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Ovum Analysis: What’s Next for Nicaragua?

Ovum Analysis: What’s Next for Nicaragua?

The second annual investment summit held last week in Managua by ProNicaragua (the Nicaraguan government investment agency) went some way toward increasing Nicaragua’s visibility as a viable nearshore outsourcing location in the Americas. With more outsourcers (and clients) looking for geographic diversification opportunities in Latin America, Nicaragua’s presence in contact centers has already been felt. Ovum believes that for the country to remain a viable delivery center, it needs to focus on higher value services that will enable it to go beyond a simple customer service opportunity.

Nicaragua’s Contact Center Space is Already Robust

It is clear that Nicaragua has already made itself a force to contend with in the contact center outsourcing space. Following successful deployments in Managua by outsourcing vendors such as Sitel and Stream Global Services, few would argue with the assertion that the country has what it takes in terms of familiarity with US commercial culture and customer service empathy. In addition, there has been an ongoing realization among private enterprises that the policies of President Daniel Ortega have been favorable to the outsourcing space.

However, Nicaragua faces the imminent challenge of delivering fluently bilingual contact center agents in excess of the number that is currently available. With a labor force of less than three million, many on the ground believe that Nicaragua will very soon hit a wall in terms of market saturation. This is despite government efforts to emphasize English instruction.

And, while these perceptions are largely outdated, we believe that a concerted effort to convince outsourcers and their clients of the advantages that Nicaragua has to offer in terms of favorable incentives, labor relations, and investment in infrastructure and education will be crucial to success.

Use Contact Centers as a Launch Pad for Higher Margin Services

The logical solution for Nicaragua is to diversify into backoffice BPO and the delivery of IT services. These sectors are not as sensitive to attrition as contact centers, and they offer more profitable margins. Ovum believes that the time is ripe for another Central American country to enter this space; Costa Rica has proven effective at attracting such service delivery, and Mexico’s IT services sector is expanding rapidly. Nicaragua’s broader outsourcing space still has some room to grow, currently accounting for roughly 3% of GDP. With outsourcers and clients looking for new niche locations from which to offer broader service delivery, Ovum believes that it would be a wise approach for the Nicaraguan government to play to its existing outsourcing success stories. An excellent example of a vendor that has diversified its services offering would be Almori, which not only handles contact center services but also backoffice functions such medical and financial related BPO and software development. Such case studies can be built upon to gain attention in the lucrative US market.

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Nicaraguan Stakeholders Need to Move Fast to Increase Visibility

Speaking at the ProNicaragua summit last week, Ovum analysts were emphatic that the key private sector and government players in Nicaragua cannot afford to be idle when it comes to communicating their country’s strengths to the world. The country still suffers from perceptions of political and economic instability, as well as the perception that it has an antibusiness government. And, while these perceptions are largely outdated, we believe that a concerted effort to convince outsourcers and their clients of the advantages that Nicaragua has to offer in terms of favorable incentives, labor relations, and investment in infrastructure and education will be crucial to success. Following this, government and industry players on the ground are advised to make an aggressive and coordinated pitch sooner rather than later.

Peter Ryan is a leading analyst with Ovum and contributes regularly to Nearshore Americas. This article is reprinted upon permission of the author.

About Peter Ryan

Peter is a lead analyst with the research firm Ovum. He has written extensively on call centers in Latin America, as well as on investment in voice applications and enterprise software market. He is based in Montreal, Canada. Peter is fluent in both English and French.
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