How Chile Beat out Six LatAm Outsourcing Destinations to Win Over UST Global

More evidence of LatAm sourcing momentum on the world sourcing stage came late last year when IT player UST Global opened its first delivery center in the region. …

More evidence of LatAm sourcing momentum on the world sourcing stage came late last year when IT player UST Global opened its first delivery center in the region. GenShare, as the new affiliate is called, is a joint venture with client General Electric and is based in Santiago, Chile. The center is mainly aimed at servicing large North American customers in the same time zone, but will soon become IT hub of the company’s global operations according to Arun Subramony, COO of GenShare. We sat down with Arun to get the big picture of UST Global’s expansion plans for Latin America, and the company’s strategy going forward.

Destination: Chile

Operating in 18 countries with 7000 employees worldwide, UST Global in its ten year life span has accumulated almost 60 clients in the Fortune 500 category. And when some of those clients began demanding service in the same time zone, the company knew it had to modify its largely India-based operation to include a Nearshore location.

“We can access talent from other parts of Latin America and even India, and bring them to Chile if required. This is important since we wanted the ability to scale up” – Arun Subramony, COO of GenShare

So why Chile? “We visited seven countries in Latin America and got a great reception in each. But really Chile was obvious”, says Subramony. He lists three reasons: government support, immigration policies, and academic curriculum. The first comes as no surprise. Chile’s economic development agency CORFO is reputed for the level of help and guidance it provides investing firms, which the GenShare boss describes as “phenomenal”.

Furthermore, relaxed immigration policies are Chile’s response to its ongoing problem with a small labor pool. “It’s one of the friendliest countries in terms of allowing foreign nationals to work”, says Subramony. “We can access talent from other parts of Latin America and even India, and bring them to Chile if required. This is important since we wanted the ability to scale up”. The country’s education system has also been recognized as a strong point, with major government investment to build a solid engineering mindset in Chile, and a very technically skilled workforce. “The academic curriculum is extremely depth-focused, not breadth-focused”, says Subramony. “This played into our strategy as we didn’t want to hire a very large base of workers. Chile will be the IT center of our global operation – we needed talent not numbers”. GenShare is currently at 350 employees, and plans to grow to a thousand by 2015.

GE Partnership

While UST Global is the majority partner in the new company, it’s important to note that GenShare is a joint project that would not have happened without the help of GE. Already a client, GE offered a protective cover and a platform off which to leverage capabilities if UST Global would set up a center in Latin America. In fact GE is helping the provider launch its new procurement sourcing platform from the Chile center.

The fact that GenShare is partly owned by GE defines much of its strategy and business goals. “We’re going to focus on a few verticals, and one of them is GE joint ventures and affiliates”, says Subramony. “Being a joint venture with GE ourselves, we will be a natural partner for them – it’s a huge IT services opportunity”. The support of a Fortune 10 company like GE will clearly continue to benefit GenShare.

LATAM Purpose and Strategy

UST Global has big plans for its new Chilean center, including making it the IT hub of its global operations. GenShare will target Global 1000 customers solely and help them manage their indirect spend and procurement by offering procurement consulting services, an integrated procure-to-pay IT platform and downstream BPO services. “A big opportunity for them is in handling the LATAM operations of their clients”, says Atul Vashistha, Chairman of Neo Advisory. “You take clients that are globally dispersed, and consolidate their Latin American operations in Santiago, Bogota or Monterrey. Chile is a great location to do this from – if I was at UST Global, that’s what I would exploit for higher level activities”.

Apart from the procurement platform, GenShare has a clear focus on providing a Nearshore alternative as a value-add to their US clients. Within Latin America itself, Chile, Brazil and Argentina are target markets. “If all goes well with us, we expect a billion dollar run-rate in ten years. In the next couple years at least, we’re looking at double digit growth,” says Subramony.

Mining

Another target vertical of GenShare is mining. The top mining companies in the world have significant presence in Latin America, and many of them are GE partners. GenShare aims to get into that market by leveraging its own partnership with GE to provide R&D, engineering and IT services. “We’re building a global center of excellence and research to better work with our mining customers”, says Subramony. “We’re in partnership talks with several firms – we got a huge response from them”.

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Chile is a great location for mining, not just because of its rich mineral deposits but also the presence of the world’s largest copper mining firm CODELCO, which Subramony says welcomed them with open arms. Chile’s new president Sebastian Piñera has plans to privatize up to 20% of the state-run firm. In recent years increasing numbers of international mining companies have been arriving in Chile, which only contributes to GenShare’s potential client base. UST Global expects US$ 250 million in revenues in five years through the global mining vertical.

Potential Roadblocks

The road looks smooth in Latin America for the new venture, but Vashistha says there will be significant challenges. “Typically in Latin America the service maturity is lower than what this company is used to in India. The skilled labor pool is smaller, and English proficiency is a continuing problem”, he says. This means higher expenditures, and more attention paid to training and project management. To deal with inherent work culture differences, UST Global has been flying some Chilean executives to centers in India to immerse them in work standards there. However over the long-run, GenShare will need to produce home-grown leadership in order to be sustainable.

Subramony recognizes this – “We want to have scale in Latin America and the only way to do that is to partner with educational institutions here to harvest the talent we need”. GenShare is working with Duoc (a leading university) and other local institutions in the area to cultivate the necessary skilled IT workers.

As a new player on the Latin American field, UST Global faces stiff competition from already established firms says Vashistha. Aside from large US companies in the area, Indian firms TCS, Wipro and Infosys, and regional LATAM players Politec, Assenda, CPM Braxis, Neoris and Softtek all pose challenges.

Continued Expansion

Although GenShare claims they’re not looking to expand outside Chile just yet, Vashistha believes that at some point their growth rate and their client base will force them to move into other Latin American locations. For now however, “Chile will be the center. Business intelligence, analytics, mining and procurement services – these four categories will be driven by GenShare”, says Subramony.

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