Nearshore Americas | The New Axis of Outsourcing » News & Analysis http://www.nearshoreamericas.com Experts in BPO, IT and Software in Latin America and the Caribbean Fri, 23 Jan 2015 15:29:32 +0000 en hourly 1 Getting Business Units To Cooperate When The Global Process Owner Lacks The Formal Authority http://www.nearshoreamericas.com/business-units-cooperate-global-process-owner-lacks-formal-authority/ http://www.nearshoreamericas.com/business-units-cooperate-global-process-owner-lacks-formal-authority/#comments Thu, 22 Jan 2015 19:52:06 +0000 http://www.nearshoreamericas.com/?p=43239 By Richa Jain While many global organizations are trying to consolidate shared services and setting up global process offices to own end-to-end processes across business units, the role of the GPO often tends to be unclear.  Global process owners frequently find themselves driving change and directing all aspects of the process improvement across business units, without being given a clear ...

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By Richa Jain

While many global organizations are trying to consolidate shared services and setting up global process offices to own end-to-end processes across business units, the role of the GPO often tends to be unclear.  Global process owners frequently find themselves driving change and directing all aspects of the process improvement across business units, without being given a clear formal authority and mandate across all functional and business units involved in the project. A study by Tungsten Network and sharedserviceslink shows that more than half of GPOs find themselves in situations where they do not have the authority to mandate change.

Most processes run across multiple functional units, each in their own silo, reporting to a number of executives across global locations. Such silos tend to have their own pre-defined value proposition and success metrics, independent of other groups. Any attempt to optimize, or even standardize, their processes is likely to meet with resistance. Measured performance against key metrics clearly shows the negative impact this has. In the same study, the KPI measuring straight through processing showed a 93% improvement when GPOs had full authority to enforce change, as opposed to 52% improvement when the GPO did not have formal authority.

When the Formal Authority is Missing

Susie West, founder and CEO of sharedserviceslink, a community for leaders in financial shared services told Global Delivery Report “If the GPO doesn’t have the formal authority to see that other business units implement approved projects, it can be very challenging.” That may be the reason behind 74% GPOs responding that support from senior management is the most important factor enabling them to enforce change.

West explained, “If the GPO doesn’t have a formal position to mandate change, the GPO will have to rely on how influential they are, how well connected they are, whether or not they can identify people in the organization who have a significant voice. It can become quite political. It’s not ideal, but it’s also not uncommon for GPOs to rely on this informal structure.” She added, “If you’re relying on influence and contacts, this kind of informal approach can take longer to drive the change. If the GPO is new to the business it can take up to 6 months for them to just identify who the key players are in the business that can help the GPO drive the required change.”

Bonding Over the End Goals

David Hamme, Managing Director of Ephesus Consulting, a boutique consulting firm that focuses on driving initiatives for its clients, shared some techniques GPOs can use to overcome the lack of formal authority, “Immediately after a project is launched, I ask the team to draft an end state of the expected outcome. What are the steps in the end process? Who are the partners? What is the business case including all costs and benefits? My reason for this exercise is not to etch in stone the eventual outcome, but rather to serve as an icebreaker for the team—getting them engaged at a detailed level while building comfort with each other. Perhaps most importantly, having the team pull together the end state so early allows them to think freely about alternative paths to achieve an outcome before they are inundated with restrictions brought on by financial constraints, political barriers, or conventional norms.”

Customer Focus: Internal and External

A GPO who lacks the formal authority and backing from senior management is likely to face greater resistance from local business units. This can be due to the local business unit feeling threatened from loss of manpower and budget allocation, or because they do not see the benefits from a shared service endeavor. In such scenarios, it helps to work with them, to assuage their fears and shift the focus from them, to the end customers. Hamme recommended, “For a global process, think through how geographic or environmental factors may impact the process? Can a solution in one area be beneficially leveraged in another? What could be done to make the end state better? And always, put yourself in the customer’s shoes. How can you delight the customer, both internal and external?”

Again, involving the key stake holders from the local business units is crucial to moving ahead. Hamme elaborated, “My next step is to ask the team and key decision makers to think about the questions requiring answers before a definitive choice can be made as to the end state that delivers the greatest benefit.  With an end state and a slate of critical questions, the team has unknowingly taken a giant leap forward towards a successful outcome. Already they are exploring ideas, plotting a path forward, and perhaps most importantly, working together.”

This article was originally published by NSAM sister publication Global Delivery Report

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Overlooking the Potential of Mexico’s Underdeveloped Areas is Short-sighted http://www.nearshoreamericas.com/mexico-missing-overlooking-potential-underdeveloped-areas/ http://www.nearshoreamericas.com/mexico-missing-overlooking-potential-underdeveloped-areas/#comments Tue, 20 Jan 2015 04:00:49 +0000 http://www.nearshoreamericas.com/?p=43171 By Duncan Tucker Mexico is widely accepted as one of the leading nearshore locations for IT and BPO work, but there is great disparity from one part of the country to another in terms of development. Investment is concentrated in internationally renowned tech hubs like Mexico City, Monterrey, Guadalajara and Queretaro, while great swathes of this vast country are ignored ...

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By Duncan Tucker

Mexico is widely accepted as one of the leading nearshore locations for IT and BPO work, but there is great disparity from one part of the country to another in terms of development. Investment is concentrated in internationally renowned tech hubs like Mexico City, Monterrey, Guadalajara and Queretaro, while great swathes of this vast country are ignored by investors, recruiters and the government alike.

Proponents for the expansion and diversification of the nation’s tech landscape argue that it would generate a healthier market, allowing employers to tap into the potential of a wider talent pool, while also bringing greater socioeconomic opportunity to underprivileged parts of Mexico. However, greater investment in education and basic infrastructure may be necessary before some areas are able to capitalize on the opportunities presented by new technology.

Widening Mexico’s Talent Pool

“In order for Mexico to become a developed country in the next 15 or 20 years we need to develop our capacities and our talent,” said Carlos Mota, a respected journalist from El Financiero newspaper, during his speech on the nation’s economic panorama at the FutureSource Summit in Mexico City last November. Diversifying Mexico’s talent base and investing in the poorer, more remote and overlooked parts of the country is key to unlocking the nation’s potential, Mota said: “There are many good universities in a few cities like Mexico City, Puebla, Monterrey and Guadalajara, but there are no good universities in the states of Campeche, Torreon, Matamoros, Chiapas or Guerrero. Who knows how much talent there is there that we’re not developing.”

Mexican citizen Manuel Lopez, whose role as Global IT Director at Gowan Company includes “developing talent to support the future growth of the organization,” agrees that Mexico must do more to develop its talent beyond the more established locations. “We’re located near Baja, California but there’s not a whole lot of infrastructure or IT talent so I always have to go to Monterrey or Mexico City. One of the things I want to do is promote the idea that companies invest in other cities,” he told Nearshore Americas.

Lopez believes – and his experience has shown him – that there is great potential in some of the more off-the-radar locations like Mexicali in the north, Tlaxcala in the center of the country and the Yucatan peninsula in the southeast. Just over a decade ago, he hired a team of university graduates who had come through an Oracle development program in the poor state of Tlaxacala. “They were very inexpensive, very dedicated, wonderful guys,” he said. “I think that’s the secret: companies and the government putting money into developing guys in these places, so people who would otherwise become farmers can now become great technicians.”

In order to take advantage of Mexico’s untapped potential, Lopez said he tries to hire from small, local universities, where he often finds people who have moved from even more remote areas because they could not find work there. “There are a lot of universities and small towns that have people who are willing to learn and get technologies but they don’t understand these latest technologies. So big companies like Cisco, Oracle, SAP and Microsoft should be teaching these guys,” he said.

The government should also invest more in these areas, Lopez added: “Instead of investing in the same cities they should put the money in the cities that are undeveloped. Like in the United States if you go to certain areas that are undeveloped they give tax breaks, so the government is able to provide infrastructure for the universities or find companies to invest in talent. That’s the most important thing: the talent that’s available and can be developed.”

IT Cluster Struggles for Funding

In some cases, persuading the government to invest is easier said than done. Raul Paredes Trinidad, President of the nascent Chiapas IT Cluster, said that the Chiapas state government has refused to back investment in the technology sector.

Formed two years ago, the Chiapas IT Cluster is comprised of eight small tech companies focused on serving or producing products for industry, renewable energy and tourism. During its first two years, the cluster has received just “$2 million pesos (US$137,000) in federal resources for consulting, planning and implementing our strategy, plus $1.2 million pesos (US$82,000) from a business in Mexico City for our feasibility study,” Paredes said.

The funds made available by the federal government came from a World Bank program to support clusters and were released through Mexico’s Program for the Development of the Software Industry (PROSOFT) and the National Council of Clusters. However, Paredes said PROSOFT was only responsible for supplying 75% of the funding, while the remaining 25% was meant to come from the state government. “There are many political barriers. The state government does not seem to be very interested in supporting us,” Paredes explained. “The federal funds are ready but the state government is supposed to cover 25% and we have no idea when that’s going to happen. These are the kinds of problems we’re constantly facing.”

Elsewhere in southern Mexico, there has been a similar lack of development. “The reality in the south of Mexico is very different to the reality in the north and the center of the country,” Paredes said. “There aren’t any clusters working in the states of Tabasco, Campeche or Quintana Roo as far as I know. In Veracruz they’ve just reactivated a cluster that hadn’t been operating in the last few years. Oaxaca is about to open its own cluster, while Merida (in the state of Yucatan) has the oldest cluster in the country, but they’ve had a lot of political problems too.”

Making Use of Technology

Home to a large indigenous population, Chiapas is paradoxically the poorest state in Mexico but the richest in natural resources. It is also a popular destination for both foreign and national tourists, who flock to see the spectacular Mayan ruins of Palenque, the gorgeous colonial city of San Cristobal de las Casas, and the large swathes of lush rainforest full of spectacular lakes, towering waterfalls and the breathtaking Sumidero Canyon.

Palenque Chiapas Overlooking the Potential of Mexicos Underdeveloped Areas is Short sighted

Full of popular tourist attractions like the ruins of Palenque, Chiapas was once home to “Mexico’s Silicon Valley: the Mayan empire,” Paredes said.

“There are many opportunities in Chiapas to develop technology focused on tourism,” Paredes said. “This opportunity has been completely overlooked. There are tourists that come to places like Tuxtla Gutierrez, San Cristobal de las Casas and Palenque and there are many ecotourism centers located in the Lacandon jungle or other regions where you can explore nature tourism, but people don’t know about these places so we’re developing a project aimed at spreading information about them.”

Paredes continued: “The tourist sector would benefit from greater investment. Many people here live from tourism but they haven’t been able to take advantage of these opportunities because they don’t have the training or the technology. For example, we’re working with a resort called Tres Lagunas in the Lacandon jungle and they don’t even have Internet there so the reservations have to be made by telephone. This means they’re missing out on potential customers. These issues can be solved easily using technology but it’s not being done.”

But are poorer states like Chiapas ready for an influx of modern technology? Guillermo Ortega, co-founder and COO at iTexico, an Austin, Texas-based software development firm with a delivery center in Guadalajara, believes that certain preconditions must be in place first. “It makes sense to bring technology to underdeveloped areas because it can help them to build a better economy,” Ortega said, but only if there is a “stable and active economic base” on which to build. “What happens if you create an app to monetize the harvest in the countryside, or if you create software for small grocery stores? It sounds great, but the farmers or the shopkeepers and their clients do not necessarily have the means to benefit from them,” Ortega explained. The government must first invest in basic infrastructure and education as “part of a wider plan for economic development in these regions,” he said.

Mayan Innovation

Nonetheless, given funding, training and employment opportunities, Paredes is convinced that Chiapas has the potential to prosper. “We have the human capital, but the people have to go elsewhere to find work. We’ve had very good feedback from businesses and research centers in other states regarding our developers from Chiapas,” he said. “I’m convinced that we’d be working wonders in Chiapas if we’d received just five percent of all the resources that they’ve given to places like Guadalajara.”

However, he recognizes that it is up to the people of Chiapas to start creating an impulse for change. “I think we need to find more projects for our businesses. Because without projects we cannot generate more employment, and the developers have to leave to find work,” he said. “One of the most important challenges that we face is how can we create the right links and meet the requirements so that we can offer outsourcing services. Because we know we have the capacity but there are certain barriers that we have to overcome.”

Among them are cultural barriers, that the people must work to overcome, Paredes said. “The mentality of the people in Chiapas has been one of very low self-esteem and now it’s beginning to change a little as we realize that we have many great qualities,” he explained. “As a businessman from the tourist sector told me, ‘A long time ago we built the Silicon Valley of Mexico: the Mayan empire.’ We developed technology that didn’t exist anywhere in the world, so we already carry this aptitude for innovation in our DNA, but at some point in history we fell into depression and subjugation. We need to reactivate this DNA that we carry in order to compete and fully develop the capacities of the people of Chiapas.”

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Everest Surprised by Strength and Size of Central America Contact Center Market http://www.nearshoreamericas.com/grips-central-american-caribbean-market-2015/ http://www.nearshoreamericas.com/grips-central-american-caribbean-market-2015/#comments Fri, 16 Jan 2015 14:07:52 +0000 http://www.nearshoreamericas.com/?p=43110 By Duncan Tucker The Central American and Caribbean contact center services market is comprised of 80,000 to 90,000 full-time employees, spread across an array of established, emerging and untapped locations. Costa Rica and Guatemala account for half of the market share, while most activity in the region is driven by service providers, with global in-house centers limited to a few of ...

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By Duncan Tucker

The Central American and Caribbean contact center services market is comprised of 80,000 to 90,000 full-time employees, spread across an array of established, emerging and untapped locations. Costa Rica and Guatemala account for half of the market share, while most activity in the region is driven by service providers, with global in-house centers limited to a few of the more mature locations.

These are among the key findings of the Everest Group report titled “Central America and the Caribbean Answer the Call for English-language Contact Center Services,” published in December 2014. Nearshore Americas caught up with the authors of the report, Anurag Srivastava and Aditya Verma, to challenge and discuss their findings.

Regarding their methodology, Verma revealed: “We used multiple sources of information. We keep on traveling to these locations and we’re in touch with stakeholders in the market on an ongoing basis, including industry players who are set up in these locations, recruitment firms and real estate firms.”

Impressive Market Size

The report divides the region’s locations into four categories: established destinations such as San Jose and Guatemala City; high cost, stable environment cities like Panama City and San Juan; sites of untapped potential such as San Salvador, Santo Domingo and Montego Bay; and low cost places with limited current market activity like Managua and San Pedro Sula.

While operating costs vary significantly – driven by difference in wages across the region – all the locations offer 35-75% cost arbitrage compared with tier-two locations in the United States such as Dallas. Most locations have low wage inflation (4-7%), but “the cost arbitrage is likely to decrease slightly in the next five years, as depreciating currencies counter the effect of inflation,” the report predicts.

Among the most striking findings, Verma said, “the size of the market in these locations surprised us. Many of these locations are still emerging so we were not expecting the size of the industry to be as big as it is.” But given the small size of countries in the region relative to the rest of Latin America, and their equally limited populations, how long will it be before the market becomes saturated and the talent pool is exhausted?

“We’ve analyzed the continuity of cost and it’s actually quite good in almost all of the locations. As for talent, there are some concerns because most of these locations are not big and the talent pool is limited. So there is obviously some concern around scalability and how long the talent pool is going to last,” Verma said. “I think there is some time left before these locations reach saturation point, however there are some exceptions. If you look at San Jose in Costa Rica there are companies that are feeling the constraints of the market and attrition rates can be high as we’re seeing more competition for talent.”

Srivastava added: “Broadly speaking, it depends on how fast the market grows in these locations. Some of these cities may not have taken off as quickly as people expected them to, so that is going to be a big driver. But as markets begin to mature, external influences may change how sustainable the market is over time. For example, a location that looks small-to-medium scale right now may have good growth two or three years down the line and if people invest heavily in talent then it may be able to support even larger scale. That is something that only time can tell.”

Assessing English Language Capabilities

With “moderate risk and low talent availability,” Managua and San Pedro Sula “have the least competitive intensity for talent,” the report states. But what can these newer markets do to become more attractive locations? “I think they need to invest in improving the availability of English-language skills,” Verma said. “I also believe there is an opportunity for companies to work in collaboration with universities. There have been some examples of this in Kingston, Jamaica but I believe initiatives of this kind are required in these locations in order to improve the availability of talent.”

The report states that San Pedro Sula has “lower employability due to lower availability of English language skills,” yet the team from Alorica assured Nearshore Americas last week that there are some 45,000 bilingual English speakers in the San Pedro Sula area. How, then, could there be a shortage of talent?

“It’s not just a matter of them speaking English but it also depends on other factors such as a lack of propensity in the workforce for the contact center function,” Verma clarified. “If you have consummate career opportunities, if you want to be self-employed or if you want to enter higher education then you have a lower propensity for working in a contact center environment.”

Niche European Language Services

While the Central American and Caribbean market predominantly serves U.S. customers, and most of the locations can be leveraged for bilingual (English/Spanish) service delivery, Everest notes that the region does offer some opportunities for service in other European languages. However, this currently accounts for under four percent of the market.

“Whatever foreign-language work that is being done there is either because of historic migration patterns or native people learning other languages in language schools,” Srivastava said. “It’s a growing opportunity; we do see evidence of French, German, Italian and Portuguese happening at least in the big centers like San Jose, Guatemala City or in Monterrey, Mexico.”

The report states that “the target buyer geography from these locations is likely to be the United States. It is difficult to establish non-English language support capabilities to Europe.” However, Canada and Brazil also represent realistic markets. Serving Canada’s French-speaking population is “definitely” more viable than serving France because of Canada’s geographic proximity to the region and the aligned time zones, Srivastava said. “I think French support is something that is becoming more important in the Canadian market, so that may be something that companies will have a look at more closely.” Portuguese-language work is more likely to be directed at the Brazilian market than Portugal for similar reasons, he noted.

Service Providers Lead the Way

The report found that the Central American and Caribbean market is much more orientated toward service providers than global in-house centers (GICs). Of 22 new set-ups and expansions of global delivery centers for contact center work reported in the region in the last 18 months, service providers accounted for 16 while only six were GICs.

“Barring a few exceptions, typically with new locations you see service providers getting in first and then the GICs and big buyers coming in on the back of these companies,” Srivastava explained. “Most locations are first populated by service providers because they tend to be more adventurous (in search of) locations that can give them years more arbitrage.”

Verma added: “Most of the enterprise buyers typically tend to be more risk averse. They don’t want to go and establish centers in new locations, which is why you see a lot of concentration in (more mature) locations like San Jose in Costa Rica and Guatemala City. However, beyond these cities there’s very little presence of enterprise buyers.” In order to attract more GICs, the newer locations “need to step up a little bit in terms of selling themselves and creating success stories – cases of buyers who have established themselves in these locations and are thriving,” he said.

Risk Assessment

Although Guatemala City and San Pedro Sula are often ranked among the world’s most violent cities, Everest states that the safety and security risks in these cities “are not significant enough to affect business operations”. Given the dangers of underestimating the level of risk, how confident are the authors about this conclusion?

“The perception in these locations is often very different to the reality,” Verma said. “We do see that there is a fair amount of drug-trafficking and associated violence in countries like Guatemala and Honduras, at the same time the major business centers are really not badly affected,” Srivastava added. “There is a level of organized crime that people have learned to live with, but that is actually the case across most of Latin America today. The violence typically does not spill over into the main cities and it doesn’t really affect business operations.”

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High-Ranking LAC State Department Official Tops Agenda at Nexus 2015 http://www.nearshoreamericas.com/state-department-official-lac-tops-agenda-nexus-2015/ http://www.nearshoreamericas.com/state-department-official-lac-tops-agenda-nexus-2015/#comments Wed, 14 Jan 2015 19:44:24 +0000 http://www.nearshoreamericas.com/?p=43101 By Duncan Tucker Francisco Palmieri, the Deputy Assistant Secretary for the Caribbean and Central America at the U.S. Department of State, will discuss new perspectives on engaging Latin America and the Caribbean in the keynote address at Nexus 2015 in New York City on April 30. Palmieri brings a wealth of first-hand experience from the region, having served in the Dominican ...

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By Duncan Tucker

Francisco Palmieri, the Deputy Assistant Secretary for the Caribbean and Central America at the U.S. Department of State, will discuss new perspectives on engaging Latin America and the Caribbean in the keynote address at Nexus 2015 in New York City on April 30.

Palmieri brings a wealth of first-hand experience from the region, having served in the Dominican Republic, El Salvador, Honduras, and Venezuela, and overseen over US$800 million in International Law Enforcement and Narcotics programs in Mexico and Colombia.

At Nexus, Palmieri will provide fresh perspective on the evolving reconciliation with Cuba, the government’s push toward greater prosperity in Central America and an overall view on success factors for U.S. businesses expanding operations in the Caribbean and Latin America.

Now in its fifth year, the annual Nexus conference organized by Nearshore Americas has established itself as the premiere executive-level event for the thriving Nearshore IT and BPO marketplace. Other confirmed speakers include Atefeh Riazi, CIO of the United Nations, Andy Nixon, CIO at Corning, Tim Norton, vendor management head at UPS, Pace Harmon partner Marc Tanowitz, Honduran entrepreneur Yusuf Amdani, former CTO at Chatham Financial Patrick Millar,  and Frost & Sullivan’s Global Program Manager for Customer Care, Stephen Loynd.

As always, the agenda is packed with an array of informative presentations, thought-provoking panels and high-level networking sessions. This year’s CIO Super Panel will focus on digital disruption, answering the question: How are global IT partners helping the C-suite adapt to radical change in the enterprise?

The Nearshore’s increased recognition as a global center for application development and testing will be the focus of one of the panels, as the session debates issues of perception and maturity as industry practices evolve into more sophisticated areas of expertise.

Another panel will tackle vendor leadership, examining how top-tier vendor management leaders are building better models for collaboration while guiding business and IT portfolios grows more complex. Given the ever-widening array of outsourcing destinations available to the BPO decision-maker, there will also be discussion of which nearshore markets to watch and where the best value can be found for your investment dollar.

During the “Difference Makers” panel, Nexus will identify and celebrate a set of industry leaders who have single-handedly created new jobs and new inspiration for a new generation of professionals in Latin America and the Caribbean.

In addition to its comprehensive content program, Nexus will stage the premiere of an exciting new documentary, created by the Nearshore Americas team, that focuses on “Mexico’s States of Innovation.” The documentary — currently being filmed and produced in Mexico –  will feature key centers of IT development and services: Guadalajara, Mexico City, Querétaro and Monterrey.

Nexus 2015 takes place on April 30 from 8 a.m. to 6:30 p.m. at the Apella Event Space at Alexandria Center in New York City.

Buy-side executives (with IT, BPO, call center, vendor management and procurement responsibilities) are invited to attend Nexus at no cost. Submit your request to attend here. 

Vendors and suppliers are invited to attend as sponsors, for sponsorship information contact Managing Director, Kirk Laughlin. Finally, consultants and advisors are also invited to attend – the cost for entry for this group is $849 – and individuals in this classification can register directly here. 

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Renegotiating Outsourcing Contracts: What Works and Why http://www.nearshoreamericas.com/successfully-renegotiate-outsourcing-contracts/ http://www.nearshoreamericas.com/successfully-renegotiate-outsourcing-contracts/#comments Tue, 13 Jan 2015 17:15:07 +0000 http://www.nearshoreamericas.com/?p=42845 By Caroline Doherty de Novoa As outsourcing decision-makers gird for another year of engaging with IT and BPO suppliers, it is a good time to reflect on what has worked well over the past twelve months and what could be improved. This is as true for outsourcing contracts as it is for everything else in our lives. The transition from ...

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By Caroline Doherty de Novoa

As outsourcing decision-makers gird for another year of engaging with IT and BPO suppliers, it is a good time to reflect on what has worked well over the past twelve months and what could be improved. This is as true for outsourcing contracts as it is for everything else in our lives.

The transition from one year to the next is a good time for companies to ask themselves whether their outsourcing relationships remain fit for purpose and whether they are getting the best value for money from their suppliers. If the answers to these questions are negative, then perhaps it is time to renegotiate the contract.

This article considers the reasons parties renegotiate, and best practices for preparing for and conducting a renegotiation.

Reasons to renegotiate

Parties will usually renegotiate coming up to contract expiry. However, there are various reasons why a customer might want to renegotiate mid-term as well. These include:

  • Dissatisfaction with the service provided: the outsourcing agreement should provide mechanisms to measure and remedy sub-standard service levels as and when they occur. Even so, over time, a customer can become dissatisfied with the service it is receiving in a way that is simply not measured by the metrics set out in the service level agreement. A renegotiation can provide a forum to address that dissatisfaction.
  • Technology issues: in the time since the contract was first signed, there may have been improvements in technology, and the customer might want the agreement to be updated to take account of those innovations.
  • Poor relationship management: the customer may feel like the honeymoon period is over and it is no longer receiving the supplier’s full and proper attention.
  • Financial reasons: the customer’s procurement team may come under pressure to cut costs, particularly in a difficult economic climate. Or the customer may believe that the supplier’s pricing is now out of sync with the rest of the market.
  • Business change: the existing agreement may no longer reflect the customer’s operational reality. The nature of the customer’s business may have changed, which could impact its demand for the outsourced services or its requirements.

Some of the above issues can be dealt with through the contract’s change governance procedures, but others may be so broad that it is better to renegotiate the agreement than get caught up in an endless cycle of piecemeal adjustments. Obviously, if the issues are chronic, then the customer should be looking at its termination options and its replacement/step in rights rather than renegotiating.

When considering its motivations for renegotiating the contract, the customer should be careful to look at the whole picture. If a customer understands the root cause or causes underlying its desire to renegotiate, then it will be better positioned to address them through the renegotiation process.

For example, low satisfaction with the supplier’s performance may not necessarily be the supplier’s fault. It may be that the contract was poorly structured at the outset, the customer has not actively managed the relationship to keep the supplier aware of its changing needs, or poor communication between the parties has led to a situation where the customer holds unrealistic expectations because it does not understand the challenges facing the supplier.

A renegotiation provides an opportunity to reset the relationship and get it back on track if it has wandered off course. It is not about tearing up the original agreement and starting from scratch, it is about taking the lessons learned from the early years of the relationship and making improvements.

In some cases, a customer will have an automatic right to renegotiate built into the terms of the original agreement. However, even if no such right arises, the customer is still entitled to ask the supplier to renegotiate. The supplier may refuse, but often it will say yes. The supplier may be content to reconsider its position in light of market forces or business changes, or the supplier may want to negotiate out or modify some obligations that have proved overly onerous in practice.  The supplier might also see the renegotiation as an opportunity to sell the customer new or additional services. Finally, the supplier may be prepared to renegotiate simply because an outright refusal would lead to tension and might damage the relationship in the long term.

Whatever the supplier’s reason for agreeing to renegotiate, the customer would be well advised to remember that both parties will be coming to the table expecting to improve their position in some way. Approaching the discussions with the attitude that “you give and I take,” is the fastest way to deadlock.

Choosing the team

When forming its renegotiating team, the customer might want to consider retaining an outsourcing advisory firm. They can advise on market pricing and standard commercial terms. Likewise, external legal counsel can advise on the nuances of the contract language and give an overview of what is standard across the industry. However, external advisors should only compliment and support the customer’s internal team. They should not replace them.

The customer’s employees have lived and breathed this contract since its inception and will better understand the customer’s needs than any external advisor. An external lawyer or consultant can make recommendations, but it is for the customer to decide what points to push and what to concede.

When the customer’s procurement department is leading the renegotiations, they must seek out the input and support of all key internal stakeholders. The renegotiating team should have senior management buy in at the outset so they understand the parameters of their authority. There is nothing worse that spending days or weeks hammering out a handshake agreement with the supplier only for the renegotiating team to find that it cannot sell the deal internally. Not only is it a waste of everyone’s time, but it can also give the supplier the impression that the customer is not negotiating in good faith. After all, this is supposed to be a mutually beneficial relationship, one that requires a degree of trust.

The renegotiating team should also consult with the people “at the coalface” – i.e. those individuals that deal with the supplier on a regular basis. They understand how the relationship works in practice and what needs improving.

Preparing for a renegotiation

Once the negotiating team is formed, there are various steps that they should take before even sitting down with the supplier. These include:

  • Speaking to senior management to understand the customer’s overall objectives for the relationship, both in the near and long term.
  • Critically assessing the existing arrangement against these objectives. It is important to understand what is working well just as much as what needs clarified, amended or scrapped. Otherwise, there is a risk of throwing the baby out with the bathwater.
  • Carrying out research on pricing, prevailing market conditions and best practices. For example, is the supplier making the most of innovations in technology and recent business learning? What is standard within the industry? There are advantages to keeping the description of the services within industry standards. The more bespoke the services a customer requires, the less the supplier is able to leverage its existing knowledge, processes and technologies, which only drives up the price. This research can be done in house or with the assistance of an external consultant.
  • Creating a position statement and setting priorities. It is fine for a customer to create an exhaustive wish list of everything it wants. However, it must be realistic and accept that it is unlikely to get everything on that list. The object is not to win as many of these points as possible, but to win on the most important points. Setting an internal position statement that sorts the “must haves” from the “nice to haves” will keep the renegotiating team focused on the issues that really matter.
  • Brainstorming from the supplier’s point of view. It is worth spending some time considering the supplier’s position. What might the supplier’s objectives for this renegotiation be? This exercise will help the renegotiating team to anticipate what the supplier might ask for so they can be prepared with a response. It also helps them to indentify what “sweeteners” they can offer to extract concessions from the supplier. For example, when asking for price cut on specific services, the customer might be willing, in return, to expand the scope of services or extend the term.  That way, the supplier’s margins might drop, but their overall revenue might stay the same or grow. Simply playing hardball and forcing price cuts without offering anything in return may not be sustainable in the medium to long term. That being said, it is important to carry out some updated due diligence on the supplier before committing to an extended term or handing over more services to them. This is because the position may have changed since the original due diligence was carried out.

Conducting a renegotiation.

After the internal preparations are complete, the customer should sit down with the supplier and agree a timeline and framework for the renegotiations. A renegotiation should be a focused and, if possible, time-bound activity. Allowing renegotiations to drag on distracts everyone from their main jobs and could negatively impact the relationship.

There are many negotiating tactics, and entire books have been dedicated to this subject. However, one of the most effective tactics is to have an open, constructive and fact-based dialogue. If the customer is well prepared, comes to the table with persuasive evidence on pricing and industry standards, and is willing to make some concessions, it will probably not need to resort to dramatic negotiating tricks.

That being said, a sensible customer will shop around and investigate both viable economic activities and their termination rights should the renegotiations prove unsuccessful. Speaking to competitors not only provides a benchmark but also creates leverage, should it be needed.

The customer should also demand a similar openness and fact-based approach from the supplier. For example, the supplier should be asked to give a clear breakdown of its pricing so the customer can understand how much relates to services and how much to infrastructure. The customer does not want to be covering more than its fair share of the supplier’s infrastructure costs.

Done right, a renegotiation should be an opportunity to make a good relationship even better by leveraging the experience of the past to create a stronger relationship for the future. Isn’t that a positive thought as we get ready to say goodbye to one year and welcome another?

This article was originally published by NSAM sister publication Global Delivery Report

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Exclusive: Cisco Sees a Brighter Future for Colombia http://www.nearshoreamericas.com/cisco-believes-build-brighter-future-colombia/ http://www.nearshoreamericas.com/cisco-believes-build-brighter-future-colombia/#comments Mon, 12 Jan 2015 16:47:27 +0000 http://www.nearshoreamericas.com/?p=43033 By Loren Moss From empowering the more vulnerable sectors of society to building smarter, more efficient cities, Cisco sees many ways that it can prosper in a mutually beneficial relationship with the people of Colombia. Nearshore Americas sat down for an exclusive talk with Christian Onetto, the general manager of Cisco Colombia, to get his take on why they see ...

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By Loren Moss

From empowering the more vulnerable sectors of society to building smarter, more efficient cities, Cisco sees many ways that it can prosper in a mutually beneficial relationship with the people of Colombia.

Nearshore Americas sat down for an exclusive talk with Christian Onetto, the general manager of Cisco Colombia, to get his take on why they see such promise in the country. The company recently moved to expansive, revamped offices in Bogota’s Usaquen district, complete with Colombia’s first Customer Experience Room, and the expansion of Cisco’s world renowned Networking Academy program.

Onetto gave NSAM a tour of their new offices, which feature ample work areas equipped with collaboration technologies, telepresence facilities and demonstration labs providing customers and business partners with the opportunity to experience Cisco’s most advanced technologies.

The offices are situated on two floors of a prominent new skyscraper – one exclusively for the company’s clients and partners – featuring auditoriums seating over 100 people, the first Cisco Customer Experience Room of Colombia, quiet rooms for sensitive communications, various video conferencing facilities, e-café zones for collaborating with customers, as well as a data center and a demo lab. The Customer Experience Room is a unique and innovative space where the company’s partners and customers can participate in opportunities to gain first-hand knowledge of Cisco’s business model and technologies in operation.

“With this first Customer Experience Room opening in Colombia, Cisco aims to provide a unique and living center where visitors can feel the impact of the Internet of Everything in the creation of increasingly intelligent environments,” Onetto said.

He elaborated that the Customer Experience Room is a powerful model that the company has opened in several of its major markets so that customers can access Cisco’s technology through the dCloud (Cisco’s demo cloud) in which they engage in personalized work on their collaborative projects. The room also highlights the company’s offerings in areas such as data centers, corporate connectivity and security, and industry solutions (transportation, manufacturing, energy and oil & gas, among others).

Corporate Social Responsibility

Perhaps the proudest achievement for Onetto as the leader of Cisco’s Colombian operations is the success they have had with Cisco’s Networking Academy. “I have big dreams for the Cisco Academy in Colombia: to reduce the barriers to opportunity, the access to social and economic development of people, thinking of the 30% of the Colombian population still in poverty, they too can rise to the next level, and I think that companies like Cisco have a responsibility to help do this,” he said. “I believe that the opportunity we have in Colombia is to reinsert [displaced and disenfranchised] youth via education technology, so that they have a good opportunity in a country that is prospering like Colombia.”

Onetto added: “For the first time in all of my professional experience, not just at Cisco but at other tech sector companies, I see a grand opportunity to tackle clearly and directly the problem, and that is where Cisco will generate value for Colombia.”

One innovative educational system in Colombia is the National Learning Service (SENA), a network of trade schools, technical academies and university-level institutions open to all Colombians, but focused on providing educational access to students with limited resources.

“Networking Academy has about 10 years of experience (here in Colombia) out of Cisco’s 20 years of presence in Colombia, and it’s very relevant for Latin America, because we have around 600 partners. We have to date, around 120,000 alumni graduated from our networking programs, and furthermore we have two very interesting statistics,” Onetto said.  “The principal Network Academy in Colombia is SENA, it’s very important from the point of view of developing youth, certifying them, and educating them. We are second place in Latin America (after Brazil), and a statistic celebrated by the ex-director of SENA, Gina Parodi, now the minister of education in Colombia, is that we have the best percentage of female graduates, a little over 24%. That’s very interesting so we are fulfilling a diversifying role: inclusion of women, not just poverty alleviation, or for the socially vulnerable, but it’s the power to give opportunity to all men and women.”

Building Smarter Cities

Onetto, added that all of Cisco’s expansion projects in Colombia will underpin the work that the company is developing hand-in-hand with the Ministry of ICT and the Colombian Chamber of Information Technology and Telecommunications (CCIT). This joint effort seeks to provide support infrastructure capable of delivering new services and solving some of the major challenges facing cities today, such as environmental sustainability, job creation, and economic growth. “Almost 70% of Colombia’s population lives in cities. If we change the environments and services that interact with urban inhabitants, we will be transforming much of the country. We will initiate processes to connect the urban centers and provide better services to the citizens,” Onetto said.

He sees plenty of opportunity for growth and collaboration; ways that Cisco can contribute to Colombia’s development. “A city like Bogota can implement a project like Smartlite, or Smart Traffic; it won’t solve all the problems completely regarding mobility that there are in a city like Bogota, but you can make it easier and faster for people to get from one place to another,” Onetto explained. “In the cities where we are developing Smart City, with sensors for example, we can put one in every garbage receptacle in the city, that will connect via the cloud, with 24/7 monitoring and we can understand how full each garbage can is. Why? To calculate the most efficient and optimum route for garbage collection, where and when to send the trucks. We saved the city of Barcelona, Spain 30% by implementing this process!”

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Why is Alorica So Bullish About Honduras’ Prospects in 2015? http://www.nearshoreamericas.com/alorica-bullish-honduras-prospects-2015/ http://www.nearshoreamericas.com/alorica-bullish-honduras-prospects-2015/#comments Thu, 08 Jan 2015 19:34:21 +0000 http://www.nearshoreamericas.com/?p=42960 By Duncan Tucker Since opening a delivery center in Honduras last year, U.S. BPO firm Alorica has seen an increase in client interest in the Central American nation and expects to experience significant growth there in 2015. Headquartered in Irvine, California, Alorica has over 40 locations and nearly 20,000 associates worldwide. In Latin America this includes 600 seats in Sao ...

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By Duncan Tucker

Since opening a delivery center in Honduras last year, U.S. BPO firm Alorica has seen an increase in client interest in the Central American nation and expects to experience significant growth there in 2015.

Headquartered in Irvine, California, Alorica has over 40 locations and nearly 20,000 associates worldwide. In Latin America this includes 600 seats in Sao Paulo, Brazil and 1,800 seats at its two centers in Santo Domingo, Dominican Republic.

Thursday’s announcement that Alorica is acquiring Omaha-based West Corporation’s agent services businesses – including 1,500 employees in Jamaica and Mexico – for US$275 million, illustrates the company’s growing interest in Latin America and the Caribbean. That news followed the launch of Alorica’s latest Latin American site in the Altia Business Park in San Pedro Sula, Honduras on April 28, 2014.

“We opened with a project for one of our primary customers and over time we’ve added a couple of other projects,” Site Director Mark Montgomery told Nearshore Americas. “Currently we’ve got just under 100 personnel at the site, with the intention to ramp up to around 400 people by August and hopefully we’ll be close to capacity, which is just under 600, by the end of the year.”

The agents are providing billing services, customer care, sales and upselling – primarily in English but at times in Spanish – to entertainment and telecommunications firms in the United States.

“The majority of the customers that are coming to us and looking for services out of Honduras are primarily Fortune 500 companies in the business-to-consumer area,” said Chief Sales and Marketing Officer Chris Crowley. “They’re primarily companies that are in the retail, communications or technology vertical markets and they’re looking for either customer care or technical support services. They want bilingual support services: English support for their U.S. customers and Spanish for the components of their companies that operate in Latin America.

Why San Pedro Sula?

“When we are looking at our geo-presence worldwide there are five key categories that are important to us: skills; languages; cultural affinity; opportunities to make sure that we’re not just an also-ran; and lastly, charter alignment – meaning safety, security, continuity, productivity and aesthetics,” said Scott Wilson, SVP of Shared Services.

The Altia business park in San Pedro Sula passed the test in each category, he explained: “In San Pedro Sula we found people with strong communication skills. There’s a service orientation that exists in this part of Honduras and so we felt very good about the embedded skills that are there. Additionally there is a high potential learning orientation with Unitec – which is right there at the business park – and seven other universities within a very small radius. Seventy percent of the workers in San Pedro Sula are in this 20 to 26-year-old age demographic and have some college education – they’re currently at university or they’ve completed a university education – so there’s this ability for us to grab their skills.”

As for languages, Wilson noted, “We’ve found English to be in very strong abundance in San Pedro Sula. There are about 45,000 bilingual English speakers just in the area.” Tom Silzell, Alorica’s SVP Business Development, added, “The one thing that is different about Honduras in general is that they… really understand that in order for there to be a long-term benefit for their country itself they’ve got to create a sustainable workforce. So they’re investing heavily with the government in English as the primary language and they’ve actually got 250,000 people that will be fluent in English within the next 18 months.”

With regard to cultural affinity, Wilson said, “There are about 40 other U.S. companies that have been doing business in the area for a long time so there’s an awareness of our culture.” And as for ensuring that Alorica is not an also-ran in another saturated market, he noted that “There are some other players in the market near San Pedro Sula. We’re the third major player in the business park, but we’re really using those early movers as a foundation for our learning and we think there’s an opportunity for us to be something distinctive in the market.”

Getting Prospective Clients Onboard

Prior to bringing prospective clients to the site, Silzell said, “We work with them in prepping them for the market itself and we do things like sending them call recordings so they can listen to the accent. They spend a lot of time understanding the various strengths of the market and why they want to be there.”

Alorica then invites them to visit its facilities. “Our approach to site visitors is actually more of a natural approach,” Silzell continued. “We want them to spend time on the floor, we want them to spend time talking to agents and supervisors and managers. Although we do prepare the site for the visit, we don’t typically prepare the agents, aside from giving them basic information about the clients. We want it to be a very natural environment so we do things like focus groups and we set up dates with local government and local universities.”

An important aspect of any site visit is introducing potential clients to the teams that would be running their operations, Silzell added. “We spent a lot of time acclimating them to the people that are going to do the work for them. So a full day in the center is about what you need to evaluate it. We try to put the management team that’s going to manage the program in front of them, so they get a sense for who they would work with on a daily basis,” he said. “That’s the same approach that we take with all of our visits, whether it’s a domestic U.S. site, a nearshore market or an offshore market, the idea being to give (prospective clients) a sense for the people themselves. Each market is different and each management team has different strengths and weaknesses, but we want clients to feel good about the market that they’re in and the management team that will be supporting them.”

Is San Pedro Sula Safe?

As is often the case in Latin America, Alorica have also had to assure clients that there are no serious security issues that threaten their operations in Honduras. The international media has frequently cited San Pedro Sula as the world’s most violent city in recent years, but the Alorica team believes the truth has been distorted and that the city’s reputation is unwarranted. “The data actually shows that there are a lot of Latin American markets out there that are much higher than Honduras in terms of murder rates and burglaries,” Wilson noted, citing the latest figures from a December 2014 report by United States Agency for International Development.

“In two years on the ground now in Honduras I’ve not experienced any issue. I feel perfectly comfortable here and I’ve had lots of conversations with other site directors and nobody’s had an issue with any clients coming down or any guests in the city,” Montgomery added. “It might not be the world’s most dangerous city but it could have some of the world’s most dangerous neighborhoods. Thankfully, we’re not anywhere near those neighborhoods, which are on the outskirts of the city much like those you would have in any large city in the United States. If you look at the current statistical data available and the population of the city, the numbers are just slightly higher than you might find in Detroit, Michigan.”

Local Growth Prospects

“We expect that we will continue to grow in Honduras and San Pedro Sula. Once we reach capacity of give-or-take 600 seats there’s another tower that will be opening up in the park that we will have access to should we choose to expand there. So we would consider continuing growth in San Pedro Sula,” Wilson said. “The capital Tegucigalpa also offers the opportunity for growth, although it’s not a primary location for us because as a capital city it’s a much more government-centric environment. But Grupo Karim’s is also in the process opening a park in Tegucigalpa and because of the success that they’ve had in developing the park in San Pedro Sula, and the vision that they have around it, I think Tegucigalpa could also be an option for us as we look to expand.”

Silzell also emphasized the great work Grupo Karim’s has done at the Altia business park: “I looked at this park in around 2010 and it was just an idea and I remember hearing the pitch that ‘We’re building this big park with a university, a hotel, a mall, restaurants, living units and office buildings,’ but I think many of us have seen other instances in LATAM when people have these great ideas and they put up a shell but it’s still a shell five years later. So I was extremely impressed to see how this has come along and all of the work that they have done for the park. It’s really been a distinguishing factor for us in San Pedro Sula.”

Alorica’s Global Strategy

Since opening the center last year, Alorica has found that interest has been strong. “Our clients have started talking to us about Honduras much more so than they have in previous years. Just over the last 60 to 120 days there has been an increase in inquiries about Honduras as (clients) look at the global footprint that they want their partners to have as they go into 2015,” Chief Sales and Marketing Officer Chris Crowley said. Given Honduras’ proximity to the United States and competitive costs, it’s become a strong alternative not only to other nearshore destinations, but also to offshore stalwarts such as the Philippines. “There is a growing sense among a lot of our clients and prospects of over-subscription to the Philippines. Honduras provides one of those lower cost, high-quality options that is certainly easier to get to,” Crowley added. “So it’s not only a competitive alternative to other Latin American countries but in some cases it’s also attractive for customers that are looking to diversify outside of the Philippines. That’s why we’ve seen an increase in client and prospect interest and why we’re so bullish about it going into 2015.”

Beyond its facilities in Honduras, Brazil and the Dominican Republic, Alorica is looking to expand further into Latin America and the Caribbean. “We’re looking at Trinidad, Guyana and Jamaica and it’ll continue to be an interesting market for us,” Wilson said. “I’ve spent time in the region and I see LATAM generally as a very strong growth market for a couple of reasons. Firstly, because the level of sophistication of the business environment continues to improve. You’ve got some very strong free trade structures across the region and it’s become very attractive for U.S. companies to open up operations there. Secondarily, the entire region in the next couple of years will probably surpass a population of one billion. So you’ll also see opportunities for even inter-region growth if the company should decide to expand operations and support services within each of those countries. We’re already doing this in our Sao Paulo site, where we’re supporting Brazil from that location. So there are tremendous growth opportunities in the region.”

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Consulting Services Emerges as Lucrative Niche for Some Nearshore Providers http://www.nearshoreamericas.com/nearshore-suppliers-consulting-services/ http://www.nearshoreamericas.com/nearshore-suppliers-consulting-services/#comments Wed, 07 Jan 2015 16:56:47 +0000 http://www.nearshoreamericas.com/?p=42929 By Tim Wilson Suit up the cavalry: many nearshore providers are looking to high-margin consulting as the next flag to capture in the battle for customer wallet. Tier one on-premise players like IBM and Accenture are checking over their shoulders as outsourcers build capacity and capability. “Customer experience is one major area in which nearshore maintains an edge,” says Camila ...

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By Tim Wilson

Suit up the cavalry: many nearshore providers are looking to high-margin consulting as the next flag to capture in the battle for customer wallet. Tier one on-premise players like IBM and Accenture are checking over their shoulders as outsourcers build capacity and capability.

“Customer experience is one major area in which nearshore maintains an edge,” says Camila Casale, Senior Vice President of Consulting Services at Softtek. “A deep understanding of cultural nuances is a crucial driver for tapping into a unique and successful relationship with customers.”

From Softtek’s perspective, this change rests on solutions that combine deep functional domain knowledge, technology and process execution – otherwise known as Business Process as a Service.

“In this capacity, nearshore is no different than onshore or offshore solutions with regard to the need to combine domain knowledge with the ability to understand each customer’s unique needs, through a consultative approach,” Casale says. “This is particularly true in the realm of the customer experience, which plays an enormous role in digital solutions.”

The argument is that, as digital technologies increase in relevance at the executive and strategic level, organizations need partners that understand the challenges that IT and business leaders are facing. More is being spent on technology, while IT is changing its function to act as a broker or enabler, which argues for additional consulting services.

“A consultative approach helps provide greater context to both parties – IT and the business owner,” Casale says. “Bringing business domain knowledge to the forefront of solution design builds a common ground, boosting the chance of success while significantly reducing the time needed to implement a digitally empowered idea.”

“People are charging US$150 to $200 an hour, and we can deliver for between $40 and $75 an hour. This is a significant reduction from what the market is already demanding.”

Finding the Domain

Those nearshore providers looking to get into consulting – or to expand their footprint – will understandably leverage off of what they’re already good at. For a company like Softtek, that means Global Procurement as a Service (GPaaS) solutions, and for others like Avantica Technologies, which provides nearshore software engineering services out of Costa Rica, partnering on the application side might lead to consulting opportunities.

“We see a growth opportunity for companies like ours to begin offering more consulting-type professional services,” says Mario Chaves, Avantica’s CEO and co-founder. “This would involve more than software development – we can add in a lot of value if we share our experience setting up software processes.”

This is a by-product of having spent years in the nearshore trenches. In the case of Softtek – which has delivery centers in Mexico, China, Brazil, Argentina, Spain and India – that means leveraging a decade’s worth of experience providing procurement services to different global organizations.

“We truly believe that the future is in Business Process Platforms,” says Casale. “Our Global Procurement as a Service is the first platform we’re bringing to the market under this concept.”

From a consulting perspective, the added value comes when Softtek helps its clients understand the strategic value of their procurement process, and to then implement a solution that streamlines operations.

“We use advanced analytics to drive value,” Casale says. “We can identify unique purchasing patterns, or a change in value of commodities, or potential geo-political risks that can affect the supply chain of our clients.”

To Brand, or Not to Brand?

For nearshore providers, the move into consulting is organic, and as such does not necessarily require establishing a separate brand around professional services. But, one way or another, the word is getting out, and the market will identify brands as business models change.

“This is rebranding – we would definitely position it as a higher value service,” Casale says. “We would hire higher level personnel from a business perspective, almost as a business unit.”

The assumption is that people will pay a little more for the additional value that nearshore provides. In this regard, and as can be seen with Softtek’s trademarked Global Nearshore model, the strategy is to build a long-term identity – even if that is tucked into an pre-existing brand.

“For the time being, our consulting services will not be offered separately from our business technology solutions,” Casale says.  “We are adding this capacity to help our clients succeed.”

The same is true for Avantica, which sees consulting as a natural outgrowth of its pre-existing expertise. It already has established customers with core development teams that are spread thin, and that need additional help with implementations.

“For example, if you look at a typical SAP implementation for a mid-size company, the requirements might be less sophisticated than with a large company, but there are still business rules and integration issues to address,” Chaves says. “All these moving parts need to be put together.”

Branding of consulting services is less of an issue – for now – because in most cases the consulting demand comes from pre-existing clients. Given that the people at Avantica have the expertise on the development side, it only makes sense that some of that value be bumped up to professional services. Some of these might be higher-value, short term engagements, and others might involve ongoing discussions to ensure that the development process delivers maximum impact.

“We used to be just another body, but now we have a mature software practice,” Chaves says. “We see a lot of companies that might have a great product, but don’t yet have that maturity.”

From that perspective, the sky’s the limit for a company like Avantica. Many potential customers don’t want to handle internal professional services, and are looking for long-term help. This includes early-stage knowledge and platform companies in the consumer products and mobile space that need technology partners.

“If you look at mobile applications, we are perfect for that,” says Chaves. “We know the platform, and have worked with U.S. manufacturers, so we know the mentality. We can work in real-time – hard to do from India or China – and we can still deliver at a third of the price compared to the U.S.”

The Numbers Look Good

And here is where the numbers begin to look good for consulting. The nearshore advantage from a price-ratio perspective for software development, when compared to an onshore contractor, is about two to one. That becomes three to one for professional services.

“People are charging US$150 to $200 an hour, and we can deliver for between $40 and $75 an hour,” Chaves says. “This is a significant reduction from what the market is already demanding.”

Chaves says that nearshore will come in at 10% to 15% more than offshore. He agrees that the added margin makes offshoring appealing to many, but they then face time zone and cultural issues. And he is not impressed by those nearshore companies that try and undercut Asia.

“It kills me when I see companies that are pricing themselves below India just because they could make a little bit more money and grab a new contract,” he says. “What they don’t realize is that in the long term that is not sustainable.”

And this is where consulting ultimately fits into nearshore’s long-term trajectory. Without moving up the value chain, nearshore providers will be stuck in a race to the bottom, and will not benefit from years of client-driven expertise.

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Why Software Testers are No Longer ‘Second Class Citizens’ http://www.nearshoreamericas.com/software-testing-crucial-role-nearshore/ http://www.nearshoreamericas.com/software-testing-crucial-role-nearshore/#comments Tue, 06 Jan 2015 21:19:47 +0000 http://www.nearshoreamericas.com/?p=42932 By  Norberto Gaona We are all well aware of the fact that software is far from perfect.  Whether you’re talking about business management systems or mobile apps, there’s always the possibility that they could malfunction without warning, thus seriously impacting the overall success and profitability of an operation. As a result, software testing has become increasingly relevant – a vital ...

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By  Norberto Gaona

We are all well aware of the fact that software is far from perfect.  Whether you’re talking about business management systems or mobile apps, there’s always the possibility that they could malfunction without warning, thus seriously impacting the overall success and profitability of an operation.

As a result, software testing has become increasingly relevant – a vital part of the development life cycle of the software itself.  Experts agree that development and testing are two inseparable but independent disciplines that should work together to help identify potential faults before the software is brought to the production line.

Many agree, however, that software testing is not always given the importance it deserves. This is often down to the fact that the businesses themselves are in so much of a hurry to enter the market and stay ahead of the competition that they dismiss testing as a waste of valuable time. Blame can also be placed at the feet of the developers themselves, as students often graduate from universities without being fully competent.

One thing is for sure – testing is a vital part of the software development life cycle. Just as a cinematic editor works to enhance a movie and a proofreader works to perfect a text, a tester is there to help perfect the software. The developer is the one responsible for testing the code before sending it to the official testers, who are there to help improve the quality of the code and the final product rather than to look for errors that may have been made when writing said code.

Total Independence

 According to Enrique Cortes, Managing Director at Luxoft (an IT outsourcing and tailor-made software development business), total independence between the one developing the software and the one testing it is vital in ensuring accuracy and objectivity. “Using an independent testing or quality assurance organization is vital. While a developer may be confident that the software he has created will work well, it still needs to be thoroughly tested to determine which parts perform well and which don’t perform so well.”

According to Cortes, testers are often viewed as “second-class citizens”. In other words, they are not considered to be as important as the developer himself. Cortes believes, however, that those carrying out the tests are just as important as those developing the software. “They need to be on the same level so that they both feel free to express themselves when it comes to informing the other of any flaws or defects that may need to be addressed. This is where it all starts – with independence when creating and testing software.”

According to Victor Martinez, Director of Client Solutions at Tiempo Development, software testing has been undervalued for far too long. Many universities don’t even include the subject in their study plans. He feels that, when it comes to careers involving IT, testing is seen to be of little relevance, rather than being an integral part of the software development life cycle. “The same thing happens when the students finally join the work force – there are very few who actually want to carry out the software testing,” he states.

According to Martinez, many businesses, in their zeal to launch their products onto the market come to see testing simply as another thing conspiring to slow them down. They look to cut costs by reducing the amount of time they dedicate to software testing, some even failing to complete certain tests that are vital to ensuring the product performs well and can be used without complications.

A good example of this is the huge increase in untested mobile apps being released onto the market. The end users are the ones that are left to discover, report and suggest improvements for the faults they contain. “A trend that is becoming all too common is the user playing the role of the tester,” Martinez says.

Of course, this cannot be allowed to happen when it comes to apps that are vitally important to the running of the business, such as those used in the financial system and the medical control system.  “Each business has to agree on what degree of reliability it requires of its software and invest in the testing process accordingly,” Martinez adds.

First and Foremost: Quality

 According to Cortes, there is a direct link between the quality of software and the success of the business: “A fault in the software leaves the customer with a bad impression; they see only wasted money and missed business opportunities, which negatively impacts the brand’s reputation.”

Today, people go online to transact with banks, airlines, shops and business systems in general, so faults in the software result in serious problems for the business. “If you do not have a sophisticated means of testing and carrying out quality assurance checks, the results will be disastrous. It is a science that has advanced to such a degree that it is now possible to predict how many faults will be found per line of code before carrying out the test.”

The main reason a company should invest in software testing is to ensure quality. According to Martinez, if you don’t invest the necessary amount of time, money and effort when testing an app you are likely to encounter all manner of problems further down the line. “If, as a user, you download a faulty app or an app that doesn’t do what it claims to, you will automatically assume that all other products released by the same company are going to be of substandard quality. This will negatively impact on the customer’s opinion of the company,” he states. “For an organization to produce high-quality software it has to be willing to invest in professionals with the necessary training and experience working as testers.”

Internal Testing

 The School of Banking and Commerce (EBC), one of the main business and finance universities in Mexico, recognizes the importance of software testing. Their tests are carried out internally in their Quality Assurance (QA) Department. Juan Manuel Zenil, Information and Communication Technology (ICT) Manager at the university, works with several of the user departments on the design, development and testing of apps used both by the students themselves and the university’s administrative and academic departments.

When it comes to the university’s development projects, the Grant Management System, (currently at the testing stage but with plans to start production in 2015) is noteworthy. This system (to be used in the Control Escolar Department) has been internally developed to follow up on the grant requests submitted by students. It provides information regarding the students’ qualifications and academic performance and indicates whether they comply with the EBC’s internal policies or not.

According to Zenil, internally testing software has been the best route to take for them. “Mainly because the staff involved in carrying out the testing are fully familiar with the business procedures in place. They know what to test and how each campus operates. This results in their being able to build test matrixes and procedures much more quickly than others.”

Zenil agrees that the QA department has to be completely independent from the software development department. “This is because the developers can’t possibly work both as judge and jury.  [The roles of development and testing] have to be autonomous. It is the job of the user department requesting the software to give the go ahead for production,” he explains.

According to Zenil, the creation of prototypes has become an intrinsic part of the software development and testing life cycle.

This has helped give the user a more accurate idea of exactly how the software will perform and what information it will contain. In earlier years, to develop an app or piece of software you had to fill out a request and undertake an analysis of exactly what would be required. It was up to staff from the QA department to make sure it functioned properly. Often, however, the user would claim that while the end product worked well enough it was not what they had requested.

“Now prototypes are included before even getting to the software development stage. The prototype is tested by the end user. This has considerably reduced the testing procedures and has improved the overall quality,” Zenil adds. “The app is validated during the testing stage and, depending on the type of app involved, subject to a stress test – particularly when dealing with apps used by students as it is important that they are able to withstand the work load they will be subject to.”

Business Support

As a CIO, Zenil highlights the main benefits a business can expect to see from software testing –whether it be carried out internally or by a third party. “The first benefit is a reduction in the number of problems experienced when the software finally comes into production,” he says.  “When systems are released without being fully tested they result in a long list of serious faults.”

It also helps ensure that the businesses get exactly what they are asking for, with the software performing well and meeting their specific requirements. “The testing should not just be technical but functional as well. In other words, it should help determine if the software fits the bill and, if approved, release the final version onto the market,” Zenil states.

Of course, software testing helps ensure the smooth onward running of an operation from a technical point of view. The software should be subjected to the most demanding technical trials available, to ensure that a system or application performs well under stress, and that the information it contains is protected at all times.

“Testing is Not the Enemy”

 The software development industry has evolved considerably over the last 20 years. Enrique Cortes points to how, in the past, software had to be built up from scratch. Nowadays however, it is developed in stages. “This means that one part of the software can be in the cloud while another part is on one of the business’ servers. There are a variety of parts that have to work well together and communicate with each other. This has resulted in testing becoming much more sophisticated and scientific; as the software is made up of a variety of connected parts, all located in different areas.”

Maria Clara Choucair, General Manager of the Colombian business Choucair Testing, states that, “software testing is nobody’s enemy. It is a vital part of a project and helps to considerably reduce the risk of problems reached the production line.”

For Choucair, it is vitally important that software testing be included right from the start. The quicker a problem is detected and resolved, the smaller the impact on the reputation and profitability of an organization, she says: “If testing is left until the end you could be in for some nasty surprises – many of which could easily have been detected right at the start.”

According to Victor Martinez from Tiempo Development, “there is still a long way to go before testing is given the importance it deserves. Both universities and the industry itself should play a part in making it happen,” he concludes.

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Turbulent Year Ahead for Latin American Currencies http://www.nearshoreamericas.com/currency-volatility-2015/ http://www.nearshoreamericas.com/currency-volatility-2015/#comments Tue, 23 Dec 2014 16:37:43 +0000 http://www.nearshoreamericas.com/?p=42839 By Sean Goforth The year ahead is likely to be a turbulent one for Latin American currencies. The first inklings of this came when the U.S. Federal Reserve announced plans to wind down its bond-buying program known as quantitative easing, or QE. During the “taper tantrum” of 2013, panicky investors sold off risky assets in Brazil, Mexico, Colombia, and other ...

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By Sean Goforth

The year ahead is likely to be a turbulent one for Latin American currencies. The first inklings of this came when the U.S. Federal Reserve announced plans to wind down its bond-buying program known as quantitative easing, or QE. During the “taper tantrum” of 2013, panicky investors sold off risky assets in Brazil, Mexico, Colombia, and other markets in order to get a higher return on investments in sovereign debt in the United States.

Initially, 2014 proved something of a respite for Latin American currencies, as mixed economic data in the U.S. and the fragility of the global economy led the Fed to keep the interest rates at near zero.

Oil prices stayed above $90 a barrel, a key source of stability given that the commodity is the region’s chief export and a major generator of dollars. Yet, the Fed’s termination of QE in October, coupled with the dramatic drop in oil prices, has seen Latin American currencies lose much of their value against the dollar.

Devalued currency supports export of goods and services. This is the logic behind Japan’s current easy money program known as Abenomics. But swift currency depreciations can jolt businesses that pay for goods in dollars, and stoke inflation, scare away foreign debt investors, most of them interpret a weakening currency as a sign of larger economic problem.

Brazil’s Real

Brazil’s real has dropped about 6% so far in December, and now it is at its lowest level, 2.76 per dollar, in almost a decade. There are many factors affecting Brazil’s real, including the alleged corruption scandal in Petrobras.

Even the Colombian currency has been hit hard despite the country’s solid GDP growth, moderate inflation, and sound macroeconomic management. Since July, the Colombian peso has lost more than 25% of its value against the dollar, the deepest slide of any major currency except the Russian ruble.

The Mexican peso’s decline has been just slightly more gradual. Many forecasters now predict that in 2015 the Mexican currency could reach its all-time low against the dollar.  Unlike many other currencies, the buying power of the Mexican peso matters to small businesses in the U.S.

Retailers in the border towns of Texas and Arizona are worried that fewer Mexicans will do their holiday shopping north of the border, or be visiting to buy goods next year. “They’re spending money,” Felipe Garcia, executive vice president of Visit Tucson, told Arizona Public Media earlier this week: “The only thing we’re seeing is that they’re doing so in shorter trips. If (Mexican visitors) were going to stay two nights, they’re staying just one night. If they were coming for one night, maybe they’re just coming back and forth on the same day.”

It is possible that 2015 could see investors pull out of foreign markets en masse, spreading the contagion from Russia to Latin America. The 1998-1999 Asian financial crisis could repeat itself.

A more probable scenario involves temporary spikes in exchange rates in response to Fed statements and rate hikes. Of course, peso values could stabilize as well, especially if the Bank of Japan and the European Central Bank add to global liquidity by ramping up their own quantitative easing programs. Here again, though, Latin American currencies will be driven more by global forces than domestic economic realities.

Crucially, even in cases where the region’s major currencies weaken, those movements are likely to spur benefits down the line. For example, although Mexican tourist spending in U.S. border states may decline as a result of peso weakness, Mexican goods will become cheaper, making themselves more attractive for export.

Moreover, central banks in many countries have become mute spectators of currency fluctuation. So far, this has been the case with Mexico and Colombia, both of which enjoy world-class central bank managers.

If peso continues to stoke inflation, central banks in both the countries may move to raise rates.  Low inflation and positive economic outlook strengthen their hands, leaving them ample room for adjusting rates.

 

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