CapGemini is expecting growth in its core Latin American business services locations, Brazil and Guatemala, and is looking to capitalize on its strengths in these geographies to grow its consulting business. Nearshore Americas sat down with Gustavo Tasner, Vice President and Head of Americas Operations for CapGemini to examine the changes in the market and the outlook for the region.
How would you characterize the current outlook for nearshore outsourcing in Latin America?
Latin American delivery centers (Guatemala and Brazil) are key to our strategy, but with some specifics that make each one slightly different. Brazil is a market that per se requires a significant onshore presence in order to serve both local clients and local branches of global enterprises. Our growth strategy in Brazil is clear and we are working with other CapGemini Group business units in joint local go to market which is very promising.
Brazil is a country where you need local presence to serve the local market, even if it is for international companies. Multinational companies always have Brazilian presence. The complexities in terms of tax processes, and tax relations in the country, the limitations to import services from other traditional outsourcing locations like India, you need to have a local presence to serve the local market.
Our main strength in Brazil has been finance and accounting, supply chain, servicing several clients, all of them being part of international companies. We are serving their local operations in Brazil and have developed a strong knowledge of the nuances of the processes related to regulations, tax implications, and also developed a very strong transformational team, working on automation and RPA.
The market is challenging. The uncertainty that Brazil has undergone in terms of politics and the economy, makes the decision on traditional outsourcing more difficult. Local companies are looking at optimizing what they have and not engaging in major transformation that can deviate them from their main business
But there are a lot of opportunities in the market. We are winning lots of consult, digitize types of deals. RPA is extremely hot in Brazil. There are lots of companies asking us to support them in identifying and implementing RPA solutions.
It has been a very interesting beginning of the year. We believe that this year for us in Brazil is going to be very good. We are expecting to go back to growth. We have been stagnant for the last couple of years, but we expect to go back to growth.
Guatemala is different, we do serve the Spanish speaking LatAm market in Guatemala, but that’s not our key role as a delivery location here. Here we mostly serve North America.We are an Order to cash and voice interaction location, highly recognized as state-of-the-art B2B collections delivery location. We are not doing call center work, but we still have voice interaction capability. It’s our main source of growth.
If we look at the past, the ratio of English and Spanish was 60:40; now we are close to 90:10. So we are seeing interesting growth of services to North America, but also some interesting growth in Latin America, supporting the LatAm presence of global clients. Overall, though, our growth is more looking North.
The changing relationship between the US and Latin America has been a focus over the last few years. How has that changed the market in terms of business services?
That was a question that we were also asking ourselves, but if you look at the reality, Guatemala keeps growing and our onshore delivery centers are not. The real dynamics are not changing; we are signing new deals with the US and we are extending services in US. Onshore delivery for us is really restricted regulated types of business for insurance companies. We are even doing HIPAA related work out of Guatemala, so it is not really a limitation. In reality nothing changed.
The changes that you see are mostly related to companies that were bringing Indian resources to work in US and deliver services in the US as if they were local services, but in reality they were offshore. It was more for the Indian pure players, but for us it was not changing at all.
Given the current state of the market, are you looking to move into new geographies in Latin America?
We are focusing on Guatemala for the Americas, Spanish and English speaking Americas, and on Brazil for brazil, we are not really looking at having anything new. We are looking at optimizing other locations globally, also bringing some other opportunities to the table like the Philippines, but not really looking at opening other location, at least in business services. Obviously we have other locations in LatAm, in Mexico, in Argentina, a small one in Colombia, but those are more related to apps, to app management and development services. For our business services, BPO, we stick to what we have and improve what we have.
How has CapGemini adapted its LatAm strategy?
The market is very interesting right now, but very different from what we have seen five or 10 years ago. What we are seeing in the market is that there are companies that have already embarked into their own captive shared services strategy.
At some point in their maturity, they decide that they want to have a new, fresh view of what they are doing, and they are constantly approaching us to get them to understand what is the level of maturity of the organization, what is the status of their processes, what can be done in terms of technology, digital transformation. We are more and more starting to engage in those non-traditional relationships, where we are actually helping clients improve first before engaging in a full outsourcing discussion.
We work with a much more comprehensive approach than just process, the Digital Global Enterprise Model (DGEM). It is something that we have been developing for years, and it has a process component, but has evolved beyond that to encompass a range of things including location, technology, pricing, governance, and so on.
Obviously you still have your big traditional outsourcing deals going on, but many companies are looking at starting with this different approach: look at what we have, help me improve, help me upgrade my technology, help me steamline my process through RPA, and then let’s talk about services. That’s what we have been seeing a lot.
Both in LatAm and North America we are getting a lot of traction in that sense. We have also started relationships with companies that are not mature, not quite ready for outsourcing, we can start like that and then end with a relationship that might end in a traditional outsourcing deal.
What are the core challenges to realizing the potential of the two markets?
I am not sure we can call them challenges. The main areas that we are working at are capabilities development, both consulting type of capabilities, and technology and RPA ones. We are strongly focusing on growing internal resources and also have been successful in external recruitment, but we recognize the market will get crowded soon.
For Brazil, local companies are still probably not as mature as others, in terms of being ready for outsourcing, but continue to go for our Advise-Digitize-Operate model. So we are not worried about that so much.
We are leveraging our other business units. In Brazil we have a large presence in application development and in infrastructure services. We are working to go to the market with multi-tower deals; we are developing new services together with the market unit in Brazil looking at some interesting opportunities that are popping up in the GDPR space. Brazil is also moving into their local version of GDPR and they need to be compliant by mid-year. We are working on developing a practice around that and a solution that will help us, to get this service up and running very shortly.
We are looking at other interesting in areas like procurement that we didn’t explore that heavily, so we are expanding our services and we are doing it in a very collaborative way with the rest of the organization and that is opening new clients to us that were traditionally IT-centric, enhancing our relationship landscape with the client. We have what we need to grow and capitalize the opportunities in the market.
In Guatemala what we need to keep doing is growing our consulting and RPA capabilities to be ready to support more and more the transformation that our clients are asking us to support. We currently have 60 people doing just RPA and we are looking to double the number of people in that area. It’s not really a challenge because we have plans on how to accomplish that.
We are developing internally our talent to become business analysts, even developers in the RPA space; we are trying to bring some native interesting consulting native talent in the group to help us accelerate on the journey to have transformation type of consultants.
We know our area of expertise is Order to Cash and we keep improving our capabilities around that area. We don’t do things that need to be done in India or somewhere else, we just focus on being best that we can be in the space that we are supposed to be serving our clients.