Outlook for Nearshore Contact Center Outsourcing: Strong and Getting Stronger

After several years of stagnant growth, contact center outsourcing in the US and Americas is now poised for a significant upswing. Given the prediction by business & technology analysis firm Ovum, contact center outsourcing by US and Canadian companies should increase at a compound annual growth rate (CAGR) of about 3 percent between 2011 and 2016.

“This is significantly in excess of the 1.5 to 2 percent CAGR we were seeing for the past several years,” said Peter Ryan, Ovum Practice Leader for Outsourced Services, during a recent interview with Nearshore Americas. Last year, Ovum forecast said North American contact center outsourcing might increase at a CAGR of 2 percent from 2010 through 2016.

Ryan said contact center outsourcing by North American companies began dipping during the global economic turmoil of 2009, but recent improvements in the global economy are helping spur new growth. “There is more interest in North America,” he said. “More economic activity is driving calls to contact centers, which increases the stress on the pipeline.”

Though Ryan believes that current political and public pressure on US-based companies to keep jobs onshore is creating a greater interest in domestic contact center development. He expects that may change once the election is over.

Good News for Mexico

“This is a good news story for nearshore providers,” said Ryan. He gave the example of the Mexican contact center outsourcing industry, which Ovum predicted will report a CAGR of 6.4% between 2011 and 2017, up substantially from the 5.5% CAGR previously forecast for 2010 through 2016. This is an improvement from a “comedown” the market for Mexican contact center services has experienced in recent years.

Mexico is “well-known” among North American companies for having strong bilingual capability

“Ninety percent of the comedown in the Mexican market was due to the negative impact of bad news about Mexico’s drug wars and unsafe borders,” Ryan said. “This was pushing work away from Mexico and toward providers in other nearshore countries like El Salvador, Nicaragua, and Colombia. However, this year we noted a pickup in interest in Mexico.”

Ryan attributed this improvement in the prospects for Mexican-based nearshore contact center outsourcing to several factors. “Capacity in Central America is limited,” he explained. “There is contact center saturation in El Salvador, Nicaragua and Guatemala, and Honduras will not have a mainstream contact center industry anytime soon. Colombia has taken some business away but is struggling with bilingual services.”

In contrast, Ryan said Mexico is “well-known” among North American companies for having strong bilingual capability. In addition, he noted that Mexico is a “huge country” and that most contact center activity takes place far away from areas plagued by drug violence. Ryan said Brazil also has similar nearshore contact center outsourcing market with a potential to grow significantly in the years ahead.

Argentina – Lone Trouble Spot

Ryan singled out Argentina, saying it is the only “bad news story” among nearshore contact center destinations. “The government is anti-commerce and anti-outsourcing, and has not taken the concerns of the BPO industry seriously,” he said. “Inflation is huge problem that goes beyond official government statistics.”

According to Ryan, the economic and political situation in Argentina has largely stopped most US companies from outsourcing contact center services there, and even domestic contact center services clients are starting to shift their business to nearby Latin American destinations such as Peru. “It was inconceivable as recently as four or five years ago for a non-Argentinean contact agent to be serving an Argentinean caller,” Ryan said.

Although the prospects for the nearshore contact center outsourcing industry look bright, Ryan cautioned they are based on current positive economic trends and may be subject to change. For example, another European debt crisis or an economic slowdown in major developing markets could scale back Ovum’s latest predictions.