The economic downturn has had two contradictory effects on the outsourcing industry in Latin America. Demand from existing customers has slowed down, especially for those companies with offshore programs and telemarketing operations, but at the same time, this lower demand has been mitigated by new clients adopting outsourcing practices in order to lower costs and improve productivity.
Meanwhile, some clients have asked to freeze their contracts, while others have demanded that additional services be made part of existing deals. Providers have responded by reducing their own costs, diversifying locations (particularly the global companies), improving efficiency, and creating innovative solutions to cope with increasing client demands for better cost structures. Some providers have also been forced to reduce their prices and decrease or freeze hiring and salaries.
The Latin American market continues to grow, but at a slower pace than in previous years. A new report from Frost & Sullivan, “Latin American Contact Center Outsourcing Services Market 2010,” finds that the market earned revenues of $7.5 billion in 2009 and estimates revenue will increase at a compound annual growth rate of 9.7 percent during the 2009-2015 period.
Despite the economic performance of the region during 2009, the contact center outsourcing services market in Latin America is still maturing and witnessing significant growth rates. Irrespective of the country where their operations are based, some providers rely heavily on their offshore business, while others depend exclusively on their local customers. We have identified four main categories of contact center outsourcers in this market:
- Large multinational companies or U.S.- or Europe-based companies
- Regional Latin America-based companies (with presence in two or more countries in the region)
- Large, locally focused Latin America-based companies (with presence in only one country in the region)
- Small and medium Latin America-based companies
The marketplace has proven to be very fragmented, and competition is fierce. There are 29 global or foreign (U.S.- or Europe-based) outsourcing firms as well as 21 major local or regional companies that dominate the scene in Latin America. In 2009, those 50 companies comprise more than 76 percent of total market revenues. The contact center space remains dominated by major global or foreign providers and large, locally focused Latin America-based companies (with Brazilian companies owning the largest share). Regional companies and a host of small- and medium-size local companies divide the remaining share of the industry.
The number of outsourced positions in the contact center market in Latin America is expected to grow at a CAGR of 9.6 percent between 2009-2015, with nearly 650,000 outsourced positions by the end of that time period.
Trends in Services
Most clients still consider outsourcing from a cost-advantage perspective, but providers have started to see their role as going far beyond the traditional services they’ve been offering. They are looking to participate in more complex enterprise processes, such as billing, accounting, financial reporting, hiring and recruiting, legal services, and so on.
Contact center providers are repositioning themselves to offer more complex BPO services. Many outsourcing players, though, tend to agree that most of these new, complex services are offered in the form of add-ons to existing customer-care services. While offerings are becoming more advanced in terms of value proposition, regional demand continues to rely mostly on contact center outsourcers’ traditional proposition.
As basic customer care and telemarketing become commoditized, the competitive landscape will be composed of companies that focus on traditional services and companies that have developed a larger portfolio of solutions. As a result of these trends, the number of outsourced positions in the contact center market in Latin America is expected to grow at a CAGR of 9.6 percent between 2009-2015, with nearly 650,000 outsourced positions by the end of that time period.
Offshore Market 2009: Main Highlights
Offshore services represented close to 22 percent of the overall revenues during 2009. As expected, Central America & Caribbean (CaCar) and Mexico are the Latin American regions that generated the highest revenues from offshore businesses in 2009, accounting for over 71 percent of the total revenues. Peru, which already aimed to rank fifth, had already surpassed Colombia when analyzing offshore revenue stream.
Business with the United States remains the most important for Latin America, representing 70 percent of the total offshore revenues. However, an increasing amount of revenue is coming from Spain, which accounted for more than 18 percent during 2009.
Competitiveness levels rose in the offshoring arena. Mexico and CaCar are clearly the main competitors for the U.S. market (together they represent 91 percent of the U.S. offshore businesses in the region during 2009). Argentina, Chile, Peru, CaCar, and Colombia accounted for 98 percent of the total Spanish offshore revenues. In the intra-regional offshore market, CaCar, Argentina, Colombia, and Peru represented 83 percent of the total revenues.
It is interesting to note that even though Argentina’s competitive conditions have decreased during recent years, this country is the only one that stands among the top 3 main revenue generator when analyzing each of the previously mentioned offshore markets.
Juan Gonzalez is team leader and analyst at Frost and Sullivan and a member of the Neashore Americas Power 50 Ranking.