By Ashok Patil

As outsourcing becomes a common practice among the business community, service providers across the globe are relentlessly devising newer and newer strategies and delivery models to stay relevant and grab a larger slice of the market.

India, the industry’s dominant player, is scrambling to cut costs and inject value into services. Unlike the countries in the Nearshore region, India has a few options at its disposal to remain dominant and relevant. Indian Outsourcing service providers are increasingly focusing on enhancing the quality of their service as the wages have continued to rise steadily over the past years.

Until recently, reducing cost was the key aim of service providers, but things have changed. Many service providers, particularly those who entered the market as of late, are focusing on quality instead of cost.

For these new entrants, offering high quality service at a low-cost is not easy, however.

Service providers in emerging destinations, such as China and Latin America, seem to have grabbed more than 10 percent of the market share from India Inc. Nevertheless, India has remained the largest BPO provider.

Experts say the sudden rise in the number of outsourcing service providers has increased competition. More providers walked into the market as U.S. companies looked for newer locations to outsource their back-office functions. These new competitors are doing everything they can to grab a larger slice of the market share from large and more established players.

“I think the cost advantage is fading with many ITO/BPO processes being automated. But Asian locations will retain the scalability advantage with their huge educated workforce,” says Anupam Govil, Senior Partner with Avasant and President of AvaSense.

What the Buyers Look For?

Enterprises, according to the Everest Group, examine several values ––sourcing models, risk diversification, access to language skills, cost arbitrage, etc –– before wrapping up deals with a service provider. And they weight both value and cost before making their decision.

“Multi-location delivery centers, proximity and cultural affinity are some of the major factors that enhance the value of a delivery center,” says Anurag Srivastava, an analyst with the Everest Group, pointing at the established players who are increasingly expanding their operation in the nearshore region.

Analysts say buyers are putting as much emphasis on quality as on cost. Working closely with the client is just another way of adding value to the service.

Many service providers, analysts say, have kept on modifying their delivery model in a desperate attempt to stand out from the crowd. But the fact is only a few providers have managed to ‘stand out from the crowd’ successfully.

Established players like Accenture, IBM, and Capgemini are adopting ‘transformational’ strategy, while some providers are adding SMAC services –– social media, mobile, analytics and cloud –– to their offerings.  Indian service providers have an advantage when it comes to application management.

But what is clear is that the new entrants have heated up the competition. Some of these newcomers are not limited to a particular country, they are expanding into many important markets, or joining forces with competitors to better tackle complex projects. Still, most of them are yet to attract the attention of large enterprises and government agencies.

A few mid-tier companies, such as Genpact, WNS and EXL Services, quickly responded to the market demand and expanded into far-flung locations, including Latin America. Aside from setting up offices overseas, they added more services to their portfolio –– finance & accounting, customer service, research & analytics, to name a few.

Genpact is also expanding in continental Europe and the Middle East, and intensifying its effort to catch up with the early entrants such as Infosys and TCS. These initiatives of the company were reflected on the financial results it unveiled recently –  Genpact reported 15.7% growth for the first quarter of 2013, while other India-centric competitors such as TCS, HCL Technologies, Infosys and Wipro posted growth rates in the range of 4% to 15%.

The Battle over Cost and Value

“As long as you add value, you keep buyers happy. Most service providers are carefully carrying out their job to retain their customers,” says Thomas Reuner, an analyst with Ovum.

Reuner says it is, however, hard to examine what changes the value has brought about. “To have a significant success with such large transformational deals, buyer and service provider should partner and work together,” Reuner added.

With all the complexities in the global sourcing industry, it is difficult to know exactly how costs can be reduced. Service providers can keep on winning deals so long as they successfully distinguish themselves in terms of value proposition, delivery model, service offerings, pricing and location.

“Cost parity cannot be achieved in the foreseeable future due to many factors,” stated Anupam Govil. He says market will correct itself as low-cost service providers expand into areas where wages are high. However, Govil pointed out , it will take some time for the industry to push down the cost.

So long as service providers do not streamline their operation and hire limited number of employees, pushing down cost will remain a challenge.

Who needs a limo? Mujica drives an ’87 Beetle

By Pat Antuña Yarza

While Uruguay has garnered attention for its potential as an IT hub, its high percentage of people with broadband access and its relative affluence compared to its nearest neighbors, in recent years the country was frequently overshadowed by Brazil, Mexico and other Latin American countries.

The tiny republic is in the spotlight once again, however, thanks to President José Mujica, a former guerrilla and farmer who has been in office since March 2010.

Mujica joined the Tupamaros guerrilla movement in the early 1960s. The movement drew some inspiration from the Cuban revolution and performed some violent actions that earned it notoriety, while at the same time performing other more sympathetic actions that fueled the Robin Hood mythology of the guerrilla.  It was crushed shortly before the military dictatorship in 1973.

Some say he was shot six times, some say nine, some say less during his stint in the movement. He was imprisoned for 14 years, most of which were spent in solitary confinement. He has often stated that his time spent in prison helped him shape his thinking and taught him that one can always  start again.

Mujica donates 90 percent of his salary — an estimated US $150,000 a year — to charities that his own political party runs, the majority of them related to providing housing for the poor.

He also shuns the presidential palace for a modest farmhouse on the outskirts of Montevideo. He lives there with his wife, Senator Lucía Topolansky, also a Tupamaros member, and their dog Manuela. Mujica is not the first Uruguayan president to remain in a private residence. His predecessor Tabaré Vázquez did the same. Vazquez lived in a well-to-do residential district, however, while water is taken from a well and clothes are hung from a line at Mujica’s farmhouse.

Mujica travels with no entourage, except for two police officers who don’t wear their uniforms inside. He drives a 1987 Volkswagen Beetle to his office, after years of driving an old Vespa to Parliament, where he spent two periods as MP. Again, the lack of bodyguards or chauffeurs is not exclusive to Mujica, in a country where other politicians regularly jog along the promenade or do their shopping at local supermarkets, all a result of the country’s still high ranking in terms of safety.

Poverty and Popularity

The president, who is usually referred to as “Pepe,” addresses the issue of his personal austerity by quoting philosophers, often present in his rhetorical repertoire. “I am not poor. Poor are those who work to keep an expensive lifestyle, always craving for more.”

He seems to be relaxed about his recent drop in popularity within the country. “I don’t give a damn” he is reported to have said, adding that if he believed in polls he wouldn’t be president.

It is worth mentioning that his popularity abroad is higher than ever, with media from all over the world producing sympathetic pieces about his persona, even when he gets himself into trouble by making “off the record” statements that get leaked, like when he recently referred to his ally, Argentinean President Cristina Kirchner, as “that old hag.”

Since his election, Uruguay has passed bills legalizing same-sex marriage and abortion, two extremely sensitive issues. Mujica himself prompted a debate on the legalization of marijuana, suggesting it would be an effective way to combat drug trafficking. After polls revealed that the majority of the population did not agree, he asked MPs to withdraw the bill and consider discussing the matter again in the next legislative session.

His government has also drawn international attention for the encouragement of alternative energy sources, like wind and biomass.

Whether he was shot one, two or six times, what cannot be denied is that President Mujica has reinvented and recycled himself, challenging every single notion of what a traditional leader does and becoming the austere president that many rich nations would like to have.

Pat Antuña Yarza is a freelance writer and translator based in Montevideo. This story was first appeared in NSAM sister publication Global Delivery Report.

Beatriz Peralta, a Director for Sykes El Salvador

By Loren Moss

To the outside world, call center sourcing is one of the most visible among BPO activities. Contrary to back-office processing or F&A, call centers usually directly engage the public in sales or customer service roles. Along with this comes unique stresses – not just  from dealing in a problem-solving role with customers who at times can be quite infuriated, but also from representing the client’s reputation and  bottom-line.

Nearshore Americas spoke to some call center veterans in order to get a feel for just what’s it like on the front lines of call center BPO, including Renato Mota, Senior Manager at Allied Global, (with main offices in Guatemala City) and Beatriz Peralta, Director of Area Operations for Sykes El Salvador Ltd. Two of Peralta’s operations directors, Marbry Perez and Jose Castaneda, also contributed to the interview.

NSAM: As a floor manager or site director, what are the most common stressful stresses that you encounter in this role that sets it apart from other occupations?

Mota: The most common stressor found at this level of management is that the ultimate responsibility for everything will always reside with you. No matter how the operation under your care is composed, regardless of how many divisions it has.

While you are at the top you will always be held responsible for the outcomes and performance of everyone.  In addition, there is a saying “it is lonely at the top”. This is very true as it is very important for the site director to maintain a healthy separation from everyone under him.

Peralta: The biggest challenge is managing in a fast and dynamic environment where change is the only constant, as well as keeping your people engaged to embrace change and adapt quickly. Additional challenges are the diversity of people management issues due to age and background differences and juggling multiple client types and business cultures.

NSAM: What unique qualities does the floor manager or site director possess that allow for long term success – and happiness on the job?

Mota: Being truly committed and in agreement with your organization´s goals. Especially in this industry, the best site directors have worked their way up the ranks and thus are uniquely qualified to understand the needs, challenges of all the positions below him/her. If you have been in the industry long enough to have become a site director; it is a perfect indicator that you enjoy the work you do, which is a must in this industry.

Peralta: Self-motivation is critical, as well as maintaining a healthy work/ life balance.  You have to be self-critical and a manger cannot be afraid to re-invent the wheel when innovation is called for.

NSAM: Do you find that Floor Managers and call center managers tend to rise from the ranks of operators and customer service representatives, or do they come in from outside, either from other management positions or as college graduates?

Mota:  It is preferable if floor managers or call center managers to have come up from the bottom of the ranks as this enables them to possess an inside perspective on how things develop at each level. These are the people who tend to be the best when reaching these levels of management.

Peralta:  I believe that as the call center industry is a people centric  business, most of the growth should come from the inside, and as such, call center managers should have a sustainable leadership pipeline to supply leadership needs at all levels. A college education may be required for some specific technical positions, but I do not consider it a sine qua non pre-requisite.  Previous managerial experience is always a plus.

NSAM: What is a typical day like for you? Walk us through the different things you spend your time on in a typical day.

Mota: I begin the day by meeting with my team, the heads of each department – operations, client services, quality assurance, workforce management, IT, facilities, human resources, marketing, and finances. This allows me to touch basis with each unit. As part of our daily meeting we discuss the past day’s results by end of business, performance trends specific to each unit, incidents and highlights of the day, so that we can resolve which business reactions will take place throughout the day to achieve desired outcomes.

Next, I review the development of our different performance progression programs and what our efforts and budgets are returning to us to assure effectiveness of each program. When necessary, our performance strategies are taken back to the drawing board for adjustments, new approaches or discontinuance if found ineffective. This is all while continuously reviewing interval result reports down to every 30 minutes (!) and taking the appropriate actions to assure each day the business closes as expected. Throughout the day, other meetings are held directly with each client. The purpose of these meetings vary, from regular updates to reviewing results or discussing different business initiatives and requests.

Peralta: A typical day for my operations managers starts with greeting for their teams and reviewing daily checkpoints, walking the floor, revising critical performance indicators, resolving critical and urgent matters, and holding project execution or planning meetings. A normal day will include conference calls and client related meetings, coaching and developing my teams through staff meetings and individual sessions, email responses, as well as regular floor walks.

NSAM: How do you recruit and retain people that can handle the unique stresses of this business?

Mota:  Our recruitment department looks for personnel based on the profile needed depending on the business vertical or line of business we are hiring for at the time. This is accomplished with a combination of a lengthy interview process that includes a variety of skill-set testing, as well as psychometric and personality tests.

We combine this with a great employee benefit package. Allied Global is a great believer in the fact that a happy and satisfied employee is a good employee. We offer a fun, interesting and safe working environment for our personnel.

Peralta: Defining the right competencies for the job and implementing a rigorous multi-step process to on-board candidates, from recruiting up to training certification during nesting, tailoring a specific competency set for the different types of contacts handled. We retain employees by ensuring that the call center atmosphere fosters a welcoming environment, assessing leadership support and having the appropriate compensation and rewards plans in place. We design attractive campaigns and foster healthy fun competitions among agents and teams and provide regular coaching and developmental sessions highlighting accomplishments and guiding opportunities.

NSAM: What is it about your work that you find particularly rewarding and satisfying? What do you like about working in your field?

Mota: Building a healthy and satisfying relationship with our clients through meeting and surpassing their service expectations. The better our company is doing the better conditions we are able to offer our current employees and at the same time, excellent performance levels result in triggering the desire of our clients to grow their business with us. This grounds the strongest and most satisfying aspect of this work for me, which is that we get to offer great jobs to many people. The better we do, the more the business grows and the more people have the opportunity to work with this great company just as I had 10 years ago.

Peralta: Having the ability to work with talented individuals from whom we learn every day, contributing to the community by sustaining a profitable business which supports over 800 families, growing and developing human capital and working in a dynamic and fast paced environment. The opportunity to exercise leadership practices daily in order to achieve goals and commitments, while developing new generations of leaders. Also, the possibility to contribute to the local economy by paying above minimum wage salaries and having a solid social responsibility program that continuously engages with our community.

DepPue at Inaka: Specializing in U.S. startups.

By Jon Tonti

Whether you are looking to build a proprietary consumer-facing mobile app or give employees access to enterprise application tools via a mobile business application, chances are ROI can be more attractive with the right nearshore mobile development  partner.  Although mobile development skill is not ubiquitous in LatAm by any means, pockets of mobile development maturity in Latin America are more than evident.  With the release of iOS 7’s local search dynamic, there is more opportunity for more players in the space. LatAm will not be left behind.

One who knows a little bit about working with clients large and small in the mobile development space is Chad DePue, founder of Inaka, a nearshore firm that builds iPhone, iPad, and Android apps with operations based in Argentina.  Inaka has engagements where strictly development services are sought by their customers, however, the company mirrors the trend of high-end nearshore software development services in that Inaka works side-by-side with many clients realizing the product vision, aiding with customer discovery, and running the client through the lean startup methodology to produce an attractive minimum viable product.

DePue talked of providing “bootstrap” services, sort of an outsourced incubator, not just guidance but the technical expertise to build the product as well.  “We’re essentially starting a lot of startups from scratch, but we’re not in the same physical building.  We are getting them from idea to design, to coding, to launch. It gives us an opportunity to share our accumulated knowledge.”  DePue, and other nearshore firms like his, are not competing with outsourcing giants that take specs and build applications with little buyer-provider communication. Inaka is more on an equal footing with domestic consultancy firms offering similar services.

They work with larger clients too that are much more focused around an experience that matches their brand.  “You really have to get into the head of the corporate client and understand how the app will match up with their brand.  They are very particular about the way they address their audience.  In contrast startups are in the process of customer discovery; who is my customer and how do I reach him or her,” explained DePue.  He recounted that it is very different the way a company like his interacts with the two, with larger companies creativity happens around building the product for the already well-known customer while with startups it is much more experimental.

Nearshore Providing Lift and Velocity

DePue described Inaka’s relationship with Whisper, a mobile-based anonymous social network, which shed light on how nearshore mobile development firms are an option for startup companies.  “We built everything, we built the client and the server, and we designed the architecture and wrote all the code up until the first year. We got them launched and everything is going great, but it came the time for them to build a team. That is what they did and now we are in the supporting role, not driving the day to day development,” said DePue.

He went on to explain that for his company it is a huge success because it proves that a prominent startup can be launched with a bootstrap team in South America, go through a Series A round, and continue on with a bright future.  “We started this whole thing, we launched it, and then we handed it off.”  The need for the handoff was no surprise for DePue and his team, he mentioned that during an angel investment round the investors don’t mind an outsourced team, but when it comes time for Series A and middle stage funding rounds, investors look to have an in-house team established.

Objective C and More

Although developers in Latin America are increasing seeing mobile technologies as a career path, a large population of developers already up-to-speed with iOS and Android will not be found.  “It is as hard as it has ever been to hire an iOS developer.  Three years ago, nobody knew it. Today not enough people know it. Either way, you are going to have to train people.  Mobile development in general is not on the forefront of developers minds,” affirmed DePue even though his operations are based in Argentina, one of LatAm’s most mature software markets.

Like other US citizens that run nearshore operations offering development in trending technologies, DePue doesn’t find recruiting all that tough, it is more about getting new team members trained and acclimated to a West Coast-style startup environment.

Our interviewees generally said that although there are more nearshore firms building mobile apps, prices have remained steady.  Despite the increasing complexity of apps, frameworks and better experience with estimation practices have given rise to more cost transparency.  Flat fees for app development have also become more common.  Juan José Navarro, founder of Hexacta, notes that “nobody does anything from zero anymore, frameworks are always employed – the same reach can be achieved with less money.”

Niall Minihan of Kogi Mobile attested that the price of building a custom mobile app, whether it is iOS or Android, is about 40 percent less than in European or US markets.  DePue cited that it is anywhere between 33 to 50 percent less expensive than in the US, although it does not compare to the very low cost some offshore development firms charge.  He also mentioned that there are some really low bids coming out of LatAm at the moment, but he has not seen quality come out of those bids.  As for offshore mobile dev, similar arguments for nearshore culture, time alignment, and quality are given.  As far as freelancers go, Minihan says they can’t do the QA testing or provide the ongoing support a team like Kogi can.  “We have over 60 devices in the office to test apps.”  Minihan also pointed out that companies that work with freelancers often do not account for the added cost of maintenance over the life-cycle of the app.

Local Market, an Unsuspected Growth Driver

Kogi Mobile started with the intention of selling their services to European and US markets. But to their surprise, a significant growth area for the company of late has been its domestic Colombian market. “Over the last 12-18 months, we have seen a lot of growth from the local market, we have already worked with some big companies in Colombia like XM, UNE, and Argos,” cited Minihan.  He went on to say that those same companies previously would have looked outside Colombia for mobile development, but now have the option to work with well established domestic firms like Kogi.

Argos is developing a consumer facing app that facilitates the buying of home building materials with features like image matching for a color of paint a customer wants to buy.  The technology can cut out time wasted by consumers going into physical locations for a simple action such as matching paint. Minihan says the explosion of devices running Android in Colombia has given Colombian firms the impetus to act.

With the release of iOS 7, Apple allows for similar localized apps to be released in different local markets.  “It essentially allows me to put an app built for a local purpose in the app store in Petaluma, CA and then a similar style app for San Francisco that do not conflict with each other, I think that really opens up the app store.  Now I don’t have to worry about Apple rejecting me because I put a similar app in my town as the town three miles down the road.”

DePue went on to note that that new dynamic will commoditize the app store to a degree and mitigate run-away apps, but will open up the opportunity for more people to build more apps thus driving growth.  The change amplifies the opportunity for people to create and sell apps for local business and local dynamics, obviously with tighter ROI projections buyers will be looking to lower cost providers based outside the US.

CIO.com published findings of the study without rigorous examination of ‘pay-to-play’ aspects of the index.

By James Bargent

A new study that lists the best and worst countries around the world for their business English capabilities has not just raised eyebrows in the Nearshore sector, it has also raised some serious hackles. The Business English Index (BEI), developed by English language trainers Global English, assigns countries a score out of ten, where one to three ranks as beginner, four to six as basic, seven to eight as intermediate and nine to ten advanced.

According to Global English, the study offers “a complete picture of the trends, achievements and challenges in business communication and the importance of Business English in the workplace.”

The results do not make a pretty reading for Latin America. Seven out of the ten worst countries are from the region, including the entire bottom three – with Honduras (2.92) claiming last place followed by Colombia (3.05), and Mexico (3.14).

“I was trying to find out what was the basis for this, what were their criteria, how did they do it, what was the purpose what are they trying to show here”

However, when the results were reprinted in an article on CIO’s online magazine, catching the eye of the outsourcing community, many found them difficult to believe. “There is an extremely different real world, on-the-ground experience compared to what the article is saying,” said Peter Ryan from business analysts Ovum. “I have visited at least five of the ten worst countries and I can tell you, from my experience, English has been very strong in each one.”

The reasons for the discrepancy lie with the study’s methodology, say critics. The results were based not on the usual array of performance indicators but instead on the placement tests of 137,000 Global English students.

“We believe that it was a little bit skewed when you compare what the companies are saying, what the KPIs [key performance indicators] are saying, what the government is doing, verses a study that is based on the selling of tests,” said Yolanda Martinez, from Proesa, the trade promotion body of El Salvador, which ranked the sixth worst country in the list with a score of 3.24.

Barometer of English Proficiency 

Aside from the claims that placement tests of students seeking to improve their English can act as an accurate barometer for a nation’s overall business English capabilities, it is the thinly disguised commercial aspect of the report that has attracted the most ire.

“I was trying to find out what was the basis for this, what were their criteria, how did they do it, what was the purpose what are they trying to show here,” said Maggi Williams, who has overseen the development of KM2’s bilingual operations in Honduras and said the country’s ‘worst’ ranking did not reflect her experience. “Once I read into it and saw who was doing it, my take was that there were underpinnings of ‘if you hire me, we’ll fix your English’.”

Global English’s soft sell approach gets harder when the report discusses why countries need to improve their English skills. “We are potentially reaching a point of global divergence: one set of businesses, countries and industries that have embraced the need for Business English proficiency as requisite to function efficiently and compete in the global economy, and another set of businesses, countries and industries destined to be left behind and lag for decades to come”, the report states.

By the report’s logic, Madagascar (14^th place) – where 70% of the population lives in poverty and 59% in extreme poverty – is tearing ahead of Germany (29th) and China (34th) in the globalized economy. Is this crossing the line of presenting a sales pitch as research? “Absolutely,” says Williams.

The concern for those in the Nearshore sector is that while the research may help drum up business for Global English, it could well have the opposite effect for outsourcing vendors and countries looking to develop their outsourced services sector.

English and Investors

“Investors value rankings that give them perspective and points of comparison so rankings can affect what investors think about a country,” said Martinez. “If the investors understand the methodology [of this report] it won’t affect them, if they don’t understand the methodology and they just go with the title of the article and then it could.”

For Williams, while as an investor she would not have bought into the findings without further validation, as a service provider the report has her worried. “My concern is that it is more likely to have influence on my potential clients because it did get some fairly wide press,” she said.

That press coverage has also come in for some heavy criticism. While some questioned the study, others, particularly CIO, have attracted the irritation of the outsourcing community for their uncritical reproduction of the results. “The problem is if you look at this article, the way it was written, this is a statement of fact,” said Ryan. “But there is a commercial element to it and from my perspective what this article and the study has done is unduly put pressure on certain countries where the emphasis on English language instruction has been concerted and successful.”

Yet while the report and its potential effects may have gone unchallenged in sectors of the media, it certainly has not in the Nearshore sector. “Since this has been published and transited around to people in the economic development community in different countries as well as to the outsourcing community, I can say there has been a significant level of hostility towards it in regards to the impact it might have on economies that are burgeoning based on their capacity to do English language BPO work,” said Ryan.

Global English, though, does not seem keen to answer to that hostility, and did not respond to Nearshore Americas’ request for an interview.

(Editor’s Note: Longtime followers of Nearshore Americas will remember the above mentioned issue harkens back to an episode four years ago when Bogota was portrayed as the ‘World’s Most Dangerous Place to Outsource.” After persistent efforts to reach the authors of the report  – from the notorious ‘Black Book of Outsourcing’, we were finally provided with a sort of Mea Culpa from the president of Datamonitor, at the time, who admitted that the Black Book process showed that ‘work had to be done’. The Datamonitor response followed our coverage of Sitel receiving recognition from the Black Book. In recent years, Ovum, which had taken over the Black Book brand, appears to have shut down the complete franchise.)

The report, created in partnership with leading software and product innovation firm – Belatrix,  specifically explains how enterprises can engage third party technology firms to drive innovation and achieve results with measurable business outcomes. The E-Report, authored by NSAM Research Director Luke Bujarski, sheds light on the SMAC, or “four pillars” of information technology –– social, mobility, analytics (big data) and cloud computing. Bujarski narrates the benefits of the four pillars and gives details about how to better adopt these disruptive forces of technology.

DOWNLOAD THE SPECIAL ‘AMPLIFY YOUR INNOVATION BANDWIDTH’ E-REPORT HERE

“SMAC gives points-of-entry to every new player into the technology market,” says Bujarski, adding that companies will die if they fail to adopt the technologies properly. The successful adoption of technology allowed Netflix, the monster on-demand media streaming provider, to capture a huge slice of the home movie rental market, but the failure to do so led Blockbuster Video to bankruptcy in 2010.

Collaborating with a dynamic team armed with the required technological know-how and dexterity is crucial to staying on top in this ever-changing technology landscape, he suggests.

The good news is that technological adoption is now cheaper and faster than ever before. Enterprises can now create new platforms and applications much more quickly, and validate them in the open market without major investment in terms of time and capital.

Technology is advancing so fast that new devices and applications fade in a matter of weeks. Therefore, enterprises have no better option but to incorporate SMAC technologies into their new devices and applications. You cannot increase your quality service and product without leveraging the four pillars of the information technology. Big Data, for example, is so powerful that it can help reduce costs, improve customer relationships, develop new products, accelerate and synchronize delivery, as well as enhance and simplify decision-making.

That means how you make use of the technology is the key to your success.  This E-Report walks you through the complex world of technology and guides you to your long-desired destination in this Brave New Technological world.

Pappas: Prepare for higher costs

By James Bargent

The site selection checklist for nearshore investors can seem endless; human capital, costs, infrastructure, incentives – each one crucial to getting the right deal. Within that mix, though, one critical factor with the ability to slam the brakes on the whole process is often overlooked or underestimated: real estate.

To walk us through the Latin America real estate minefield, Nearshore Americas caught up with Jeff Pappas, Executive VP at Arledge Partners, a company offering site selection services and real estate negotiations that specializes in call centers and BPO.

The first shock to the system for new investors in nearshore real estate is just how long the process can take, according to Pappas, who says six to nine months is the minimum time to get a call center operational.

“We can find that one, two story tech space in the United States all day long,” he said. “[But] in the majority of Latin America you don’t have that type of move-ready space where you can make a fast decision.”

The main reason for this, said Pappas, is the absence of the sort of business world fluctuations that create readymade and readily available spaces – companies moving on to scale up or scale down or closing down completely.

“The majority of [companies] haven’t closed their Latin American centers because they have been very successful and they’re in it for the long term, so you don’t see vacant call centre space in Latin America,” he said. The one exception to this is Cost Rica, he added, where rising costs are driving companies to leave in search of cheaper markets.

The lack of available sites is compounded by the scarcity of information on what real estate is available. “You can’t just go to a database and find all these vacant properties, sometimes you have to spend an extra day in the market and just drive around,” he said. “You have to know and be in the know of who owns the facility and who the investors are in that market.”

Biggest Challenge: Accessibility

Also time consuming is the need to search for properties with attributes that would not normally be an issue in the United States. The most important of these, in fact possibly the most important attribute of all for call centre real estate, according to Pappas, is accessibility.

While in the United States, sites need little more than parking spaces, in Latin America only a minority of employees drives to work, leaving the rest dependent on public transport. “It may be a great building, it may look nice but if the top 20% of your workers need five bus transfers and an-hour-and-a-half to get there then you’re never going to keep those guys,” he said. “I can get a worse building but save two or three bus transfers and I’ll take that top employee off you.”

The next nasty surprise for new investors is the cost, according to Pappas. “Real estate is not cheap, that is the one thing that people are shocked about when we do these projects in Latin America,” he said. “These properties are class B properties for class A rates that you’d see in the United States.”

According to Pappas, real estate that would go for $12-15 a square foot in the United States is often priced at $19-21 in Latin America, a price differential that needs to be factored into calculations on labor arbitrage savings.

Upfront Capital Expenditure

Companies also need to be willing to invest more in upfront capital expenditure, Pappas said. “In Latin America, few owners will actually build the space out turn-key for you, most of them want to do an “as is” deal – keep their rent low, keep their tax structure low,” he said. “You, the tenant, will have to put in its own build-out – its own generator, bathrooms, breakrooms, offices, the training room.”

However, it is not all bad news for BPO operators on the lookout for nearshore property. According to Pappas, the Latin approach to business leads to a level of flexibility in contract negotiations that would be unheard of in the United States, including over such commonly non-negotiable factors such as exiting the lease. “One of the key things people say is that everything is negotiable in Latin America and that includes the lease,” he said.

While the real estate markets in different Latin America countries shares many characteristics, there are of course differences as well. According to Pappas, the state of the BPO real estate market is often linked to the state of the outsourcing market as a whole. “Typically, if you see a more mature call center market you probably see a more mature real estate market.”

Pappas highlighted San Jose in Costa Rica as the region’s top location in his experience, owing to its multiple business parks, which are easy to access and have good telecommunications setups and infrastructure. He also commended San Salvador in El Salvador as another top destination for its high-end high rises and San Pedro Sula, where the development of the BPO market has been aided by the construction of two impressive towers at the Altia Business Park by developers Grupo Karim’s, which is currently in the process of constructing a third.

For the rest of the region to catch up, Pappas said, the trade promotion bodies that work so hard to sell their markets to investors in other areas need to start taking more responsibility for real estate.

“After you’re incorporated then it comes down to how fast can I get the buildings built, or what buildings exist and [trade promotion bodies] have to know that and a lot of times they don’t,” he said.

According to Pappas, the best way for them to do this is to begin compiling data bases that can give potential investors a snapshot of their real estate options – in both lands available for development and properties, whether they are move ready or not.

“The company is going to say how fast can I get in there, how fast can I get my centre open and that all comes down to real estate,” he said.

Edery: Peru’s mining industry is a catalyst for tech growth

By Jon Tonti

The gains Peru has made in the development of its IT Services export sector over the past few years are only being outstripped by the impressive diversification of services the industry produces.  PromPeru, the country’s IPA, will be looking to highlight just that at the 2013 Peru Service Summit, which gets underway in Lima on June 17.We thought it is relevant to talk to PromPeru’s Export Services Coordinator, David Edery, to find out if Peru is just enjoying a short-lived nearshore sweet spot or taking steps to develop a sustained value proposition that will propel it into the future.

Although the summit promotes a broad range of services, special attention will be given to software, editorial, contact center, graphic, animation and video game related services.  PromPeru aims to push the image that Peru has high value-added services at competitive prices and is at your service.

“The interesting thing about Peru’s software exports is that 53 percent of software exports are specialized solutions.  For example, Peru accounts for a large portion of the software that runs ATM machines here in Peru and Latin America in general, obviously we have specialized solutions related to the control of mining processes, and Peruvian companies are on top of solutions related to social media analytics,” said Edery. He went on to say that Peru’s software firms are in line with current practices offering software products on a SaaS model as opposed to licensing.  Internal demand for outsourced services also help move Peru on the maturity curve.

“Mining generates a lot of support industry in services, and services are where 70 percent of the working population is focused on.” That is good because much of the competitive advantage of Peru’s mining industry is based on the supporting BPO and KPO companies that provide services to the mining companies, according to Edery.  Advancement of the Peru’s services sector can in part be contributed to demand from mining, there are aims to take it to the next level.

Contact Centers & Business Intelligence

Edery says the services offered by the contact centers are migrating to higher value added services like collections, tech support, and business intelligence.  PromPeru wants a tighter relationship between contact centers and Peru’s professional services community.  The cross-integration aims to not just create entry-level jobs for young Peruvians, but instead generate full spectrum employment that satisfies Peru’s mid-career professionals and provides advanced consulting and analysis services.  At the summit, PromPeru plans to explain this dynamic and position it as a new exportable service to complement basic BPO.  “In the next two years, we want to have about 100 BPO companies exporting high value added services,” affirmed Edery.

Nearshore software development across LATAM has responded to the demand for mobile technologies. Some countries like Argentina that have a more mature software industry had tended to control the space, but now a leveling of the LATAM playing field is beginning to take shape. Countries like Peru that were dominated by .NET and Java are beginning to see a great diversification into other technologies. Edery stated that Peruvian firms are not just catering to the demand for mobile, but also breaking ground in Smart TV.

Peruvian 3D animation companies are responsible for producing seven animated films that have been received well internationally, Rodencia being one of the latest. The Summit will play host to Asian companies coming specifically to meet with animation firms. Video game publishers are not to be left out either, Peru’s knack for graphics and animation talent is being sought.

Lack of Startup Accelerators

When asked if there are weaknesses in Peru services for export sector, Edery candidly stated that they are many and varied, and that Peru could be much stronger if the proper means were to be taken to encourage the services sector.  Peru doesn’t have a technology park and lacks startup accelerators.  Trade agreements with other countries are also lacking that can affect not just the trade of goods but also services.  Human resource development is another concern of Edery, he is quite conscious of the fact that nearshore destinations have a sweet spot, which can turn bitter if labor development doesn’t coordinate with demand both in numbers and type. Development of an English-speaking labor force, a concern for any LATAM destination, is being addressed in Lima through a program that will be launched in the coming months by Lima’s Chamber of Commerce in conjunction with a private provider.

Moreno: Many students are motivated by job prospects.

By Loren Moss

It is no secret that Spanish is the second language of The United States, neither is it any secret that English is the second language of Latin America. In many cases, fluent English is necessary for employment or advancement, and in almost every case is considered an advantage in a competitive workforce.  Though there are many ways that workers become proficient in English—from living abroad and travel, formal academics, or commercial language schools to software, audio recordings or even auto-didactics; traditional methods have usually left something to be desired, leading to both high course dropout rates, or lack of proficiency even after completion.

Open English, a company founded in 2005 by Venezuelan entrepreneur Andres Moreno along with his friend Wilmer Sarmiento and now headquartered in Miami, Florida is reinventing the way English language is taught for over 100,000 students by combining the benefits of internet based distance-learning with live instructors interacting with students in real time. Moreno already ran a successful English language school but saw flaws in the existing, traditional teaching methodologies.

“We focused on re-inventing the English learning experience. Before, students would be handed some textbooks and photocopies and sit in a classroom with a non- native English speaker teaching the course. We are offering the convenience of anytime, anywhere English language education with a live, native English speaking teacher as long as you have in internet connection,” explains Moreno. “We offer access to native American teachers, class groups of three students, and instead of a stack of books and photocopies you have hundreds of hours of interactive courseware available to the student at anytime.”

When asked how he chose this career path, Moreno explains: “My father was in the Organization of American States (OAS), so we did lots of travel growing up.”  Being in a diplomatic family, Moreno moved frequently, living in nine different countries as diverse as Slovenia to Scandinavia, Chile, Dominican Republic, and Peru. “I got a good appreciation for the power of language,” says Moreno of his upbringing.

Starting with $700

The potential of Open English was realized early on by the venture capital community. Moreno traveled from Venezuela—the first time with $700 in his pocket—during the early stages to raise money from investors who were looking to expand their international focus that had traditionally been on Asia, to The Americas. “We started with fifteen and twenty thousand dollar checks. We traveled to California to meet with angels,” says Moreno. In 2010, the company had 5,000 students. By the end of 2012, there were 65,000 students. “We have a very steep growth trajectory.” In April, 2013, Open English announced an additional $65 million in funding, bringing the total capital to $120 million and a company valuation of $350 million—A far cry from the initial checks written by the (now very happy) early stage investors.

Still, Open English is a very young company with a lot to offer both executives who want to polish or perfect English skills working with a native English speaker to a student or aspiring outsourcing employee working on job skills and basic competency. The pricing model brings one-on-one instruction within the reach of the average Latin American consumer. “We are B2C,” explains Moreno. “So we don’t focus on B2B marketing but there is an important portion of our student body that is motivated by employment or advancement…We have a lot of exciting projects and expansion plans.”

Those expansion plans are impressive. Not only has Open English already launched in Brazil, having perfected their delivery model, they are now actively targeting the domestic “ESL” or English as a Second Language market for immigrants who need to gain a business level proficiency in English. Moreno realizes that the key to success is not in selling to Wall Street as much as selling to customers.  In an interview recently given to CNN, Moreno told the audience that their strategy is not to lose focus on operations or objectives.  “It’s possible for you to reach a high level, but it’s important that you concentrate on business first, and grow [that base] in the early stages because that is proof of concept and it is what is going to help you to reach the second round.”

As nearshore economies continue to grow and mature, it is important that executives and employees at all levels are aware of the various methods and means available for learning English, just as it is important for native English speakers to learn the other languages of The Americas. Open English is an innovative new option that can be used not just by companies or executives, but by anyone with a computer and internet access to increase his or her quality of life and to add a skill that today is practically mandatory for success or advancement in The Americas, or elsewhere on the globe.

Theodore of Caipa: We need to be more proactive.

Narayan Ammachchi

Despite its formidable positioning both geographically and linguistically – many Caribbean countries have struggled to fully capitalize on their unique advantages in winning more business and investments in the global services industry.  Some countries remain deeply dependent on tourism and others frankly don’t know where or how to get started down the road toward building and promoting an internationally focused knowledge-based economy.

There are certainly lots of bright spots in this fascinating archipelago, however. Jamaica and the Dominican Republic are home to a considerable number of BPO operators. Trinidad is seeking a loan from the Inter-American Development Bank (IDB) to stimulate its outsourcing sector. Barbados has recently unveiled plans to build up a strong offshoring services industry.

“We need to make it clear that the Caribbean is not just for sun and fun, these countries are also a good destination for investment,” says Ronald Theodore, President of the Caribbean Association of Investment Promotion Agencies (CAIPA), an umbrella organization aimed at enabling collaboration among the region’s investment promotion agencies. Theodore, who was elected as the president of CAIPA in November last year, is also the vice president of the Grenada Industrial development Corporation (GIDC). Nearshore Americas engaged with Theodore to learn more about the overall business climate and the efforts of his association to bring investment into the region’s service sector.

NSAM: What are the key advantages in the Caribbean, and what plans are there to further improve the business climate?

Ronald Theodore: Geographical placement, abundant labor pool and a stable political climate are our advantages. Our telecom and electricity infrastructure are not bad either. Year after year, our ranking on the World Bank’s ‘Ease of Doing Business’ report is rising. The Caribbean countries are increasingly realizing the need to protect the interest of foreign investors. We are signing trade agreements with many countries and positioning ourselves to lure more foreign investment in service sector. I think we need to build a new image for the Caribbean, we are not just for sun and fun.

NSAM: Many businesses are using generators for electricity in many countries including Jamaica. How are you advising governments to ease the power crisis?

Ronald Theodore: Not all countries are running short of electricity, many countries supply uninterrupted electricity to businesses. We are turning to alternative energy sources to ease the crisis. Things are improving rapidly.  We are confident of overcoming the power crisis in the near term.

NSAM: How strong is the ICT infrastructure to attract foreign investment in the technology sector?

Ronald Theodore: Our ICT sector has gone through a series of changes in the past few years. In Grenada, for example, almost every household has a computer and a smartphone. You will see public Wi-fi hotspots in many rural areas across the country, an evidence of growing usage of Internet.  Our telecom markets have finally been liberalized. Nowadays you cannot see an  operator monopolizing the telecom market. ICT costs have gone down considerably. I am not an ICT expert, but you need to take into account the decreasing cost of telecom services.

NSAM: What are your plans for the outsourcing sector?

Ronald Theodore:We have a huge number of English-speaking population and also people who can speak fluently in Spanish and French. Good education and low-cost labor are our main advantages to grow this industry. From New York, many Caribbean countries are closer than California in terms of flying-hours and time-zones. Not only call center services, we also need to develop software companies in the developed world. The Dominican Republic and Jamaica have successfully grown their outsourcing sector. JAMPRO (Jamaica Trade & Invest) is also our member. I think every member states can mimic the success of others. The CAIPA will ask all member countries to set up agencies to monitor and lobby for the outsourcing sector, which I think has a huge potential to increase employment opportunities in the region.

NSAM: Why do you believe the region has not fully capitalized on some of these opportunities?

Ronald Theodore:We have not capitalized fully, because we are reactive not pro-active. We don’t go behind investors, we answer the investors’ call only when they call us. We have not really mastered the art of convincing investors, explaining them the advantages they can make use of if they invest in our country. Some countries are promoting themselves well and many countries are not. We need to have a clear investment promotion strategy in place.

NSAM: What are the factors preventing you from luring large investment in the outsourcing sector?

Ronald Theodore: There are many hurdles standing in our way. We don’t have office buildings suitable for housing call centers. Almost every country in the region has an industrial park, but this kind of industries (call centers) need facilities that are ready for use. When we approach the investors, we should have the resources in place. Building such infrastructure needs money. Lack of financial resources is preventing the region from ‘capacity building.’ I think there is a need to build business parks specifically to house call centers.