Outsourcing: Latin America Threat to India, China
Latin America is not far behind legacy outsourcing destination China, which is ranked second at 27 percent, while India leads with 60 percent of companies outsourcing to this country. This is revealed by a survey from Capgemini, a leading provider of consulting, technology and outsourcing services.
Today (Sept. 14), it announced the results of the second annual Capgemini Executive Outsourcing Survey, which found that Latin America is the third most popular outsourcing destination, with 25 percent of responding companies currently outsourcing to this region.
Latin America refers to the countries of Mexico, Brazil, Argentina, Chile and Guatemala.
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The survey, commissioned by Capgemini and conducted online by Harris Interactive, among 300 senior executives at Fortune 1000 companies also identified the top reasons for executives to select Latin America as part of their outsourcing strategy.
More than two-thirds (69 percent) of surveyed executives cited cost of labor as the top reason why their company might outsource to Latin America, while other attributes reported included technology and infrastructure capabilities (49 percent), skilled labor (48 percent), and economic stability (44 percent).
These attributes are aligned with the key reasons why companies choose to outsource in general suggesting that outsourcing to Latin America will continue to expand.
Other reasons cited as important for selecting Latin America for outsourcing include its proximity to the U.S., time zone alignment and accent neutrality. These attributes are all unique to this region when compared to other outsourcing locations such as China and India.
The Executive Outsourcing Survey findings also revealed that almost half (45 percent) of executives who do not currently outsource to Latin America say their company would be interested in considering the region as a resource for outsourcing in the future.
In addition to uncovering Latin America as a leading outsourcing destination, the survey highlighted the region’s increasing value to the global economy.
An overwhelming majority of executives (89 percent) believe that Latin America is an emerging market that will become increasingly important to U.S. businesses, and that there are advantages to doing business in Latin America (83 percent).
Further, more than half (56 percent) of executives believe doing business in Latin America is becoming easier than doing business in other parts of the world.
“As the economy rebounds, companies are looking to use outsourcing more strategically as a tool to increase efficiency, yield significant cost savings and drive growth; this includes considering locations beyond India,” said David Poole, VP and Head of Americas Business Process Outsourcing, Capgemini.
Other survey highlights include:
- The top five factors listed by executives in choosing an outsourcing destination are labor costs (79 percent), technology & infrastructure capabilities (62 percent), skilled labor (61 percent), language proficiency (49 percent) and economic stability (44 percent);
- Less important factors listed by executives in choosing an outsourcing location are tax benefits (26 percent) and proximity to the U.S. (3 percent);
- Forty-one percent of executives outsourcing to Latin America cited language proficiency as a key reason;
- Forty percent of executives cited the average education of the Latin American workforce as a key factor in their decision to outsource in Latin America.
This Executive Outsourcing Survey was conducted online within the United States by Harris Interactive on behalf of Capgemini between April 6 and April 16, 2010, among 300 senior executives at Fortune 1000 companies.
Why Costa Rica?
Costa Rica is the new “in” location for “near-shoring.” With a population of about 4 million people, Costa Rica boasts the region’s oldest democracy, political stability, infrastructure and an impressive 95% literacy rate. A Free Trade Agreement with the United States has companies such as IBM, Microsoft, Procter & Gamble, Hewlett Packard , and Intel making substantial investments in Costa Rican outsourcing call centers. It ranks behind powerhouses India and China as one of the most competitive offshore outsourcing destinations offering high-paying, highly sought-after jobs.
Global competitive pressures are forcing United States corporations to lower their costs. Today, it is necessary to do offshore outsourcing just to remain competitive. After careful analysis, many companies have now expanded their operations in Costa Rica . It is attractive in terms of cost and breadth of capabilities.
Business conditions are stable and secure, not like other countries with lower levels of working conditions and unstable governments. Our Costa Rican Call Center offers the highest quality bilingual call center support for wages that are 40%-80% lower than the United States. There are plenty of English speakers attuned to the needs of the North American market.
Each region has its pros and cons. We have worked with people from India, China, East Europe and South America. I felt that South America does have many advantages — cultural affinity, timezone affinity, cost effectiveness and technical soundness. It appears to me that dealing with small firms and individuals in South America works better for now. Of course, the maturity and scale will improve over time. It’s interesting to see how each region/country develops in the global IT industry.