About a quarter of the Tholons 2012 Top 100 Outsourcing Locations come from Latin America, which proves how the entire region is realizing and intensifying its capabilities in delivering IT-BPO services. Latin America has been showcasing its capabilities as a key outsourcing destination for multilingual BPO services, as well as select KPO and ITO processes. This development on a regional scale resulted in an overall upward surge in the rankings of nearly two-thirds of the Latin American cities covered in the Top 100 List.

 

The list included the deep investigation of top outsourcing cities from rising countries such as Brazil, Costa Rica, Chile, Uruguay, and Colombia. Although not having emerged cities for this year’s list, Latin America has three cities in the Top 10 Emerging list – São Paulo (13th), Buenos Aires (15th), and San José (18th). São Paulo leads the Latin American outsourcing destinations list as it moves 2 notches up, marking a cut between East Asia’s Beijing (12th) and Dalian (14th). In addition, a commendable feat is seen in the city of Cali, Colombia, making an entrance for this year (98th). The inclusion of Cali in the list is attributed to the city’s overall support in developing an IT-BPO industry through the launch of free trade zones, and in general also signifies Colombia’s rise as a service outsourcing hotspot in Latin America.

Tholons foresees Colombia to emerge as one of the most promising service delivery countries in coming years. The rationale for such development in the global outsourcing space is attributed to various factors. First, the regional and domestic markets in Latin America are collectively growing, led by regional giant Brazil. More outsourcing opportunities within the region are unfolding, which has enabled domestic companies to realize their potentials in delivering outsourced services. Consequently, the fulfillment of the domestic markets has become the foundation for many Latin American service providers in enhancing their delivery capabilities in the global offshore and nearshore markets.

Further, in tapping this enlarging regional market, global service providers have started locating in the region. NASSCOM reports that in 2010, a total of 24 delivery centers were set up in Latin America, which was comparable to the number of delivery centers established in the Philippines and other parts of Asia. Indian Pure Play companies have also continued their expansion in the region. For instance, TCS now has seven delivery centers in the region, while Wipro has three.

A microcosm of interplay is seen in the top outsourcing city for the region, São Paulo, Brazil. With expertise in high value services, São Paulo now hosts Genpact which targets the developing Brazilian market. Genpact’s delivery center in the city provides F&A services to Astra Zeneca, a biopharmaceutical company. Aside from this, São Paulo has also capabilities in clinical analysis and laboratory tests, proven by DASA’s (Diagnosticos da America S.A.) services to Amil Participacoes S.A., the largest healthcare company in Brazil. These examples of expansion and array of services validate São Paulo’s progress in 2012. Industry growth in the city has also spread to nearby cities such as Campinas. The city recorded a 6-place progression, attributed to a rapidly improving business ecosystem. Campinas is now home to notable providers such Capgemini, IBM, ACS, among others. The city now also has more progressive business and fiscal policies, such as favorable tax incentives for service providers locating in the city’s Technology Cluster.

Chile and Uruguay – having high quality labor force attested by various international service providers – experienced upward movements in the List. These two countries bank on its highly skilled talent pipeline, which has enabled the flourishing of high value KPO and ITO services. Scale however, is a mid-term concern for these two locations.

Meanwhile, the entrance of San José, Costa Rica in the emerging list, as well as becoming the third most feasible city for outsourcing in the region, highlights how the city surpassed competing destinations, by capitalizing on its technical delivery capabilities. In 2011, outsourcing operations in San José included the expansion of Aegis by hiring additional 400 bilingual employees. By building a new facility in Pavas, San José, Concentrix also expanded in the city and aims to hire 150 new agents. Realizing Costa Rica’s strength for ITO services, IBM likewise announced a US$300 million investment in the country in order to intensify the company’s offering in cloud computing. Such an investment is set to provide 1,000 jobs by 2014. Intel and HP, on the other hand, are already well-embedded in the Costa Rican IT Services landscape.

In addition, Colombia’s Bogotá and Medellin showed notable progress. These two cities are the biggest movers in the list, accelerating to 9 places and 8 places up respectively in the rankings. Such a feat denotes how these Colombian cities have been showing their capabilities in delivering a broad spectrum of IT-BPO services to the international market. As the Tholons 2012 Top 100 Outsourcing Destinations report mentions, Bogotá and Medellin both improved security conditions which encouraged various companies to create new investments as well as expand in these cities. The current government of Colombia has extended the strict adherence to safety and security policies of the past administration, which has provided for a significantly more conducive (and predictable) business environment. Such initiatives have also created better perceptions on the overall social risk profile of the country.

The positive risk perceptions certainly unveiled the feasibility of these two cities for services outsourcing. Nevertheless, Latin America still possesses challenges that need time and focused strategies to be addressed. Although countries like Colombia have been recording improvements in overall security conditions, other contributing factors hindered accelerated movements among the top cities in the region. Latin America continually wrestles with negative risk as well as pressures from inflation. One country that the risk component has significantly affected is Mexico. The prevailing negative security conditions in its lead outsourcing city, Mexico City, has been preventing service providers to expand within the city while pushing them to locate to other Mexican cities or in many cases, outside Mexico altogether. The downgrade of Mexico City translated to a marginal increase in Monterrey’s and Guadalajara’s rankings.

Meanwhile, São Paulo in Brazil is held back by increasing labor costs. This may curtail the progression of São Paulo towards the emerged cities list. In addition, Argentina’s lingering fiscal problems, coupled with political risks, likewise have caused large providers rethink expansion plans in the country. Given this, service providers may now be more likely to source operations from similar profiled destinations like Peru, which despite of ongoing political movements, is fast realizing its potential in delivering IT enabled Services (ITeS). Tholons views Peru to be an upcoming player in the region, especially for voice-based BPO services. These dynamics are reflected in the rankings of these cities, as Argentine cities fell one to two ranks with Peru’s Lima moving 2 places up.

Establishing a strong presence in Latin America serves as the gateway to realize the gains from the region’s domestic market as well as from the global outsourcing market. Despite the challenges and inhibitors of the previous year, Latin America still managed to become one of the most promising regions for IT-BPO services. Hence, effecting better mandate and changes on the critical development areas will foster the fruition of even greater benefits from the industry.

Tholons sees that Latin America will become a stronger destination for IT - BPO in the coming years. With this in mind, it is important to note specific countries and cities which will become active agents in catalyzing the region’s maturity for outsourcing. Such locations possess strengths in core components which will become the primary anchor in developing a robust outsourcing industry.

Costa Rica will see further positive movements in the coming years, as the global IT-BPO market moves towards more vertical-specific high value services. Service providers will be more persuaded to locate in the country, in order to make most of the country’s skilled labor force for F&A and ITO processes. Moreover, Costa Rica is now exerting increased efforts to attract more investments in the Creative Services Outsourcing space.

Colombia is also poised to move up in the rankings. With its program Transformación Productiva, the entire country has acknowledged IT-BPO as a key growth industry. In the case of Colombia,

stimulating the industry means a focused strategy on its KPO and ITO segments. This will be realized through implementing more effective training and capacity building programs – a wide-scale initiative that the country has begun to initiate.

Chile’s Santiago is another city that will be under careful consideration in years ahead, as the city will possibly vie for a place in the next survey of the Top 10 Emerging Cities list. The sustained drive to hone expertise in vertical-specific processes will be the key point for Santiago’s further progression.

On the other hand, Brazil, Mexico and Argentina need to address internal risk concerns, from the social, economic and political fronts - to regain lost momentum. Without a proactive stance to control inflation, curb negative risk conditions and manage perceptions on these countries, upstart destinations such as Peru and smaller nations in Central America will be poised to capitalize on the lost market opportunity from these three larger destinations.

The rankings for the Latin American region also reveal heightened country-level competition. This competition paves way for the vitality of the region’s services outsourcing industry, marking the varying competencies of each country. The oscillation of the industry dynamics in the countries marks the positive results for the entire region – identifying both the regional leads and next wave countries for outsourcing. Without doubt, Latin America will be oneof the more, if not the most, promising service delivery cluster in the world in the near-term.

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