As more and more countries clamber onto the outsourcing bandwagon, competition is becoming more intense, driving governments and trade promotion bodies to furiously flaunt their assets in a bid to attract the attention of foreign investors. But who are these investors and what criteria are they using to find the next golden destination? Nearshore Americas spoke to two outsourcing veterans to find out what investors look for when they go out and invest in a country, what sort of support they expect from local governments and how nations in Latin America and the Caribbean are shaping up in the global market place.
Both Russ Sandlin and Richard Brinson have over a quarter of a century of outsourcing experience and have worked all over the globe –– from the Philippines to Palestine. Their CVs say they worked for global industry giants like HSBC, Dell, and Time Warner before launching companies of their own. They are currently looking to invest in an established BPO setup as active partners and have been scouting locations around the world.
They say what they look most in a country they are going to invest is a stable and business-friendly environment. “We are looking for an environment that is open to investment from North America, an environment that is a safe investment and an investment that can grow and be nurtured,” said Sandlin.
About half of the sites that they have scanned so far are in Philippines.
“All places on the planet are open if it is a company that has got the fundamentals,” said Sandlin, “But Richard and I always tend to ask how to compare Philippines. The Philippines, at least for voices processes, is the number one location on the planet and there’s no signs that that’s going to change in the near future.”
However, the Philippines’ reputation for quality is not without its drawbacks. “It causes the valuation of the company to be higher,” said Sandlin. “You are paying a premium for the Philippines because people know how good it is, so there might be better value for our money outside.”
It is not only the lower cost that matters most in outsourcing, Sandlin added. “If you are an early adopter or a pioneer in other locations you can get some added benefit by getting some really high-level agents or better assistance from the government.”
They say Latin America is fast gaining prominence in the outsourcing sector, partly because of its proximity to the United States. “When you look at Latin America you still have very robust labor arbitrage, but more importantly you have many people who have an affinity with or distinct experience of North America,” said Sandlin. “Nearshore is also picking up in terms of language skills, it is coming into its own right now,” added Brinson.
Latin America is also in a unique position to cash in on the exploding Latino demographic in the U.S. because of its ability to offer bi-lingual operators fluent in both Spanish and English, according to the pair. “The buying power of Latino [North] Americans is tremendous. So, if you can save money and also reach that target market, which is a growing demographic feature for your marketing roadmap, then it makes sense,” said Sandlin.
“In the more mature markets such as Argentina, the thing that made us worried was the ability to repatriate profits as well as the higher costs of labor”
Increasing Labor Cost
Sandlin explains precisely what they look for before investing in a country. “Part of that is the governments and how much they make it attractive to work there, how much the labor costs would be and how much stability there is in terms of infrastructure and geo-politics.”
They have divided the Latin American countries they have assessed into roughly three categories. According to them, Argentina and Costa Rica are advanced markets, and they will soon be joined by Colombia. The Dominican Republic, Guatemala, Nicaragua and Panama as emerging markets, and Peru, Ecuador and El Salvador are somewhere in between.
However they say a country that is ranked at the top is not necessarily an advantage. “In the more mature markets such as Argentina, the thing that made us worried was the ability to repatriate profits as well as the higher costs of labor,” said Sandlin.
Operating at the other end of the scale, though, presents its own problems. “[In these countries] the industry is in its infancy and it is more difficult to find a cadre of management, it is difficult to find robust policies and procedures in place [and] it is difficult to find advanced language skills,” said Sandlin.
However, when it comes to making a final decision the key for these investors lies with the individual business, not the country it is located in. “The region and the area makes a lot of difference,” said Brinson, “but it still comes down to how that centre is performing, how many years they’ve been in business, the overall management skills. Those are the biggest factors.”