Honduras’ Altia Highlights Public-Private Partnership Challenges

TBR's Patrick Heffernan and Geoff Woollacott examine how this 'smart city' has prospered and the challenges it still faces

In an IT world under pressure from automation and cloud, managing human capital properly is critical for enterprises, IT services firms and even governments. By exploring the way a privately run, publicly supported smart city in Honduras has built a hub for business process outsourcing (BPO) operations, Technology Business Research, Inc. (TBR) sees connections between smart public policy, a predictable business climate and a focus on human capital management.

The following commentary is based on TBR’s semiannual Global Delivery Benchmark, research conducted for previous Nearshore Americas columns, interviews with Altia Business Park executives, and TBR Principal Analysts Geoff Woollacott’s and Patrick Heffernan’s industry experience.

Working in concert with the Honduran government, private entity Altia created a business environment attractive to foreign enterprises looking for offshore locations to site their BPO call centers. The initiative spans a broad range of investments and localized services, simplifying the decision-making process to compel foreign multinational companies to consider Honduras for regional call center expansion.

If You Build It, Will They Come?

Under the surface, human capital management sits at the core of the activities critical to the creation of successful customer service hubs. Like other business-model-centric, planned smart cities, Altia takes on the risk of building out the physical infrastructure, constructing smart cities that provide the professional infrastructure to perform the functions and specialized, targeted personal services that can ease the costs of initiating a new business and improve an employee’s overall quality of life. Cornerstones to Alita’s capital investments include:

  • Building out three towers leased to capacity and employing 5,000 people
  • Building a lifestyle center being augmented with a game area for children of all ages, essentially providing child care services for employees
  • Development of retail mall space to provide call center employees with a convenient venue for commercial activities
  • Construction of a hotel, owned and operated by Marriott, to be completed by the end of the year

Altia also provides startup facilities management services for its prospective clients, guiding them through local legal requirements, simplifying the steps foreign companies have to undertake to enter the market. Large U.S.-based enterprises looking to set up BPO operations have a wealth of attractive office spaces available; the services, including gratis legal assistance, Altia packages together are the critical difference. Altia’s human capital resource management touches everyone from new call center staff members to U.S.-based investors’ general counsels.

If They Come, Can They Staff It?

A world-class facility built by a private enterprise traditionally has not been sufficient to recruit foreign investment to Honduras or any other emerging market. Businesses must be convinced a pool of qualified labor exists to staff the facilities, and the Honduran government plays a critical role in ensuring its population has the requisite skills.

Altia launched five years ago, and the Honduran government’s investments revolve around educating citizens and providing favorable tax conditions for those global firms agreeing to locate to the country. Government investments in Altia-employee education include:

  • A year-long online English as a Second Language course for 100,000 scholarship students to provide firms seeking entry-level call center staff with a trainable pool of English-speaking individuals
  • An Altia-supported, UNITEC-administered program, available to 600 students who will be given 18 months of university-level education free in English and BPO call center operations skills.

The Honduran government’s support has been tailored to Altia’s needs. In other designed private-public partnership smart cities, local and national government support for education typically has been broad-based, aimed at appealing to a wide range of students and potential business investors. With Altia and the Honduran government, the BPO and English focus should pay off in faster-trained and employable human resources — another critical piece to human capital management.

If It Succeeds, Can Altia Repeat it Elsewhere?

The Altia office park located in San Pedro Sula, Honduras, has three office towers and 5,000 employees. The Altia smart city has a fourth tower under construction, targeted at local businesses seeking smaller office locations of 100 to 200 square meters for initial efforts, but space that can grow into larger operations over the long term.  Altia leases a nine-floor tower in Tegucigalpa and is constructing a second tower in that location. Purely from a build-lease-manage-grow perspective, Altia has been a success.

However, TBR cautions that the history of public-private partnerships creating specialized economic zones remains uneven. Businesses look for stability and consistency as much as they seek the tax credits and concessions. Relocation costs can erase any short-term benefits if the business environment in question lacks a steady supply of qualified labor talent or resides in an area with considerable political upheaval and instability. Also, a five-year lease opens a business to considerable risk. Additionally, BPO as an entry-level position with competitive pay and benefits can pull in plenty of recruits, but performing call center work does not remain attractive for long. And as TBR’s research around global delivery shows, automation is eroding BPO staffing levels, adding a further element of fear and uncertainty for people considering an IT career.

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Altia’s activities in Honduras have been operating in earnest since 2011, limiting TBR’s ability to assess long-term stability, but early indications suggest a continued commitment from all parties. Altia is actively considering efforts to replicate its success in Honduras with a similar investment initiative in Nicaragua as well as infrastructure investments in Mexico focused on light manufacturing, a considerably greater challenge than building customer service office space.

What Creates the Tipping Point?

Wildly successful economic free zones and planned business-themed cities — Jebel Ali in Dubai, United Arab Emirates, comes to mind — share a few basic traits.

First, private-public partnerships do not depend on common goals but on mutually enhanced, yet separate goals. Altia’s leadership undoubtedly appreciates the benefits of a low local unemployment rate, but the company’s core decisions revolve around business imperatives, not the common, or social, good. In contrast, the Honduran government must assure its citizens the hard benefits forfeited to draw international investment, such as tax receipts, will be more than offset by the near-term opportunities for jobs and the long-term impact on the business climate and overall economy. These goals do not clash, but a successful private-public partnership depends on making those goals explicit and measurable (i.e., Pricing Pressures and Protectionist Policies Bring New Pain to Midtier Players, Nearshore Americas, May 2013).

Second, neither the private company charged with building and operating the free zone or smart city nor the local government can deliver anything less than reliable, consistent services, from basic electricity through safe work places to predictable legal environments. Emerging markets provide more than a few examples of smart cities that failed when cost cutting and/or corruption undermined expectations.

Finally, as is true in all enterprises, success depends on leadership and management. Leadership provides the vision, raises the capital and makes investment decisions. Management handles the day-to-day operations, especially around human capital. As explained above, for an effort like Altia, it all comes down to smart human capital management.

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