Nearshore Outsourcing: Notes from Nexus 2018
July 10, 2018
By: Jason Sterns
I attended Nexus 2018, a nearshore outsourcing conference hosted by Nearshore Americas, last month in San Francisco, where I had the opportunity to interact with many organizations that have BPO and IT operations in LATAM.
The conference attendees were friendly and engaging. Everyone I met, from a small group of software developers to representatives from Uber, was willing to share challenges, successes, and their vision of the future for nearshore outsourcing.
As Kirk Laughlin, Nearshore Americas’ founder and managing editor, noted in his opening remarks, the future for nearshore outsourcing is bright, and the amount and level of talent available is increasing. He warned, however, that change can occur quickly or slowly depending on the degree of government support.
Investment in Nearshore
Investment in nearshore operations continues to be strong ($120 billion in 2017) despite evidence that the number of investment deals is leveling off. However, like Jim Marshall, head of emerging manager practice at Silicon Valley Bank observed, the amount of dollars per deal is increasing as is the quality of each investment.
Two other trends mentioned were artificial intelligence (AI) leading the charge in investment interest as well as an increasing number of family investments: 26 percent in 2018 up from 4 percent in 2009.
Marshall also talked about one of the most significant changes coming to technology, the second Amazon headquarters, which will make the chosen city an instant technology hub through the addition of 50,000 tech jobs.
AI & Automation
A discussion on Robotic Processing Automation (RPA), while initially drawing comparisons to chatbots and AI in the customer service world, was highlighted as an essential part of any outsourcing decision.
As A.J. Hanna, vice president of client advocacy at Symphony Ventures pointed out, industry executives are excited about the potential ROI of headcount reduction resulting from the use of automation. Hanna added, however, that 50 percent of the clients his company serves failed RPA implementation.
The reasons include:
- Many competing priorities (Is it applied in the right process?)
- Lack of understanding of the technology
- Fear of being “out of a job” (not everyone embracing the project)
- Lack of experienced talent
His remarks reminded me of how important it is for any brand to take the time to review its customer journey map (or create one). Such a review will help the brand identify and drive strategy regarding the processes it can and should outsource and in what priority. I believe failure to conduct such as review is a common misstep many organizations make in their outsourcing decisions.
Criteria to consider include processes or customer interactions that are repetitive and straightforward, easily outsourced to a nearshore locale at measurable cost savings, and not a core competency of the organization where the skill set of a partner can provide a lift to results.
Uber Growth Case Study
Rahul Vijay, head of global strategic sourcing with Uber, shared some interesting thoughts on how the company has grown by being agile and lean.
From ensuring reliability with Uber Lite being operational on 2G to obtaining the right talent to solve complex challenges, Uber is very agile and deliberate in making sure the company provides exceptional service to its customers, including those in developing countries.
What struck me most, however, was Uber’s ability to deliver a consistent customer experience across the globe with its three million drivers, over 100 million rides, and up to 300,000 concurrent rides at any one time.
Mexico Election, NAFTA Changes Impact on Nearshore
Nearshore Americas revised the conference agenda to allow for a panel discussion on the impact a left-wing, populist candidate being elected as president of Mexico and the possible changes to NAFTA and TN visas could have on nearshore outsourcing.
Sergio Legorreta, principal partner at the law firm Baker McKenzie, and Daniel Ujczo, a partner at law firm Dickinson Wright, two highly-regarded legal experts on Mexico and cross-border trade, led the discussion, presenting their perspectives on what to expect.
The discussion was fascinating in terms of how complex and far-reaching decisions between the U.S. and LATAM countries can be on U.S. brands. Each tariff decision has a ripple effect on industries, not only with U.S. North American partners but LATAM as well.
Now that the landslide victory of Andres Manuel Lopes Obrador as president is in the history books, we could see Mexico’s relationship to the U.S. change dramatically.
But Mexico is but one example of the effect politics can have on nearshore outsourcing — Nicaragua is another. That country has been disrupted by so much political and social turmoil, it threatens the very existence of the BPO industry there. Other LATAM countries — Guatemala, Honduras, and El Salvador — are also experiencing their share of trouble in one form or another.
Contrast that with the relative stability of the Belizean government, dating back to its days as a British colony, which makes the country a much more secure place for U.S. brands to outsource their contact center activities.
Nearshore Outsourcing Location Research Trends
Choosing a call center location is a huge decision for any company regardless of geography. King White, CEO of Site Selection Group, highlighted research trends in nearshore locations while pointing out differences in comparison to North American site selections.
He advised organizations reviewing nearshore outsourcing locations to consider several factors, including:
- Accessibility (how easy is for your team to access)
- Labor Availability
- Market Saturation
- Geopolitical stability
- Government resources and support
- Entry cost (are building built out, or empty shells)
- Employee attrition rates
- Real Estate availability
- Exchange Rates
This research, he said, is complicated by the variability of resources and tools needed to obtain this data.
King cautioned about merely relying on regular internet searches as the information is not as consistently reported in nearshore countries as it is in the U.S. and Europe. He stressed the need to check with local governments or utilize professional services like Site Selection Group.
Of course, I was delighted with how well Belize is doing in all the areas listed above and expect to see continued growth as the country continues its investment in the BPO industry.