Through nimble acquisitions and savvy business strategy, U.S. BPO firm Alorica has been making significant waves in the Nearshore BPO industry, giving the big players something to watch closely in their rear view mirrors.
Alorica has become a $2.3 billion company since founding in 1999, but is aiming to shoot that figure up to $3.14 billion by January 1st, 2020. Alongside its company headquarters in Irvine, California, the global organization has over 92,000 people working in 150 locations.
Nearshore Americas visited the company’s offices in Guatemala City where some key company leaders revealed many of the regional challenges and pressures for Nearshore BPO.
Guatemala & EGS
Launched in 2009, Guatemala has become one of the flagship operations for the firm, made even more vital after the company acquired Expert Global Solutions (EGS) this year. The acquisition cleared on June 30th, but the merged company still retains the EGS branding, for now. The team plans to take the new company to market with the full Alorica branding by January 11th, 2017.
When asked about layoffs during the integration process, Chris Crowley, EVP and Chief Commercial Officer at Alorica said: “There were synergy layoffs, but the bulk of the integration savings was not people. For example, the combined weight of the sales teams amounted to around 70 people, but due to duplicated responsibilities, this was reduced to around 60 people. In fact, single recruitment, not cost, is the biggest driver for our clients—the ability to scale people.”
Attrition & Salaries
In terms of the company’s Latin American attrition rates, the legacy Alorica side is higher than EGS, at 8-9% and 5-6% per month, respectively. The team cited the notion that not having the right leadership at middle-management level results in losing talent, but that’s not the only pressure. “The U.S. economy continues to show good signs of growth, which is impacting the average wages and creating a further cost pressure for the entire industry,” said Crowley. “To combat this, you have to work on retaining more people. Of course, if you look at it the other way, customers are also dealing with this, so won’t want to abandon their BPO contracts and hire their own people, if they can help it.”
Wage inflation is going global, which is one of the reasons Alorica has invested heavily in Nearshore and Philippines. The company predicts that BPO jobs in the United States worth between $9.50 and $11 per hour will soon be in the $11 to $14 per hour range, meaning the former high end is now the low end. “Today, if a new client comes to us for 300 people in the U.S., we cannot model it without $12 to $14 rates,” said Crowley.
This clearly puts Latin America in a much better place, because the countries in the region can continue to be competitive, as well as being geographically and geopolitically dispersed. Ultimately, the region on a whole balances out the impact of the U.S. economy.
“Healthcare is the most difficult vertical to penetrate, although it’s one of our highest organic growth verticals,” said Crowley. “This growth comes from the voice component, as well as email, chat, offline, whitemail, and claims processing. The areas that give profitability are nursing services and non-dispensing pharmacy services. It not the calls that are profitable, but the ability of being able to provide this many different services.”
Aside from diving into the standard verticals, “New Economy” companies, like Uber, are always becoming dominant in the marketplace quicker than expected, so Alorica wants to focus a little on this segment. These companies have a light model and don’t want to invest in infrastructure, making them ideal targets for BPO firms. And, as these types of companies seems to sprout from Latin America on a near-daily basis, there will likely be even more chances to on-board them as BPO clients south of the border.
This time next year, 60-65% of Alorica’s business will be domestic (U.S.-based), while Nearshore business will grow to 15% (representing a 6% growth) and Philippines will grow to 20%. Compressing US rate by increasing work-at-home.
Work at Home Market
Alorica has been attacking the work-at-home niche in the States for some time, but now wants to look at the UK and Canada too, before attempting to implement the culture in Guadalajara, Mexico and Montevideo, Uruguay (for a large client) in Q2 2017. “Right now, certain labor regulations are getting in the way of this trend in Latin America,” said Miro Batista, Alorica’s Latin America President. “There’s a need for governments to understand what a work-at-home culture can mean for the people and the industry, because most employers require a physical location to hire people.”
Through the months of October, November and December 2015, Alorica added $20 million of business per month thanks to its access to 26 states’ worth of work-at-home agents. The team stated that the reason they got the business was because other companies just couldn’t provide the same scalability, flexibility, and availability of talent, three benefits that work-at-home can bring a firm. “If you scale with the demand of clients and provide work-at-home flexibility, then clients will inevitably stick around,” said Batista.
Why Latin America?
Almost 95% of Alorica’s Latin American operations are currently supporting U.S. clients, meaning just over 6% of it works for local clients. This is because, in order to compete regionally, there has to be an applicable cost structure, which is cumbersome to manage across multiple countries.
One of the key discussions that Alorica’s clients want to have is about understanding why the firm is betting on nearshore countries like Guatemala and El Salvador, particularly when they already have such a strong U.S. presence. According to the team, these talks represent an operational consultative approach that clients enjoy, creating a much stronger bond between vendor and client. “The benefits of Latin America come not from a single country or single market, but from the entire region as a single entity,” said Batista.