Is Colombia’s BPO Sector Really Competitive?

When it comes to the economics of outsourcing services, at 55% of GDP the Colombian sector lags behind its Latin American counterparts, especially Panama, Costa Rica, Brazil and …

Camilo Montes, CEO of the PTP, says the figures of the BPO sector are bigger than expected.

When it comes to the economics of outsourcing services, at 55% of GDP the Colombian sector lags behind its Latin American counterparts, especially Panama, Costa Rica, Brazil and Uruguay, all of which boast robust GDP percentages due to BPO, KPO and ITO. That is one of the key findings of the report“Caracterización y formulación estratégica del sector BPO, KPO e ITO en Colombia” (Characterization and Strategic Formation of the BPO, KPO and ITO Sector in Colombia) co-authored by analyst firm IDC and the Colombian private-public initiative Programa de Transformacion Productiva (Productive Transformation Program – PTP) charged with improving productivity and competitiveness within economic sectors.

Issued in March 2014, the extensive annual report also found that Colombia is lacking in bilingualism, a problem the country has been struggling with for a long time.

Subjective Findings Reveal True Picture

Different from analysis conducted by objective third-party firms, the PTP report takes a very strong subjective view and arose from the deficiency in hard facts about real figures in Colombia about issues regarding the sector such as exports, income, number of employees, level of bilingualism, required human capital, regions where the companies are located and regional strengths, competitive position and development potential. “The figures of the sector are bigger than we all had in mind,” said Camilo Montes, CEO of the PTP, “for example the 2012 estimated income for the 2,615 companies in the BPO, ITO and KPO sector was $14.581 million USD compared with 2011, where the estimation was $3.620 million USD.”

This implies that outsourcing services must be taken in consideration when defining public policies and programs if the sector is to continue to grow steadily as it has been doing over the last few years, stressed Montes. The trajectory is also reflected in the number of people the sector employs which rose from 190,638 in 2011 to 319,038 in 2012.

Colombia’s capital of Bogota controls 53% of the entire sector, followed by Medellin and Cali, however, BPO is more prominent in Manizales and Barranquilla and KPOs are on the rise in Popayán. The report identifies 24 subsectors (8 BPO, 7 ITO y 9 KPO) that provides an interesting picture of where each region or city’s strengths lie. For example, Bogota leads in the vast majority of sub-sectors such as Spanish language and bilingual contact centers, logistics, Finance & Accounting services, cloud computing and data centers, legal services and graphics design, but the city falters when it comes to IT testing and KPO health services which are led by Medellin and Cali respectively.

Citing research conducted by IDC Colombia staff members Granados and Villate in 2003, 2006 and 2010, the authors of the PTP study issued a call for the elimination of taxes on ITO companies in order to foster industry growth and the financial viability of the clients of those firms: “The impact of a dollar invested in information technology and communications, pays 30 to 40 times more on GDP than a dollar invested in infrastructure, so the feasibility of eliminating taxation on investment in technology for the ITO sector with the aim of reducing their rates, increase the demand, transform businesses customers and thereby increase earnings, sales, expenses and investments and of course, the tax collection linked to them.”

BPO Growing Despite Lax English

“Colombia has a strong BPO industry that has been evolving the last years offering value added services that support its client’s competitiveness,” observed Montes and he explained that the PTP  is working with Colombia’s IT and academic sectors in order to secure access to the latest technologies and to the qualified human capital BPO companies require. “KPO is quickly growing in Colombia and we expect this to continue in that way because we have the specialized human capital and technology it requires and there are government programs that support its development,” he explained.

The report shows that companies providing BPO services are highly concentrated in contact center services and collections, followed by logistics and human resources management. Despite being the largest generator of operations worldwide, bilingual service contact center represents just 6% of total BPO operations in Colombia. Furthermore, the management of human resources globally is the largest revenue generator outsourcing, with 43%, but in represents only 11% of the turnover of the sector in Colombia, which reveals an opportunity for development and sectorial growth, as well as a lag in the development of such services in the country.

When the report was issued, Montes stated, “One of the great challenges facing the sector is the lack of bilingualism.” This was a profound moment in the sense that players so closely tied to the success of the BPO industry hardly ever speak about the shortcomings within their country. The truth to this statement is illustrated in the report findings that state the percentage of the national average of 11th grade students earning B + or B1 on the Saber 11 English language test is 6.6% with an average level of English language proficiency around the country showing at:

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This dearth of English language abilities indicate that President Juan Manual Santos’ edict to create a completely bilingual society appears to have failed, if it started at all. However, the PTP team is working closely with the Ministry of Education to provide the information needed to build a solid bilingualism policy and a so-called “bureau of bilingualism” with the goal of generating the capabilities required by the different sectors.

Strategy for Sustained Growth

Resulting from in-depth interviews with over 60 industry leaders and industry stakeholders, methodical analysis of previously collected evidence and understanding of the structural evolution of the sector globally presented the report authors designed a strategy of 10 focus areas that can be used to advance the sector:

1. Association
2. Evolution of the proposed sectorial value
3. Momentum of exports
4. Opportunities and trends
5. Driving cross-sectorial relationships and micro-businesses
6. Attracting investment of major global players
7. Development of large local players
8. Intensive design of skilled human capital for the sector
9. Create a model of outsourcing services by the state
10. Development of Impact Sourcing

The overall findings of the PTP study are being presented to key players across Colombia with the intention that the sector is developed according to the strengths and opportunities found. Montes expects that BPO/KPO/ITO will continue to grow domestically and that the country will export more of these services. “All the activities the Government and associations are executing will end with BPO KPO and ITO working together to offer more specialized services, educational institutions providing programs that support the sector´s needs,” he said. “In five years BPO KPO and ITO will be stronger and consolidated sectors that will bring more social and economic development to Colombia.”

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