Original Publication: Customer Management Insight - November/December 2008
View Online
Thanks to such captivating attributes as strong language skills, geographic proximity, a young and talented labor force, a solid technological infrastructure and alluring cost factors, Argentina, Brazil, Chile, Columbia, Costa Rica, and Mexico have become highly desirable near-shore customer care locales for U.S. and Canadian companies, as well as an attractive off-shore alternative for some firms based in Europe, particularly those in Spain.
Numerous leading corporations have set up their own large contact centers in Latin America in recent years, while others have contracted with one of the many reputable contact center outsourcing suppliers that have operations in the region. According to DMG Consulting, Latin America call center growth is the fastest in the world at 16.8 percent agent position compound annual growth rate (CAGR) and number of call centers at 18.4 percent CAGR The research firm Datamonitor predicts that in Mexico alone, the number of call center agents working for outsourcers will grow from 33,500 agents in 2006 to close to 80,000 agents by 2010.
Multinational organizations that choose Latin America have the opportunity to save a lot of money while offering excellent customer support in the two most important languages in business today. As the authors of a recent whitepaper by global strategic management consultancy A.T. Kearney write, “For companies in North America and Europe, the interest in Latin America is twofold, as they view it as an alternative destination for English-based services as well as a location to serve their large Spanish-speaking clientele… .”
Large, indeed, especially in the U.S; with more than 40 million Hispanics in the U.S. — and growing steadily — the U.S. has the second largest population of Spanish speakers in the Americas. “As this group continues to gather economic strength,” write the authors of the A.T. Kearney whitepaper, “it is drawing increased attention from corporate America.”
Leading Locations
Considering the Latin American advantages already listed, along with ample improvements in both political and economic stability in the region, the biggest challenge for many executives isn’t deciding whether or not to establish a contact center presence in Latin America, but rather choosing which country in which to do so. To assist in that endeavor, this article provides a snapshot of the region’s most enticing customer care locations.
Argentina
Over the next few years, Argentina is expected to experience rapid contact center growth, provided that its economic improvement and controlled inflation of recent years continue. The country has a large, underemployed labor force of native Spanish speakers with solid English language skills, and has the lowest wages for skilled labor in all of Latin America. Argentina also boasts the highest rate of college enrollment (56%) in the region, with many of the country’s largest universities offering programs that promote flexible student employment.
Of course, Argentina is hardly a contact center Utopia; many investors are deterred by its less-than-predictable political and economic environment. However, things may be stabilizing; the country’s president’s put a monetary policy in place that makes Argentina’s goods and services affordable to developed markets. Add to that the fact that the country’s Investment Promotion Agency offers fiscal incentives to foreign investors, and Argentina’s future as a contact center hotbed looks promising.
Brazil
Brazil has the largest economy in Latin America and the largest call center industry; however, that industry is largely domestic due to language limitations — there are a relatively small number English- or Spanish-proficient workers in this Portuguese-speaking country.
“Although it’s Portuguese language services are world-class, its largest contact centers require several months to recruit and train even a small pool of English-speaking agents,” write the authors of the aforementioned A.T. Kearney report.
Further hindering Brazil’s ability to lure multinational businesses seeking to near-shore or off-shore contact center services is the country’s rigid labor laws and excessive red-tape. Still in all, many believe that Brazil — due to the sheer size and expertise of the domestic market will soon start attracting more international investors.
Chile
Chile is considered one of Latin America’s powerhouses, due in large part to its incomparable political and economic stability, excellent telecommunications infrastructure, skilled labor, and commitment to clear investment rules. In fact, the country’s call center industry is expected to experience double-digit growth over the next three to four years. However, since the country has only a limited availability of fluent English-speaking professionals, it’s appealing only to international firms looking to support Spanish-speaking customers. This language limitation is why Chile’s contact center market is currently focused largely on Spain; U.S. companies with a need for cost-effective Spanish customer support may also want to look into what Chile has to offer.
Colombia
Colombia often conjures up images of drug cartels and drug-related violence — images that have hindered the country’s ability to attract multinational enterprises. However, its reputation is far worse than reality, and many organizations that recognize this have established a contact center presence there, including such large outsourcing agencies as Atento, Sitel and Contact Center Americas.
According to A.T. Kearney, drug cartels do not represent a threat to people living in urban areas like Bogota, and crime rates in Bogota are lower than in Mexico City, Sao Paulo, and other large metropolitan areas in Latin America. What’s more, investors can capitalize on the “neutral” Spanish spoken in Colombia’s central region, plus Bogota’s labor pool contains a large number of educated young people, many of whom speak English proficiently. Another draw is the labor costs — comparable to that of Argentina.
Costa Rica
Due to the fact that it’s easier to reach (from the U.S.) than South American countries, has a highly educated and affordable bilingual workforce, and has a very stable economy and government, it’s no surprise that Costa Rica’s contact center market is thriving. Several large contact center service providers have set up shop here, and numerous multinational corporations — e.g., Supra Telecom, Fujitsu, UPS, PeopleSoft and Western Union — have opened their own centers.
Of course, being such an attractive location has contributed to Costa Rica’s main drawback: stiff competition for skilled workers; while the country’s labor force is talented, it is not particularly large, thus contact centers may struggle to find and keep top agents. Still in all, say analysts at A.T. Kearney, the country’s investment promotion agency — CINDE — “offers world-class assistance to foreign companies that wish to settle in Costa Rica,” thus this might be an ideal location for enterprises that aren’t afraid of a little recruiting and retention challenge.
Mexico
If you are a U.S. contact center professional — and haven’t been hiding (or trapped) under a pile of ACD reports for the past couple of years — you’ve heard about Mexico as an alluring near-shore customer care option. It tops most other Latin American players in terms of geographic proximity to the U.S., availability of skilled (and rather affordable) labor, and language capabilities. In addition, it features a stable economy (the second largest in Latin America, after Brazil) and government.
Most importantly, it has experience — Mexico accounts for roughly one quarter of the total agent positions in Latin America, according to A.T. Kearney, and is expected to see a 13 percent CAGR through 2009. Many U.S. corporations have near-shored their Spanish-language operations to Mexico, with several others doing the same with their English-language customer care.
One drawback to Mexico is that its foreign investment process isn’t the best organized: Government support to investors is structured by individual Mexican states. While having numerous states compete can benefit investors, the regulatory framework is a bit chaotic; however, the country is currently making improvements to the process. Once this occurs, Mexico stands to take full advantage of what A.T. Kearney calls the Latin American trifecta: “Privileged location; abundant talent and competitive spirit.”
How Does Latin America Compare to India?
Although Latin America has a promising future, it is still not as mature as India in terms of exporting BPO or ITO services to the rest of the world. It has, however, had the capabilities locally for a number of years. Additionally, English-language skills in Latin America have not yet permeated the working classes to the extent that they have in India.
Among the criteria that companies cite in deciding where to send functions is attrition, time zone and regional stability. One of the major challenges that India, the Philippines and other Asian locations face is retaining personnel, especially in the overnight shifts that are so crucial to supporting customers in the U.S. Some call centers in these hot markets report annual attrition rates ranging from 20 percent to more than 100 percent.
In Latin America, by contrast, attrition ranges from 10 percent to 25 percent for outsourced call centers, and about 5 percent for captive and shared service centers. This lower attrition rate is explained by the unique attractiveness of some of these new jobs, higher unemployment rates, less competition for talent, and daytime working hours (given the time zone proximity to the U.S.).
One of the main advantages in Latin America is the ability to offer real-time services, which allows managers in both locations to resolve issues more quickly — something that is not always possible when working between the West and India. In addition, IT systems batching is less of an issue when working with centers in Latin America, since both operations (on- and near-shore) are on the same schedule. Moreover, being able to travel to the near-shore site within the same business day or early the next morning without missing work hours while airborne adds a unique attribute to business continuity planning. This factor also eliminates the need to pay premium wages to nightshift employees.
Source: A.T. Kearney
Tijuana Pays Off For Health And Beauty Giant
One of the world’s largest health and beauty care companies operating in the U.S. recently sent its Spanish-language call center to Tijuana, Mexico, thus reducing costs by nearly 30 percent. Tijuana boasts a large and skilled labor force, making recruiting/hiring (and attrition) very manageable.
Source: A.T. Kearney
Greg Levin is creative projects coordinator for ICMI. gregl@icmi.com
