By Luke Bujarski
With only 5.5 million inhabitants and the second smallest economy in the western hemisphere, Nicaragua doesn’t stand out as the burning BPO destination turning heads in Latin America. Yet, having spoken with the major contact center players currently operating in Managua, this low-profile destination still shows room to grow, with surprising capability in its workforce and public sector commitments.
While new providers looking to scale up beyond 250 seats might want to think twice about Nicaragua, the market should remain strong for those with small to mid-sized clients looking for relatively cheap, yet higher quality agents. For the larger incumbents, overall consensus shines green-to-yellow for continued expansion beyond current operations. Attrition rates and total costs have remained low and recruitment continues to keep up with demand. However, there are signs that the market is tightening. Furthermore, a palpable lack of cooperation and communication between the major players could drag this fledgling industry down by inflaming attrition and subsequently wages.
Volcanoes, Beaches, and Call Centers
Driving through the streets of Managua, banners strung across the city’s major roadways advertize everything from hair salons to career opportunities at one of four major call center firms. The industry has grown quite rapidly since 2008 when Sitel and Stream Global Services opened their doors to give native and veteran BPO provider Almori a run for its money. Now with India’s 24/7 Customer as the latest international player, the contact center industry here employs a scratch over 3,000 agents performing inbound and outbound customer support and sales for retail and telecoms, as well as higher-end BPO operations in health care and very basic financial services.
Various country and market dynamics have proven Nicaragua to be a favorable destination for these companies. Much of Nicaragua’s English speaking population has at one point lived in the United States, after having left the country with parents and relatives in the 1980’s fleeing from a bloody civil war. Aside from very low wages – entry level for agents is $500 per month across the board – “Nicas” also have a good level of cultural savvy that you don’t get in places like Guatemala. “During orientation when asked how many had lived in the United States, it is common to see 70 percent of new recruits raise their hands,” explained Kapil Rajvanshi Vice President, Latin America with 24/7 Customer.
Val VanDegrift country manager for Sitel which currently employs over 2,000 agents in Nicaragua also noted that the country’s dual currency economy makes it safer when hedging against inflation. “All of our employees are paid in dollars which cushions us against any instability of the local currency the Cordoba (aka “Cord”), which tends to fluctuate month to month. Payments for rent and telecoms can also be arranged in US dollars, which makes it easier for us to plan.”
While total operations costs are similar compared to Guatemala, says Kapil, site director for Stream Global Services David Mejia noted that telecoms and internet are still very expensive when compared to Costa Rica – in upwards of 40 percent. However, all of the major players confirmed that communications costs continue to go down. Electricity costs on the other hand remain high, but this is a reoccurring theme across Central America.
Personal safety is another strong point. Statistics put Nicaragua as the safest of Latin American countries, especially when compared to Guatemala, Honduras and El Salvador. At the same time, underdeveloped transportation infrastructure can make it more difficult to move about safely and securely. Kapil who travels between Guatemala City and Managua noted that Guatemala’s highly regulated and monitored public taxi service is something that is missing in Nicaragua. “The lack of transportation infrastructure in Managua can make it more unsettling when getting around.” Nevertheless, Nicaragua has for the time being escaped the intense drug-related violence seen in other Central American regions.
When asked about future plans, all of the major players with the exception of Stream noted intentions to expand their operations in Managua
Diving into Managua
For the time being, Managua is the only viable population center in Nicaragua capable of supporting an international BPO operation. And, complaints of employee poaching across all seniority levels and shifts in recruitment strategies including bonus programs for current employees referring new candidates, as well as tax holidays suggest that the market is heating up. “In the early days we could recruit straight off the street but we had to get more creative of late,” explained Val from Sitel. Veteran Nica BPO player Almori also uses a range of tax holidays to make pay more attractive to its employees.
Additional talent is however being drawn from other population centers. Coastal areas along the Pacific and Caribbean with their high level of English speakers coming from Nicaragua’s growing tourism industry could be a good source for English speakers looking for new opportunities in the country’s capital. Likewise, Nicaragua has in recent years witnessed a reverse “brain drain” where nationals have been returning as opportunities back home open up, and dry up elsewhere.
Circulation of employees between the major companies is common which could also mean that the labor is tightening. Kapil thinks that this comes as a result of the contact center industry being so new, the flood of employment opportunities drives agents to “shop around” before settling down with one provider. This has also made it a challenge for 24/7 to hold on to middle managers – i.e. team leaders and operation managers. For these positions, they have brought employees in from Guatemala to fill the holes as 24/7 ramps up.
This revolving door scenario could prove to be a good opportunity for smaller new entrants with progressive management styles and a thirst for already-trained workers. Potential for operations at the higher end of the BPO value chain is also possible, as is witnessed with Almori that specializes in medical billing and coding for the US health care system. According to Alvaro Montealegre, their employees train in upwards of two years and take a certifying exam in the US before making the cut with their health care clients.
Room to Wiggle
A closer look suggests that the market has in upwards of 25 percent more wiggle room before scalability becomes an issue. When asked about future plans, all of the major players with the exception of Stream noted intentions to expand their operations in Managua. Sitel sees the 3,000 employee mark as the mid to long-term target, but doesn’t see much more room for them after that. 24/7 Customer also shows no signs of stopping at its current 200 seats. Their location at Accedo Technology Park just outside Managua has considerably greater capacity and their pipeline of clients suggests that they plan to use it. Stream, with operations in Costa Rica, El Salvador, and the Dominican Republic, is the exception and is currently running its Nicaragua operations at 80 percent capacity with about 150 stations open. Another positive sign is that attrition rates have remained low for two of the four major players at 4 to 5 percent per month, while one international player had reported attrition in upwards of 10 percent.
Lack of Cooperation Could be Costly
Responsible management and cooperation rather than availability of workers will probably have more to do with growth of Nicaragua’s contact center industry. On numerous occasions, decision makers noted that greater cooperation between them is needed in order to secure a more sustainable and vibrant BPO industry. According to Kapil, Nicaragua does not yet have a contact center “cluster” where competitors work together and alongside government to make the industry more competitive globally. Greater cooperation could keep the limited pool of labor happy and the contact center industry from imploding in on itself by hiking up costs and wage inflation so common with high attrition rates.
Continued collaboration with government agencies including ProNicaragua will also be critical to providing the needed resources to train and coordinate the needed talent for this growing industry. Concerns over data security and fraud that have kept 24/7’s financial services customers from coming to Nicaragua should also be addressed in concert with government and other providers looking to expand into this space. Finally, as election season draws near, it will be important for groups like ProNicaragua to calm any existing and potential investor concerns over political instability in a country with a less than stable political past.