When the son of the founder takes over the running of a company known for pioneering offshoring BPO, it is easy to feel the pressure to make your own mark. And that is exactly what President and Chief Executive Officer of Sykes Enterprises, Chuck Sykes has done.
Far from living under the shadow of his father John H. Sykes, Chuck Sykes has marked Sykes Enterprises with his own stamp, pushing the customer contact management company into new markets and reaching his billion-dollar revenue goal in just five years of taking over the company.
He has done all this without losing sight of the original ethos and strategy of the company, which started out by making an impact on small communities in the United States, but now also has operations around the globe.
Early Days of Sykes Enterprises
Sykes Enterprises, Inc started as an engineering services business in 1977. Founder John Sykes saw the opportunity to move into the consumer support services arena to offer tech support. He acquired Jones Technology Incorporated (JTI), run by husband and wife team Laurie and Dan Jones. The small 20-person company was the basis for Sykes Enterprises’ BPO activities, all centered in the United States. Laurie and Dan were from a very small community in the U.S, Sterling, Colorado, with about 20,000 to 30,000 people, but at the time that they founded their business they lived in San Francisco.
“They had the idea that, in the U.S, a company like JTI – and now like Sykes Enterprises – could actually build these tech support centers to support this new emerging market in consumer technology,” said Charles. “These would be very attractive to small communities because they would create new, exciting jobs, and the communications infrastructure that had been placed in the U.S would enable it. We would be a premier employer in these small communities. That was their strategy and my father, when he bought the company, stayed true to that strategy.”
Sykes started building these centers in very small towns in the U.S., built around training and teaching individuals how to do consumer tech support. Clients included PC manufacturers and Internet service providers. In 1995 they expanded into Amsterdam, went public in 1996, and started making acquisitions throughout Europe. “That premise of consumer tech support centers in small communities where we could be the premier employer, hiring great talent at an affordable price, was how it all started,” Chuck said.
Sykes in Latin America
Latin American expansion came about almost by accident. When the company went public in 1996, John Sykes realized that there were very few large companies in the industry in Europe, so he wanted to go into the market and aggregate it. In Germany, there were four small companies that he acquired and brought together; in the Scandinavian countries, he acquired three and pulled them together.
“The company that changed everything was McQueen in Scotland, a customer service provider like SYKES, that also had a fulfillment operation,” Chuck said. “My father saw this whole e-commerce industry coming up and he thought it would be great if our company could not only do the front-end, customer-facing activities of customer service and technical support, but if we could also help these new consumer technology companies fulfill their products.”
Sykes said that the fulfillment side of the business, e-commerce, did not work for them, but the one thing that did work well was that McQueen had a small operation in the Philippines that they had set up for one of their clients with about 20 people there. They realized that they could do a similar thing to what they had done in the U.S., which was built on a talent strategy of going into smaller communities and hiring people with the cognitive skills and teaching them how to do tech support. Sykes then started to offer email tech support from the Philippines.
“We started presenting to them doing email support from the Philippines in 1998. It was not an easy sell, but we did get a major software manufacturer to agree to it and we quietly built that to about 800 people,” said Chuck. “Then the dot-com bust happened, a lot of our clients were struggling, and we found ourselves with a first mover advantage in this offshore operation in the Philippines. We had a lot of clients that needed to save money and we went after this aggressively and started offering voice support.”
Benefits of Costa Rica
The Costa Rica expansion was a case of being in the right place at the right time, and leveraging the lessons learned in the Philippines. Chuck Sykes was working in sales at the time and was meeting with a computer manufacturer to discuss possible solutions. However, they turned the meeting around, pitching the sale of their center in San Jose, Costa Rica to Sykes, who immediately saw the potential. “We were very interested in doing English support outside of the United States because of the success with the Philippines, so San Jose was appealing to us,” Chuck said. At that time, the company was doing English voice support in Costa Rica for their customers out of the United States.
Chuck toured the facility, fell in love with what they had there, and bought it from them. “The lady who was running that operation is still the lady who runs all our Latin American operations today. Flora has built that operation from the 15 people supporting that original computer manufacturer to over 9,000 people in five countries,” he said. “It is all built around talent. We did have a first mover advantage.”
Chuck has spent great deal of time in Latin America and in Costa Rica in particular – although these days he doesn’t get to do that as often. What has impressed him most about the region is the people: “Latin Americans are very gregarious, they love family, they are more festive. There are more hugs and embraces; it’s amazing camaraderie. The nature of our business is about helping our clients. It’s a service culture and it fits really nice with the attributes of the region.”
Availability and quality of talent, cultural affinity, and infrastructure were the core factors that drove expansion in Costa Rica. “There’s a big cultural affinity with the U.S,” he said. “The U.S has always been a big melting pot, but it continues to be a melting pot. When I look at Costa Rica, I really look at the Costa Rica operation as just another fantastic U.S.-based operation and I have the same confidence in it; it’s just that it is about 35% to 40% less expensive, and that is a very powerful value proposition to offer to our clients.”
He added that today Latin America is feeling a little more popular to U.S.-based companies than the Asia operations. “Clients are now starting to say how much work do I want to continue to put into the Philippines. So while the Philippines and India continue to experience growth in BPO, many companies are turning to LATAM as an alternative given their proximity to the US, infrastructure, and so on. From the risk management perspective, they are looking more and more to central and south America.”
Future Latam Plans for Sykes
When a five-year plan for the region was developed, Mexico was identified as a logical next step for expansion. “We like to be the first mover or second mover. We looked at Argentina, we looked at Colombia, and at Brazil. But the big surprise was El Salvador, which was recommended by a client. Flora called me up and said, “Chuck, I have found the next Costa Rica”,” Sykes said. Despite initial concerns, Sykes took the risk and opened a site in El Salvador without a customer. It took a full year to convince the first U.S. company to set up there. “It has just been a huge success for us,” he said.
Today they have operations in Mexico, Brazil, and Colombia as well as Costa Rica and El Salvador. While they are scouting out potential locations and have their eyes on Guatemala and Nicaragua, the core focus is expansion in existing locations.
Charles is also looking at some ideas of how they can use their virtual capabilities. This could work well for Latin America because, while work from home models might not be the best fit, virtual offerings could enable satellite operations in different parts of the country. This would allow Sykes to leverage talent in areas beyond the increasingly saturated cities like San Jose.
He also believes that while technology is eliminating some of the simpler transactions, it is also creating new opportunities. The ones that are going to remain are going to be very technical. “The work that we are doing particular in El Salvadaor and Colombia and all the Latin American operations is very very technical,” Sykes said. “Those are not being automated.”
Sykes is excited at the changing environment. He believes “customer service is the new marketing”, something that was reinforced for him recently. Sykes Enterprises has acquired a digital marketing company and is looking at how he can extend that idea throughout his operations.
One thing is clear: Chuck Sykes is his own man and is shaping a new path for a company with a long history of pioneering innovation.