Don’t Trust the Numbers: Five Tests for Latin America Site Selection

I was floored recently when a notable site selection company president told me that he almost never sends his analysts to the Latin American and Caribbean region (CALA) …

I was floored recently when a notable site selection company president told me that he almost never sends his analysts to the Latin American and Caribbean region (CALA) to see markets first hand. Due to budget constraints, he told me he keeps his people in the United States (in this case, Texas).

That’s right – a major site selector in the U.S. which provides lots of analysis and advice to North America clients seeking CALA knowledge, who spend big bucks for such reports, simply doesn’t believe the expense to visit, say Hermosillo, Santo Domingo or Lima, can be justified. Surprised? You shouldn’t be.

Plenty of consultants, site selectors and advisers will have you believe that the answer to a country’s attractiveness and suitability for global services’ investment is in the data. Collect the right data, and the decisions should be clear.

This approach is deeply flawed, and our advice to buyers (whether a corporate decision-maker or provider) is to be very cautious of relying only on the numbers.

Case in point: Last week we published an article about Thoughtworks’ decision to open a new center in Ecuador. The decision caught a lot of us by surprise. Why would a well-regarded global software firm pick a country like Ecuador which has had little-to-no historic cache? Its trade promotions efforts are nearly invisible and we can’t remember the country ever showing up on one of those Top 10 or Hot 100 type-lists of lucrative outsourcing destinations. The prevailing view on Ecuador is that it’s too risky, based on a limited English speaking pool and generally untested global services’ environment.

Yet, the article by Tim Wilson explains that ThoughtWorks’ executives clearly had invested some time getting to know the country and determined that the government’s embrace of technology and progressive economic policies are a good match for ThoughtWorks. Furthermore, the awareness the company gained around the proliferation of agile methodologies only occurred after getting in touch with developers, organizing a hackathon and literally testing the competence of local professionals. Can such conclusive insights be generated from an air-conditioned office suite in Dallas? We think not.

Another major flaw in the ‘phone it in’ research methodology is ascertaining the validity of the data that is accumulated. Bad data can be collected from Bangalore just as frequently as it can be collected from on-the-ground resources within the region. But, our belief is that first-hand contact with the data source and the provider of the data (often from trade association and government institutions) can yield more accurate findings.

The five keys to truly understanding a market and gaining enough hard information to make an informed investment decision are as follows:

  1. Talk to multiple sources: Cross-check and validate information by talking with a cross section of investors, captive operators, local legal experts, media and research groups, consultants and government institutions. If you’re not hearing more or less the same story – there is obviously something behind the curtain that you need to investigate.
  2. Markets are dynamic, yet most research is done at a point-in-time: Let’s face it – the lazy method of analyzing opportunities in CALA is to seek sources that will give black and white answers and pompously indicate where you should spend your money. They may base their counsel on reports developed at some point in the past. Are those findings still valid? Maybe, or maybe not.
  3. The Passport test: Are the individuals you are working with specifically visiting markets and engaging on the ground in the metro areas you are seeking insight on? This has to be one of the simplest tests to determine who to partner with in learning about CALA. If the capitals of Nicaragua, Colombia, Peru and Jamaica aren’t names that they can instantly rattle off, what does that tell you?
  4. Do you really know who you are working with? Often we hear about ‘associates’ or ‘alliance partners’ who are purported to be the advisory firm’s expert in a specific country yet are not actually employed by the advisory firm in question. They are simply hired as contractors to provide services to the adviser. In other words, it’s completely appropriate to probe for and obtain detailed insight into the background and specialization of the local contact.
  5. Don’t be cheap: Establishing a presence in Latin America and the Caribbean is often a major undertaking. Cutting corners by failing to do market census studies, buy plane tickets, ask questions or do your own due diligence can almost guarantee that you will either fail or get off on the wrong foot. Paying staff too little or too much (as a major call center player did a few years ago in Bogota and later attempted to notch down pay rates) is one of the many hazards that can result.

Finally, our goal at Nearshore Americas – virtually from the start of our launch four years ago – has been to expose and promote industry best practices and to ‘raise up’ and highlight smarter ways of doing business in CALA – especially in the area of site selection. If you are an adviser and have a column to contribute – let us know. We might want  you to tell us the capitals of a few Latin America countries before we proceed!

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