Today's guest blog on outsourcing in Latin America comes from Melany Williams, Partner & Managing Director, TPI Innovation Center.
With a wave of buyers of outsourcing services looking to Latin America, the habit of moving your business 7,000 miles away needs evaluation.
The appreciation of the Indian rupee by more than 11 percent against the U.S. dollar this year and the rise of the Canadian dollar is causing many companies to consider diversifying their offshore portfolios. India is facing constraints such as wage inflation, talent attrition and infrastructure strains, and Latin America is increasingly becoming the alternative "go-to" location.
A number of factors support setting up a Latin America operation: most countries in the region have stable social and economic environments, the necessary infrastructure, intellectual property rights, and free trade agreements including NAFTA that make sharing data in core business applications across borders possible. These regions are more appealing now than a few years ago and successfully migrating IT and business service support functions requires a balanced view of risks and opportunities.
One of the most significant factors to North American buyers of
outsourcing services is knowledge of English, particularly in Tier 2
cities where many providers are establishing operations. Language
skills play a vital role in Mexico, a populace familiar with American
customs, language and culture, as well as Argentina and Chile, both
with large and increasing numbers of English speakers. The shared time
zones also help, enabling communication during business hours and
reduced travel time.
But all roads lead to cost considerations and interesting dynamics are at play here.
Many U.S.-based providers expanded their footprint in Latin America
through partnerships or acquisitions. This not only benefits the U.S.
provider via insight into the culture, work styles and customs, but the
local provider by access to improved technology and process innovation.
The "human" factor can't be neglected either. The Mexican government,
for example, has offered attractive tax incentives to India heritage
companies to establish operations in the country, affording them the
opportunity to establish relationships with top engineering schools
from where they recruit talent. And while India and The Philippines
suffer from high attrition, Latin America has a resource talent pool
capable of stepping up to U.S. demand while exhibiting low turnover and
attrition rates.
But challenges do exist south of the U.S. border. Outsourcing contracts
must address security of both the physical facilities as well as
address business continuity planning, contingency planning and disaster
recovery. Global service delivery contracts must comply with multiple,
varying laws across nations and take into account inconsistent data
privacy policies. Invoicing and taxation can be complex, and labor
regulation, excessive bureaucracy and some infrastructure bottlenecks
can pose routine constraints.
At the end of the day, technology pushes globalization, but access to
markets and standardization do not create homogeneity. Success in
outsourcing engagements results from understanding people, traditions
and relationships, and companies need to take this into account during
any project, irrespective of geography. Before turning to Latin
America, companies need to understand the conditions from A to Z in
order to position themselves to take advantage of the outsourcing
opportunities that Latin America has to offer.
I would love to hear about your Latin American outsourcing experiences. Are there other factors that should be considered?
