The site selection conversation has changed. Today’s discussions are now prioritizing the perceived stability of each nearshore country’s relationship with the US.
Infrastructure, security, governmental stability: these topics were always the next considerations after availability of labor, but the political risk of nearshore countries and their future with the US has now risen above those—a trend triggered by Trump’s bullish views on outsourcing.
“Clients were more assertive about location before the election, and there wasn’t a tremendous amount of dialogue about it,” said Scott Wilson, Senior Vice President, Operations Planning and Transactions at Alorica. “But now it has become much more collaborative as clients look for our view on the topic.”
For Alorica’s clients, the site selection conversation has been about the aggressive dialogue surrounding offshoring and outsourcing as an industry, such as the high-profile comments about US ties with Mexico, for example.
While “wait and see” is still the order of the day, vendors are looking at backup plans for every possible outcome. “During the contracting process, we talk to clients about “what happens if” scenarios, enabling us to plan for situations that are unforeseen or to address emerging regulatory challenges of partnering in certain regions,” said Wilson.
Companies are looking at balancing that risk by spreading their seat presence across multiple nations. A domestic footprint in the US is also serving as a good safety net, so that clients have something to fall back on if a nearshore business relationship is forced apart by unfavorable regulatory shifts.
Like everyone, telemarketing and outsourcing firm Sitel is also in the dark about the long-term political climate in the US, but has seen these concerns in other geographies, so is focusing on the continuation of the usual day-to-day operations. “There’s always political noise everywhere, so we’ve traditionally discussed those uncertainties with our clients about how best to manage the risk; it’s just what we do,” said Kim Facer, SVP Global Real Estate and Development at Sitel.
“Clients still have a mix of philosophies when it comes to site selection, but we still see a lot of favorability in the Philippines because it’s the best choice for English language scalability. Some companies are also bringing business back to the US and diversifying by putting some business into nearshore locations,” he continued.
While it’s not exactly “business as usual” in the site selection world, some nearshore locations are shining brighter on the talent side of the coin, which could serve to alleviate political concerns for a time.
Dennis Donovan, Principal and Owner at Wadley Donovan Gutshaw Consulting (WDGC), a location advisory firm based in New Jersey, has seen Colombia step up the game in recent months.
“They’ve got the approach to attracting BPO and IT operations down to a science,” he said. “English is taught throughout public education and is becoming more prevalent in recent college graduates. The country is also performing customized training programs for each individual company that improves the English and technology skills of new hires.”
Still, Donovan is aware that other nations have a lot of work to do if they are to compete with the attraction levels of Colombia.
“Most Latin American inward investment agencies are not as sophisticated or as full-service as they are in Colombia and Costa Rica; they’ve got a ways to go, particularly when it comes to acquiring data,” he said.
“It’s incredible that the Spanish- and Portuguese-speaking countries that are trying to attract US companies don’t even have reliable statistics about the volume of English-speaking adults. The data is terrible.”
Furthermore, Argentina is still stuck in a political mire of its own, making it an unlikely choice during the site selection process for BPO firms.
“If Argentina pulls its act together by removing anti-business regulations, fully restricting currency, and not intruding on business, BPO companies could have a pan-European operation in the country because of its great range of language skills,” said Donovan. “They’re now moving away from those negative aspects, but you can guarantee that it will be systemic down the road.”
Exploring Every Option
For Alorica, there has been a renewed site selection interest in places that were previously seen as backup locations, like Puerto Rico, for example. Even so, the company doesn’t yet see any nations that are becoming more attractive than others.
“When we talk to customers, we spend more time talking about mandated, regulatory elements or tax elements, and how those impact the financial transaction of our relationship, and then making sure we’re both protected from those situations,” said Wilson.
In the current political storm, BPO companies and site selection consultants should be weathering it by framing the site selection conversation around “what if”. By not putting all their seats in one location, and establishing a domestic US presence to prepare for disaster, the fallout of whatever comes next should be a lot easier to manage.