombia – the places with the best education systems. Mexico has a fair amount of development.

What impact will the Cloud have on IT and software development?

Baradello: Cloud Computing, like any transition, offers new opportunities. Companies will migrate some products and services to the Cloud and enable clients to do new things. The Cloud and Nearshore go hand in hand.

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If the US economy rebounds wonderful things will happen for Offshoring and Nearshoring. There will be a wave of companies with revenues between $100 million and $1 billion and we will see a positive movement for Nearshoring. It is easier to move to Colombia, Peru or Ecuador as opposed to Bangalore or the Philippines.

If the US economy goes into a freefall from the great recession to the great depression, with 20-30% unemployment, then the willingness of people to relocate to a rural area, or accept lower compensation will be a different scenario. Let me make it clear – I hope we never get to that point because we all be under severe pain. If we freefall we are going to be very judicious about what we pay.

I’m not going to Peru for 5% savings; I’m going there for 30% or 50% savings

What is your opinion on Rural Sourcing?

Baradello: We live in a global society – the best professional should win. Barriers are only temporary band-aids. After World War II the US was a proponent of a global meritocratic society. The best professionals and services win in a free-trade environment.  Any thing we do to prevent free trade is a temporary band-aid. We need to be competitive.

Offshoring is going to be under attack and there will be a reversal in the trend to bring things in country. I’m not going to Peru for 5% savings; I’m going there for 30% or 50% savings. My presumption is if the country rebounds, there will be less incentive [to rural source] and unemployment will be reduced. You can buy people at the top of the pyramid for $2,000 per month in Argentina, whereas here it is $10,000 per month.

Managers should always be thinking of multiple contingencies. How many moves are you able to think about ahead? When you decide to commit to a vision you need to have a stepwise approach and understand what you are getting into.

About Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

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