Nearshore Americas | The New Axis of Outsourcing http://www.nearshoreamericas.com Experts in BPO, IT and Software in Latin America and the Caribbean Mon, 13 Apr 2015 16:42:47 +0000 en hourly 1 Satyam Founder Sentenced to Seven Years of Imprisonment http://www.nearshoreamericas.com/satyams-raju-sentenced-years-imprisonment/ http://www.nearshoreamericas.com/satyams-raju-sentenced-years-imprisonment/#comments Mon, 13 Apr 2015 16:38:24 +0000 http://www.nearshoreamericas.com/?p=44695 By Narayan Ammachchi A court in India has condemned Ramalinga Raju, the founder of Satyam Computers, to seven years in jail, in one of the country’s biggest ever corporate scandals involving an IT outsourcing firm. The sentence ends almost six years of investigation by India’s federal investigative agency, the CBI. Known as the Enron scandal of India, the Satyam affair almost threatened ...

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By Narayan Ammachchi

A court in India has condemned Ramalinga Raju, the founder of Satyam Computers, to seven years in jail, in one of the country’s biggest ever corporate scandals involving an IT outsourcing firm. The sentence ends almost six years of investigation by India’s federal investigative agency, the CBI.

Known as the Enron scandal of India, the Satyam affair almost threatened to spoil the prospects of the nation’s entire outsourcing industry. It came to light in January 2009, when Raju confessed that he had overstated the company’s profits for years and falsified assets.

Days after his confession, the company’s share price nosedived, with investors from around the world losing well over US$2 billion.

Soon Mahindra & Mahindra, one of India’s largest conglomerates, bought Satyam for almost a throwaway price, and renamed the company Mahindra Satyam. The name Satyam, which means “truth” in Sanskrit, was so tainted that Mahindra later further rebranded the company as Tech Mahindra.

Today Raju is behind the bars, but Tech Mahindra has grown into a large IT services firm, with the company aggressively competing with the likes of TCS and Infosys in the global marketplace.

Along with Raju, eight other former executives of the company have also been found guilty, with each receiving a seven-year prison term. The court has also slapped a fine of $800,000 on Raju, while the other defendants were each fined five million rupees ($80,000).

The son of a farmer in India’s southern state of Andhra Pradesh, Raju established Satyam Computers in 1987. Within a few years, Satyam had became the country’s fourth largest IT services provider, with its stock being listed on both the New York and Indian stock markets.

Satyam Infoway, a subsidiary of Satyam Computers, became the first Indian information and communication technology company to be listed on the Nasdaq. When it collapsed, Satyam had a footprint to 30 countries and a large clientele in North America and Europe.

Raju has appealed against the verdict in a higher court.

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KM2 Solutions Reshuffles Management to Focus on Innovation http://www.nearshoreamericas.com/km2-solutions-reshuffles-management-focus-innovation/ http://www.nearshoreamericas.com/km2-solutions-reshuffles-management-focus-innovation/#comments Mon, 13 Apr 2015 15:57:14 +0000 http://www.nearshoreamericas.com/?p=44675 By Narayan Ammachchi KM2 Solutions has reshuffled its managing board, with Dana Brandon Kreiss, the former Investment Strategist of U.S. Trust, taking charge of the company’s marketing initiatives in the Americas. In a statement, the company announced that Kreiss will replace senior director Daniel Aristimuno, who has been promoted to Vice President of Client Services and Business Development. The new appointment ...

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By Narayan Ammachchi

KM2 Solutions has reshuffled its managing board, with Dana Brandon Kreiss, the former Investment Strategist of U.S. Trust, taking charge of the company’s marketing initiatives in the Americas.

In a statement, the company announced that Kreiss will replace senior director Daniel Aristimuno, who has been promoted to Vice President of Client Services and Business Development.

The new appointment comes almost a month after the outsourcer landed a contract with a U.S. telecom firm to provide call center services. Company officials have confirmed that its call center in the Honduran city of San Pedro Sula will provide customer care service to this unnamed U.S. carrier.

Named as Senior Director of Client Services, Kreiss will be responsible for the management of key client accounts, fostering operational relationships between the clients and company, and spearheading new corporate marketing initiatives.

Kreiss was previously an investment strategist for U.S. Trust, the private wealth management subsidiary of Bank of America. He holds an MBA degree from New York University.

One of the fastest growing voice-based BPO providers in the nearshore region, KM2 Solutions started out with small operations in the Caribbean country of St. Lucia. It later expanded to the Dominican Republic, Barbados and Grenada. Today its biggest bilingual call center is in San Pedro Sula, Honduras.

In 2012, the BPO provider was named Caribbean Contact Center of the Year by the Caribbean Business Awards. KM2, according to its website, employs more than a thousand people, with the majority of them based in Honduras.

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Cuba, Central America Top U.S Agenda at 7th Summit of the Americas http://www.nearshoreamericas.com/resurgent-sets-agenda-favor-cuba-central-america-7th-summit-americas/ http://www.nearshoreamericas.com/resurgent-sets-agenda-favor-cuba-central-america-7th-summit-americas/#comments Mon, 13 Apr 2015 14:45:09 +0000 http://www.nearshoreamericas.com/?p=44655 By Sean Goforth Traditionally, the Summit of the Americas is a get-together that succeeds in showing how the hemisphere is, politically at least, coming apart. During the commodity super cycle from 2005-2012, when Hugo Chavez espoused an anti-American path toward economic development that gained adherents across a wide swath of the region, the conference served as little more than a ...

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By Sean Goforth

Traditionally, the Summit of the Americas is a get-together that succeeds in showing how the hemisphere is, politically at least, coming apart. During the commodity super cycle from 2005-2012, when Hugo Chavez espoused an anti-American path toward economic development that gained adherents across a wide swath of the region, the conference served as little more than a launch pad for verbal fireworks. More often than not the United States and its traditional allies, Colombia and Mexico, were mere spectators.

The 7th Summit shaped up quite differently. Given that Venezuela’s recession spells the end of generous handouts to Caracas’s professed allies, and that Chavez’s successor, Nicolas Maduro, is looking more and more desperate by the day, Venezuela is something of a spent force in the region.

Meanwhile, the United States has a strengthening economy, and has re-emerged as an energy player in the hemisphere. This is drawing more countries to seek closer trade ties with el norte. So, unlike recent summits, this time around many Latin American delegates steered clear of Venezuela and walked toward the United States.

Adding a bit of urgency, the 7th Summit was one of the last chances for many leaders from Latin America to engage with President Obama. The 8th Summit in Suriname is due to be held in 2018; by then someone else will occupy the White House. And even though Obama will be in office until January of 2017, most of his energy this year and next will likely go toward shoring up the projects that will burnish his legacy, namely securing the future of his namesake healthcare reform, and addressing some of the security challenges posed by terrorist groups in Africa, the Middle East and Asia.

Hence, the stage was set last weekend for the 7th Summit, held in Panama City, to be most meaningful since the First Summit in 1994. Of greatest importance was the prominent role that Cuba and Central America enjoyed.

Cuba, Central America…South America?

The most symbolic change was Cuba’s attendance at the Summit of the Americas. Until now, Cuba had been blackballed from the summit because the founding members decided in 1994 that they wanted the venue to uphold democratic values; that decision was reversed in 2012, paving the way for Cuba’s attendance this year.

Obama and Cuban leader Raul Castro shook hands and meet for an hour. One major change that Havana is pushing for is an end to the U.S. declaration of Cuba as a state sponsor of terrorism. Senate and White House aides reported before, during, and after the summit that Obama is working to drop the classification, which would pave the way for Cuba to gain access to global financial markets. But no major announcement occurred at the summit.

Beyond this, both sides tempered enthusiasm over a speedy restoration of U.S. ties with Cuba. On Saturday, with Obama sitting next to him, Raul Castro reiterated, “we need to be patient, very patient.” From Obama’s perspective, the quick move came on Dec 17, and now any steps he takes are likely to run up against the opposition of anti-Castro groups in Florida and New Jersey, the reality of Cuba’s paltry human rights records, and the bureaucratic weight of five decades of U.S. policies designed to isolate Cuba on the international stage. For Castro, the ultimate concern is ensuring that opening of the economy does not trigger calls for political reform that could threaten Castro’s hold on power.

Also, in recent months the Obama administration has launched an effort to help spur the development of Central America, as signified by a 2016 fiscal budget that calls for an additional $1 billion in aid to Central America.

James Bosworth, Director of Analysis at Southern Pulse, points out that Obama arrived in Panama City in a position of strength: “President Obama’s administration has managed a level of sustained engagement in both [Central America and the Caribbean] that has helped rebuild US influence and friendships.” Capping this off, Bosworth notes that recent US proposals to increase economic and security aid in Central America has been welcomed across the trouble spots of El Salvador, Guatemala and Honduras.

Nexus 2015: U.S. Dep. Asst. Secretary of State Francisco Palmieri will outline the Obama administration’s plans to energize Central American economies.

Nexus 2015: U.S. Dep. Asst. Secretary of State Francisco Palmieri will outline the Obama administration’s plans to energize Central American economies.

On April 30, U.S. Dep. Asst. Secretary of State Francisco Palmieri will detail the Obama administration’s plans to energize Central American economies in the Nexus 2015 keynote address.

Facebook CEO Mark Zuckerberg’s prominence in Panama City was one big surprise. In a business conference held alongside the summit, Zuckerberg hinted that Facebook saw Cuba as a potential destination for investment: “One day, as Cuba starts opening up, it will be something we might consider.” The cautious words nonetheless stirred frenzy. Zuckerberg’s express purpose was to champion Internet.org, a wide-ranging collaboration that includes big business, NGOs, and communities. Zuckerberg also met with Brazil’s Dilma Rousseff and, in a press conference with Panamanian President Juan Carlos Varela, announced that through Internet.org all Panamanians will have access to the Internet.

Still, this does not add up to broad U.S. reengagement with Latin America. An actionable consensus on immigration and trade remains elusive. And the focus on Central America is not without its critics, especially those who would like to see more intensive U.S. engagement across all of Latin America. Miami Herald columnist Andres Oppenheimer recently asked, “Has the United States given up on South America?”

At least for the duration of President Obama’s term the answer may be ‘yes,’ but even so that’s not necessarily a bad thing. For starters, greater U.S. involvement in South America has backfired consistently over the past two decades. In the present context, it is easy to imagine an active but clumsy U.S. policy in South America rescuing the Maduro government from a collapse of its own making by energizing the Chavista ranks, while also renewing dormant frictions over U.S. military partnerships in the region.

Obama’s best option for now involves letting the region’s populists keep up their old antics while showing that Washington is an honest broker in its select dealings.

Realistic Expectations

As with most high-profile conferences, the real importance of the 7th Summit will be determined by the policies and cooperation it inspires. And there is even more reason to be cautious this time around given that many countries are just beginning to feel the sting from the end of Venezuela’s generous oil diplomacy, and this threatens to choke off budding economies from Jamaica to Cuba. It’s not at all clear how the Caribbean and Central America will secure oil and gas in the future.

On a deeper level, Latin America’s most stubborn problem is not one Washington can readily solve: inequality. Over the past two decades, groups like USAID have played a major role in helping South American governments devise welfare programs. These have succeeded in getting children elementary education, reducing hunger, and expanding access to basic healthcare. Poverty has been dramatically reduced as a result, and today “extreme poverty”—defined by the World Bank as income of less than $1.25 a day—has been largely eliminated, except in pockets of Latin America.

Eric Olson, Associate Director of the Latin American Program at the Woodrow Wilson Center, said the U.S. should not extend a blank check to Latin America.

Eric Olson, Associate Director of the Latin American Program at the Woodrow Wilson Center, said the U.S. should not extend a blank check to Latin America.

However, in other respects broad plans for development has yielded few results, and as the U.S. reengages with the region the remedy is likely to involve finding the right bureaucratic partners, then slowly advancing better governance by increasing tax compliance and cleaning up law enforcement. “The U.S. should not extend a blank check to the region,” says Eric Olson, Associate Director of the Latin American Program at the Woodrow Wilson Center. Rather Olson notes that Washington should, “reach prior and mutual agreements with each country around benchmarks for success, disbursing resources as benchmarks are met.”

Further work on development will have to be carried out over the coming months and years. But even though such measures rarely grab headlines, Bosworth notes that the groundwork is already in place. Recent initiatives aimed at Central America and the Caribbean, he says, “are smart long-term policies that will pay benefits over decades.”

Even if the summit only succeeds in bringing together select parts of the hemisphere, that’s still progress, especially given the divisions that have persisted across governments in the Americas up to this point in the 21st century.

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Titanic Hero’s Eco-Resort in Belize Aims to ‘Heal the Island’ http://www.nearshoreamericas.com/titanic-hero-dicaprio-build-ecoresort-belize/ http://www.nearshoreamericas.com/titanic-hero-dicaprio-build-ecoresort-belize/#comments Mon, 13 Apr 2015 14:44:26 +0000 http://www.nearshoreamericas.com/?p=44669 By Narayan Ammachchi Actor Leonardo DiCaprio is building a luxurious eco-resort on a tiny island off the Caribbean coast of Belize. DiCaprio, who in recent years has become an environmentalist and green speaker, wants to demonstrate how the hospitality industry can prosper by reviving the ecology rather than destroying it. Sandwiched between Mexico and Guatemala, Belize is said to be home ...

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By Narayan Ammachchi

Actor Leonardo DiCaprio is building a luxurious eco-resort on a tiny island off the Caribbean coast of Belize. DiCaprio, who in recent years has become an environmentalist and green speaker, wants to demonstrate how the hospitality industry can prosper by reviving the ecology rather than destroying it.

Sandwiched between Mexico and Guatemala, Belize is said to be home to the world’s most biodiverse marine life. Significantly, it was the cradle of Mayan civilization. Here lie the temples that tell the tale of Mayans. With secret beaches and Mayan ruins, Belize offers one of the most beautiful Caribbean escapes for tourists.

The island in question is called Blackadore Caye, which DiCaprio purchased with Jeff Gram in 2005 for $1.75 million.  The actor, according to reports, fell in love with the Caribbean country after he stayed at Gram’s luxury resort, Cayo Espanto, in 2004.

New York City-based Delos has reportedly agreed to develop the resort, while architectural firm Jason F McLennan has designed the blueprint of the project.

The resort will have about 68 villas, infinity swimming pools and sunset views for its wealthy guests. After the guests watch the sunset and frolic in the pool, they can turn on special lighting that induces sleep.

There will also be spa services and fine dining restaurants. The special feature of the resort will be its solar-paneled airstrip, which will generate additional electricity. It will also include private pools with direct access to beaches.

Reports say DiCaprio also has plans to build a small runway for private aircrafts. That means the resort will cater to wealthy clients and possibly several famous friends of DiCaprio.

Blackadore Caye is currently fighting for survival due to overfishing, erosion and deforestation. The resort will however transform it completely, restoring it back to its former glory. His goal is to heal the island.

The Hollywood actor has told the New York Times that he would replant the island’s unique marine grass to support the manatee population and replant mangrove trees to replace the invasive species that have moved into the area. “A team of researchers will monitor the resort’s impact on its surroundings.”

The New York Times also reports that Deepak Chopra will “spearhead a program focused on health and anti-aging” at the resort.

Thanks to his newfound love for greenery and wildlife, DiCaprio has been named UN Messanger for Peace. UN Secretary-General Ban Ki-Moon calls him a “new voice for climate advocacy.”

It seems the actor is of the belief that he can strengthen the environment by employing natural resources such as water, sun and wind, and ensuring that the resort has zero negative impact.

DiCaprio is the second popular Hollywood actor to be lured by the Caribbean. Last year, Robert De Niro announced plans to develop a luxury resort on the island of Barbuda.

If everything goes according to plan, the resort will open in 2018.  A nearby island Ambergris Caye is already popular with foreign vacationers.

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AT&T Fined $25 Million for Customer Data Breach at Mexico Call Center http://www.nearshoreamericas.com/att-agrees-pay-25-million-customer-data-breach-call-centers/ http://www.nearshoreamericas.com/att-agrees-pay-25-million-customer-data-breach-call-centers/#comments Thu, 09 Apr 2015 17:23:35 +0000 http://www.nearshoreamericas.com/?p=44625 By Narayan Ammachchi AT&T has agreed to pay US$25 million in fines after two employees at its call center in Mexico confessed to accessing customers’ information and reselling it to strangers. Analysts say this is the largest fine ever issued by the U.S. telecom regulator for data security and privacy violations. The settlement comes amid intense federal investigation into AT&T’s ...

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By Narayan Ammachchi

AT&T has agreed to pay US$25 million in fines after two employees at its call center in Mexico confessed to accessing customers’ information and reselling it to strangers. Analysts say this is the largest fine ever issued by the U.S. telecom regulator for data security and privacy violations.

The settlement comes amid intense federal investigation into AT&T’s call centers in Mexico, Colombia and the Philippines. Neither the FCC nor AT&T has disclosed the name of the vendor that ran the call center on behalf of the telecom operator.

“This puts outsourcers under a lot of pressure,” said Peter Ryan, Lead Analyst with research firm Ovum, adding that data security is the big issue on the minds of both buyers and service providers.

“This is a drawback for the call center industry in Mexico, Colombia, Central America and also the Caribbean,” Ryan told Nearshore Americas.

Chief Global Strategy Officer for KM² Solutions, Maggi Williams does not think that nearshore operations are any more vulnerable to such scams than anywhere else. “The nefarious fiddler and thief is likely to pop anywhere and find the hole in the process that enables him or her. Sounds as though knowledge of this particular hole was pretty well spread around,” she said.

Globally call center data breaches and fraud are nothing new, but the settlement highlights the vulnerability of such centers. According to research by Pindrop Security, an Atlanta-based “phoneprinting” start-up, one in 2,900 calls to contact centers are attempts at identity theft. Pindrop’s researchers examined 105 million phone calls and looked at how fraudsters conned call agents.

The threat of insider collusion with fraudsters as in the case of AT&T employees selling data makes preventing such fraud even more difficult as they are able to access the stored data relevant to the customer. According to the Federal Communications Commission (FCC), the two AT&T employees disclosed personal details of almost 280,000 U.S. customers, including “full or partial” Social Security numbers.

This came to light in May last year when the FCC began investigating the suspected data breach at AT&T’s Mexico call center, which handles calls from Spanish-speaking U.S. customers. Who tipped off the FCC?  Ryan said, “it’s anybody’s guess. I think some employees at the call center informed the U.S. regulator.”

The investigation found that employees accessed protected account-related data, known as customer proprietary network information (CPNI), and obtained other personal information that customer care agents ask for before unlocking a customer’s mobile phone. The employees then sold that information to “unauthorized third parties” who allegedly peddle stolen cell phones or secondary market phones and also try unlocking such devices.

According to Ryan, “There has not been a significant issue around bribery historically, but we have had some anecdotal evidence of gang activity popping up in call centers in some Central American countries.”

To prevent such breaches, Ryan said call center operators have to check the criminal background of every new recruit to make sure that they have good credit rating. “When it comes to securing internal processes, they have to put in place a system that will lock the computers whenever managers find something suspicious. They even need to make sure that there are no personal devices on the floor, including pen and paper.”

Williams echoed Ryan’s comments, adding that she was “surprised that the service provider had such lax security protocols that this particular breach was able to go on so long and not become scuttlebutt in the call center.”

She said: “If you look at all of the things we try to do in terms of monitoring of agents, not having cell phones on the floor, no pen and paper, the industry tries to prevent this type of thing. Obviously people do find ways around it.”

Ryan said his firm recently conducted a survey during which they asked enterprises what qualities they look for when choosing outsourcer. Data security and fraud prevention appeared to be the second important factors for them, he said. “The security of clients’ data is absolutely top of mind for nearshore providers,” Williams added.

As part of the settlement, AT&T must put in place robust internal processes to prevent future breaches and notify customers if and when their personal details are stolen.

FCC Chairman Tom Wheeler stated that “the agency cannot and will not stand idly by” when a carrier’s lax data security practices expose the personal information of hundreds of thousands of Americans. He went on to say that the agency will punish every phone company that fails to safeguard the personal information of customers.

Travis LeBlanc, Chief of the Enforcement Bureau, stated that the regulator will make sure that all phone companies properly secure customer data and promptly notify customers when their personal data has been breached.

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Cuba Hopes for an Image Makeover as Obama Meets Latin American Leaders http://www.nearshoreamericas.com/obama-panama-cuba-hopes-image-makeover/ http://www.nearshoreamericas.com/obama-panama-cuba-hopes-image-makeover/#comments Wed, 08 Apr 2015 17:00:17 +0000 http://www.nearshoreamericas.com/?p=44616 By Narayan Ammachchi President Barack Obama’s meeting with regional leaders at this week’s Summit of the Americas is likely to lead to the United States removing Cuba from the list of state sponsors of terrorism. Such a decision, analysts say, would not only warm the relations between the two countries but also dramatically enhance Cuba’s economic prospects. But the Latin American leaders waiting ...

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By Narayan Ammachchi

President Barack Obama’s meeting with regional leaders at this week’s Summit of the Americas is likely to lead to the United States removing Cuba from the list of state sponsors of terrorism. Such a decision, analysts say, would not only warm the relations between the two countries but also dramatically enhance Cuba’s economic prospects.

But the Latin American leaders waiting to meet Obama in Panama City do not appear overly concerned with Cuba; instead they are expected to pressure the U.S. president to lift the sanctions imposed on Venezuela, another socialist country whose economy is in the doldrums in the wake of a sudden drop in global oil prices.

The Union of South American Nations (UNASUR) has already urged Obama to revoke the sanctions through an executive order, while other organizations have launched a petition in support of this measure.

Unlike the last summit, analysts say Obama is better positioned to deal with Latin American leaders this time. According to a recent survey from Pew Research, the majority of Latin Americans now have positive attitude toward the United States.

In eight of nine Latin American countries, majorities see the North American giant in a favorable light. Salvadorans (80%) are particularly positive in their assessment, as are Chileans (72%) and Nicaraguans (71%).

Despite all the tension between Washington and Caracas, 62% of Venezuelans have a favorable opinion of the United States, although less than four-in-ten Argentines (36%) are positively disposed toward the country.

Brazilian President Dilma Rousseff is reportedly considering rescheduling her visit to Washington, which she cancelled in 2013 following revelations that the U.S. National Security Agency spied on her.

Obama will stopover in Jamaica on his way to Panama City, where the summit gets underway on Thursday.

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Chile’s Economy is Showing Strong Signs of Recovery http://www.nearshoreamericas.com/chiles-economy-shows-strong-signs-recovery/ http://www.nearshoreamericas.com/chiles-economy-shows-strong-signs-recovery/#comments Wed, 08 Apr 2015 14:59:49 +0000 http://www.nearshoreamericas.com/?p=44599 By Narayan Ammachchi Chile’s economy appears to be recovering from the recent slowdown, with retail sales and services offsetting the drop in mining activity. According to the country’s central bank, the economy grew 2% in February, compared to the same month in 2014. Although below the 2.7% growth the country experienced in January, that figure confirms that the South American country is ...

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By Narayan Ammachchi

Chile’s economy appears to be recovering from the recent slowdown, with retail sales and services offsetting the drop in mining activity. According to the country’s central bank, the economy grew 2% in February, compared to the same month in 2014.

Although below the 2.7% growth the country experienced in January, that figure confirms that the South American country is steadily easing out of recession.

The figures come from the Central Bank’s Monthly Economic Activity Index, or Imacec, which incorporates 91% of the goods and services included in the gross domestic product (GDP).

Chile’s economy slowed down last year as the demand for commodity decreased substantially in the global marketplace. Chile is one of the biggest exporters of minerals, particularly copper.

The drop in commodity prices halted mining activity in several sites across the country, leading to the loss of thousands of jobs. In August last year, unemployment rate rose to a record 6.7%, while factory output shrunk by 4.9%.

Chile’s labor force numbered 8.36 million people in the three months leading up to last August, of whom 560,180 were unemployed. The primary cause of the slowdown, according to analysts, was the decreasing investment in mining, although the financial services and tourism sectors also shed a large number of jobs.

The central bank cut interest rates several times last year, but the banks continued to cut back on lending, blaming low consumer confidence. The latest figure from the central bank confirms that consumer confidence is improving, albeit slowly.

Throughout last year, there was a tremendous pressure on President Michelle Bachelet to inject money into the economy and reverse the trend. Now it seems Bachelet’s efforts are paying off.

Still, Bachelet must do more to keep the economy growing, because the Chilean peso has dropped 24% in value over the past two years.

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Nearshore Americas Geo Sprint: Caribbean http://www.nearshoreamericas.com/nearshore-americas-geo-sprint-caribbean-2/ http://www.nearshoreamericas.com/nearshore-americas-geo-sprint-caribbean-2/#comments Wed, 08 Apr 2015 14:54:30 +0000 http://www.nearshoreamericas.com/?p=44611 A data-rich snapshot of the global services investment opportunity for the Caribbean.

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A data-rich snapshot of the global services investment opportunity for the Caribbean.

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Latin America Claims Part of the ‘Subscription Economy’ Pie, But Challenges Remain http://www.nearshoreamericas.com/latin-america-subscription-economy-pie-challenges-remain/ http://www.nearshoreamericas.com/latin-america-subscription-economy-pie-challenges-remain/#comments Wed, 08 Apr 2015 14:45:05 +0000 http://www.nearshoreamericas.com/?p=44583 By Anna Heim According to Gartner, 35 percent of the Global 2000 companies will generate revenue through subscription-based services and revenue models by the end of this year. Latin America is also following the same trend, and represents an interesting opportunity for those who are able to overcome its specific challenges. There is no doubt that the market is huge, ...

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By Anna Heim

According to Gartner, 35 percent of the Global 2000 companies will generate revenue through subscription-based services and revenue models by the end of this year. Latin America is also following the same trend, and represents an interesting opportunity for those who are able to overcome its specific challenges.

There is no doubt that the market is huge, and it is already bearing fruits for global B2C companies. As Netflix revealed during its fourth quarter 2014 earnings report, the film and TV streaming company has passed the milestone of 5 million subscribers across the region, with more to follow. “If you take that 5 million number that we talked about, and 65 million in terms of addressable [market], we think we’ve got a lot of room for growth in the market,” its CFO David Wells told shareholders during the earnings call that ensued.

In return, these big players are boosting the adoption of subscription models in Latin America, while creating new consumption habits. Once consumers have tried these offers and understood their convenience, they are much more likely to request similar payment facilities for other verticals. This is true for B2C, but also for B2B, with giants such as SAP entering the subscription economy to adapt to changing demands.

A panel discussion on subscription services at the Assinaturas Day in São Paulo

A panel discussion on subscription services at the Assinaturas Day in São Paulo

However, Latin America presents a unique set of challenges for subscription-based models, for which foreign companies need to be prepared. During its first months of operation in the region, Netflix made sure to keep shareholders informed about the difficulties it was facing on its path to success — which made its good results a pleasant surprise to non-believers.

“We’ve had payments issues and e-commerce trust issues that we’ve wrestled with and improved over the last 3 to 3.5 years,” Wells explained. “For example, many banks turn down all e-commerce debit card transactions due to fraud risk, making it a more challenging environment than our other markets,” the company noted in a previous letter to investors.

Brazil’s ‘Boleto’

Netflix made particularly clear that it would have to adapt to the “uniquely Brazilian form of payments known as Boleto Bancário.” Skype’s website gives one of the best explanations of this online/offline concept from a consumer perspective. “When you pay with Boleto Bancário, you can either visit a bank or retail outlet to make the cash payment, or pay via your online banking account,” it notes.

However, it also adds a warning: “Although we provide you with a payment confirmation in real time, the payment can take a little while to go through — generally three to seven days from the date of payment for the product to show up in your Skype account, but it can take longer depending on your bank.” As The Brazil Business points out, providers need to take other rules into account as well, such as the fact that overdue fees vary from bank to bank.

This can quickly become a headache for subscription services. Factor in fraud and default rates unseen in other markets, and it is understandable why many foreign companies may struggle when they first enter Latin America — not to mention the potential logistics pains if they sell physical products.

Benchmark’s Case

Benchmark Email can now charge customers in Brazilian currency, both via local credit cards and via 'boletos'.

Benchmark Email can now charge customers in Brazilian currency, both via local credit cards and via ‘boletos’.

In the case of US company Benchmark Email, its main difficulty was payment processing, Brazil manager Fillipo Madella recalls. When the DIY email marketing company started operations in the country in March 2013, it found out that many businesses — even larger ones — were unable to pay in dollars and/or via credit cards. As a result, its staff had to manually issue ‘boletos’ in Brazilian currency each month to charge its subscribers. “We were losing clients,” he confessed.

According to Madella, things changed when Benchmark started to work with Brazilian startup Vindi, which provides companies with recurring billing solutions. “It solved this problem for us,” he says. Benchmark is now able to charge clients in Brazilian currency, both via local credit cards and via ‘boletos.’ Not only does it generate less work behind the scenes, but it also remove barriers to entry, as clients feel more inclined to trust Benchmark.

Bench Email Brazil manager Fillipo Madella explain stat Brazil was the first country where Benchmark adopted recurrency - but others will follow.

Benchmark Email Brazil manager Fillipo Madella says Brazil was the first country where Benchmark adopted recurrency.

As a result, Benchmark might eventually adopt similar practices in other Latin American countries; it already has offices in Colombia, Guatemala and Mexico, which presents its own payment challenges, such as a preference for wire transfers. “Brazil was the first country where we implemented local recurrency, because of demand for ‘boletos’, but I think others will follow,” Madella predicted.

This reality creates many openings for a company like Vindi, which has been growing fast since its creation in 2013. According to its founder and CEO, Rodrigo Dantas, it hopes to reach 1,300 clients this year, mostly organically. “The recurrency market is booming in Brazil, and companies are looking for a service like ours,” he said.

Learning From Shoes4you

Vindi founder and CEO, Rodrigo Dantas hopes to reach 1,300 clients this year.

Vindi founder and CEO, Rodrigo Dantas hopes to reach 1,300 clients this year.

A former banking executive at Itaú Unibanco, Dantas was convinced to push forward with Vindi when he witnessed first-hand the failure of Brazilian Shoedazzle clone Shoes4you, which sent new pairs of shoes to its members on a recurring basis. Despite funding from high-profile investors such as Accel Partners, Redpoint Ventures and Flybridge Capital, the company’s managing team decided to cease operations in 2013 (its brand assets have since been sold).

Shoes4you’s core problem? A lack of proper payment tracking, which caused an unexpected hole in its business model. As a matter of fact, some members started to cancel payments directly through their banks, perhaps to bypass the company’s somewhat cumbersome cancellation process. Unfortunately, Shoes4you took weeks to notice, and kept on shipping them shoes in the meantime; word of the bonanza soon leaked out, and what started out as a small problem became a huge cash leak. When the company found out, it decided it was already too late, and ended up closing shop.

“I asked Accel whether Shoes4you would have closed had it used Vindi, and I was told it wouldn’t have, which convinced me to step on the gas pedal,” Dantas recalled. In addition to online subscription clubs, Vindi’s partners now also include offline businesses, such as English teaching schools and fitness centers.

Ongoing Migration

SmartFit uses Vindi's recurring billing solutions for its low-cost gyms.

SmartFit uses Vindi’s recurring billing solutions for its low-cost gyms.

One of Vindi’s international clients is low-cost gym chain Smartfit, which boasts a 700,000 client base through its 230 clubs in Brazil, Chile, Mexico and the Dominican Republic. With a monthly price point below US$25, it ended up driving smaller competitors out of business when they failed to adopt payment practices that were as favorable to customers.

While monthly subscriptions may seem similar to payments in installments, which have been extremely common in Brazil, they have the advantage of not generating any debt. Furthermore, they don’t involve credit card limits, which make them well suited to the country’s current economic context. “The migration has already started,” Dantas says.

This belief in the subscription economy led Vindi to organize Assinaturas Day (“Subscription Day”), a series of networking events aimed at federating its sector and discussing its issues. The latest and fourth edition took place within BRNewTech‘s monthly meetup in São Paulo, and attracted 250 attendees. Considering its success, Assinaturas Day could also turn into a full-blown conference, not unlike the Subscribed event organized by Zuora, which is one of Vindi’s US counterparts.

Building From Latin America

Leandro Faria, co-creator of metrics tracking dashboard Saasmetrics.co, says although it is till in private beta, Saasmetrics already has 51 clients.

Co-creator Leandro Faria says that, although it is still in private beta, Saasmetrics already has 51 clients.

One of the three entrepreneurs invited by Vindi to pitch their idea at BRNewTech’s event was Leandro Faria, co-creator of metrics tracking dashboard Saasmetrics.co, which focuses on subscription businesses. Although it started out as an in-house project within Stefanini’s big data venture Datastorm, it is now picking up steam on its own.

While it is still only in private beta, it already has 51 clients. Interestingly, most of these do not come from Brazil or Spanish-speaking Latin America: 54% are from the US and 21% from EMEA, Faria said. In addition, 112 companies have joined Saasmetrics.co’s waiting list to start testing its public beta as soon as it launches.

“We aren’t actively working on distribution and customer acquisition yet, but we might initially focus on the US, also because the main platforms we are integrating for automatic data collection (such as Stripe and HubSpot) have higher penetration rates there. We may give special attention to SaaS in the beginning, but our goal is to serve as a base for any subscription business,” he explained.

Beyond Monthly Billing

A demo of Saasmatrics' tracking dashboard.

A demo of Saasmatrics’ tracking dashboard.

Faria has also been sharing interesting advice with companies that want to launch their first subscription offers. In a blog post, he cautioned them against automatically associating subscriptions with monthly billing cycles, which can cause cash flow issues. “Yearly billing can make all the difference in the world for the health of your SaaS business,” he said.

Leiturinha co-founder Guilherme Martins emphasizes the need for retention incentives.

Leiturinha co-founder Guilherme Martins.

More generally, subscription-based companies can benefit from well-thought retention incentives. For instance, Brazilian book club for kids Leiturinha offers several pricing levels: “the longer the subscription period, the smaller the monthly price,” co-founder Guilherme Martins explained. The formula seems to have worked well, with the company now shipping books to more than 6,000 subscribers, for whom reading is quickly becoming a habit.

According to Dantas, this is one of the requirements for success: having a product or service whose consumption is truly recurring. Once that basic criterion is met, companies can now rely on a growing set of tools to track their metrics and boost their revenue. One thing is for sure: in Latin America and elsewhere, the subscription economy is here to stay.

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Conflicting Views on Latin America’s IT Services Growth, But Cloud Still Seen As Key Driver http://www.nearshoreamericas.com/strong-growth-forecast-latin-americas-services-market-region-quick-harness-cloud-technology/ http://www.nearshoreamericas.com/strong-growth-forecast-latin-americas-services-market-region-quick-harness-cloud-technology/#comments Tue, 07 Apr 2015 15:45:38 +0000 http://www.nearshoreamericas.com/?p=44575 By Duncan Tucker The Latin America IT outsourcing market is set to almost double in value from US$38.08 billion in 2014 to US$65.76 billion by 2019, according to a new study by market research firm TechNavio. The report, titled “IT Services Market in Latin America 2015-2019“, forecasts market growth to quicken from 9.74% in 2014 to 13.24% by 2019, equating to ...

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By Duncan Tucker

The Latin America IT outsourcing market is set to almost double in value from US$38.08 billion in 2014 to US$65.76 billion by 2019, according to a new study by market research firm TechNavio.

The report, titled “IT Services Market in Latin America 2015-2019“, forecasts market growth to quicken from 9.74% in 2014 to 13.24% by 2019, equating to a healthy compound annual growth rate of 11.55%. This is “natural” and inevitable growth, as more companies in the region become aware of the benefits of IT outsourcing and realize that they do not have the personnel to take advantage of the latest technology themselves, the author of the report, Faizan Akhtar, told Nearshore Americas.

However, Guilherme Campos, IT Industry Analyst at Frost & Sullivan, challenged this prediction, stating that it is unlikely for the market to exceed one-digit growth in this period. “In countries like Colombia, Mexico and Peru there is an expectation for two-digit growth in the years to come,” he told Nearshore Americas, “but Brazil, which accounts for half of the market, is expected to experience one-digit growth of about 7% or 8%. Even considering that some smaller countries are growing by two digits, I think 11.5% is a bit too optimistic.”  The IT services market usually grows at about three times the rate of GDP in Latin America, Campos explained. With recent studies forecasting GDP growth of about 2.5% for the next few years in Latin America, the IT services market will not experience two-digit growth, he concluded.

The TechNavio report shows that Brazil continues to dominate the Latin American IT services market with a 50.39% market share, followed by Mexico (15.1%), Argentina (6.43%), and Chile (4.48%), while the rest of Latin America combined accounts for the remaining 23.6%. Of the major players in the market, Campos noted that Brazil is currently losing market share, along with Argentina and Venezuela, while Mexico, Colombia, Peru and to a lesser extent Chile are all growing faster and gaining market share.

While the Latin American market is still “lagging behind other more mature markets like APAC (the Asia-Pacific region) and the United States,” Akhtar noted that businesses in the region have a greater appetite to try out new technologies. “When it comes to new technology like Cloud and mobility these guys are actually going and testing it out,” he said. Campos agreed that Latin American companies are early adopters and that the market makes a good laboratory for the testing of new technology such as cloud. “The main reason way companies turn to cloud is to reduce costs,” he said, noting that there is greater potential for savings in Latin America because the region is not as developed as some of the more mature markets. “I went to IBM’s main global cloud event and they said that some of the most complex cloud projects they have all around the world are in Latin America – in Mexico, Brazil or Argentina – because of the lack of infrastructure and the other challenges in the region,” Campos said.

TechNavio counts banking, financial services and insurance (BFSI); telecoms; the government and public sector; retail and logistics; and oil and gas as the key customer segments for IT services in Latin America. Of these, Akhtar said BFSI is likely to experience the most growth over the next five years. “It’s the one industry that is always at the forefront,” he explained. “They have to really lead when it comes to technology adoption from a business standpoint. There are other verticals that can be at the forefront, but BSFI always leads across any region, especially the banking sector.”

Drivers of Growth

The report states that the key drivers for growth in the region are the increased adoption of offshore business practices, increased broadband penetration, increased IT demand from the government sector, increased centralization of data centers and increased adoption of the latest IT initiatives. However, the author was keen to emphasize that above all “this is natural growth.” Akhtar explained that “as more and more organizations expand and venture into new product categories, they’re going to realize that they’re not fully competent in handling these functions. It’s just a matter of time before they decide to concentrate on their core businesses and ignore these other functions which need to be handled by experts. Yes, companies like to have full control and ownership over everything so they may get some satisfaction from that in the short-term but in the long-term they will feel the expenses and the hurts of managing something that is expected to continue to grow. So it’s just a matter of time before they realize the benefits that come with outsourcing IT services. It’s not a matter of whether it will happen, but when.”

A lack of tech-savvy workers among client organizations is also driving the increase in outsourcing, Akhtar said. New technologies such as cloud and mobility are so crucial to contemporary enterprises because they do not just support business functions but in many cases they’re becoming “one of the things that actually drive business revenue,” he explained. “The market is not prepared for this. It will not be a smooth transition. There are people at the lower level who are trained and used to IT support functions and they might be very good at what they’re doing now, but the market does not have enough skilled workers to handle this up-can-coming technology. That’s exactly why the organizations are turning to external service providers for help because they can provide those skills.” However, insufficient talent is also a problem for IT service providers in Latin America. “Even these companies are facing similar shortages when it comes to skill sets,” Akhtar added. “The market has not had time to prepare the resources to handle this kind of demand.”

Finding the Right Solution

Other challenges cited in the report include clients’ difficulty in choosing right solution and concerns over client satisfaction. With all of the marketing jargon that is thrown around today, the many clients that are new to IT outsourcing may struggle to determine which solutions best meet their needs. While their lack of knowledge of the market will mean some clients cannot understand why they should pay more or less for certain services, “they have to look beyond cost and choose from their options carefully to find what’s right for their business,” Akhtar said. Campos agreed that finding the right solution is problematic in today’s competitive market. “The challenge nowadays is that most IT providers have very similar portfolios. Everybody is focusing on analytics, cloud, mobility, security and social so it’s kind of hard to decide which solution would be better for your company,” he said. “It’s very complicated.”

The key buying criteria cited in the report are: cost-effectiveness, credibility and stability, scalability, scope, service and maintenance. Campos stated that, “as a buyer you need to have control and know that your information is secure so the IT provider needs to be reliable. After this you consider the need for the provider to have infrastructure, good connectivity and competitive prices. But if you just look at these factors it’s very difficult for a company to say one provider is more reliable than another, because they’re all huge. What’s the difference between IBM and Cisco and HP and Microsoft? It’s very hard, even for the big IT companies, to explain the difference between their solutions and those of their competitors.” Faced with this dilemma, most buyers typically make RFPs (requests for proposals) from three to five providers and base their decision primarily upon the prices they are offered rather than the solutions, Campos added.

Forward-thinking is crucial to making the right decision, Akhtar affirmed: “Cloud technology may not seem to make much sense to an organization at this point, but they must look long-term and think future-proof. What’s the point in saving a few dollars in the short-term with a solution that will became obsolete within a few years, or something that cannot be upgraded to the latest technology after a few years? Making that extra effort to find the right solution will pay off in the long term.”

Green IT Services

The report cites the increased adoption of green IT solutions as a key market trend, noting that “increased concerns over the global energy crisis and the focus on judicious use of energy have led the governments and corporates in Latin America to increase their investments in green IT. Currently, organizations are forced to adopt green IT initiatives to deal with certain issues such as increased carbon footprints, high energy bills, and other environmental concerns. As part of this initiative, organizations are seeking to use renewable raw materials, create awareness about water conservation and waste disposal, and increase energy efficiency.”

The paper explained that “the green IT initiative comprises three stages: assessment, planning, and implementation. It requires companies to create a baseline for energy usage and their carbon footprint, develop detailed roadmaps, and implement specific technologies to accomplish them. There is an increase in awareness about green IT among firms in Latin America, and many companies are expected to implement green IT investment plans in the near future.”

Campos disagreed with this assessment. “Green IT was a trend in 2010 and 2011. Everyone was talking about it but in the past two years I haven’t any providers trying to educate the market about it,” he said. “Due to the present economic conditions in Latin America I don’t think this is the moment for green IT to really grow,” he explained. “Green IT solutions typically cost 5% or 10% more and I speak weekly with CIOs and I really doubt that they would pay 10% more for green solutions while they are trying to reduce costs.”

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