Selecting a Sourcing Location in Latin America

How to Choose the Right Sourcing Location

July 28, 2015

NAVIGATING THE LATIN AMERICA GLOBAL SERVICES MARKET

Adriana Castro, SVP Customer Service, Citibank, LATAM HUB Tim Bilali, Executive Director, Global SAP, Interpublic Group Brian Tumpowsky, Acting Vice President, Re: Sources

© 2015 Neo Group Inc. Proprietary

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ABOUT NEARSHORE EXECUTIVE ALLIANCE (NEA)

The Nearshore Executive Alliance (NEA) is the industry association for the IT Services and Business Process Outsourcing sector in Latin America. A nonprofit organization founded by a broad selection of industry leaders with the objective of creating awareness of the capabilities of the region and increasing the use of the Nearshore delivery model.


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•  Globalization Strategy •  Sourcing •  Location Strategy •  Health Checks •  Renegotiations •  Governance

ABOUT NEO GROUP

We deliver results through three distinct and linked solutions and services:

ADVISORY SERVICES GOVERNANCE SOLUTIONS

•  Design •  Run and Support •  Ongoing Resource,

Contract and Performance Management Services

SUPPLY MONITORING & ANALYTICS

•  Country •  City •  Supplier •  Real-Time Event Alerts •  Subscription-Based

Monitoring

"   Since 1999, we have been helping clients accelerate benefits and minimize risks associated with global services and sourcing.

"   We have a singular focus on the global services supply chain.

"   We achieve outcomes through deep intellectual property, real-time analytics, proven methodologies, experienced advisors and co-creation with our clients.


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TODAY’S PARTICIPANTS

Adriana Castro, SVP, Customer Service, Citibank, has 20 years of experience in BPO. She has integrated huge international migration of operational process for Citibank into a Colombia HUB. Due to her global Best Practices she has been awarded as a best performance country for 5 consecutive years by Citibank Corporation.

Tim Bilali, Executive Director, Global SAP, Interpublic Group is responsible for leading the technology for a major business transformation initiative for this $7B global advertising and marketing services company. Previous to IPG, Tim has held leadership positions with Infosys, Kraft Foods, and Nabisco.

Atul Vashistha, CEO, Neo Group, is recognized globally as an author, speaker and leading expert on globalization. Atul is passionate about helping corporations create competitive advantage by leveraging global services and sourcing.

Brian Tumpowsky, Director, Strategic Business Solutions, Re:Sources, is a trusted advisor and well-regarded market leader in strategic sourcing and vendor governance. He specializes in optimizing organizational resources — both internally and externally — to improve efficiency and effectiveness of operations.

Rebeca Hassan, Executive Director, NEA, is an accomplished nearshore outsourcing industry professional, with a background of hands-on IT solutions development, data warehousing and business intelligence.


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"  Key considerations in location selection

" LatAm landscape and perspectives

"  Taking action on location risks

AGENDA


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QUICK POLL #1

QUICKPOLL

Why are you considering Nearshore? Poll Results:

Agile 33%

Cultural context 44%

Business context 55%

Cost 33%

Other (Feel free to use the chat feature to elaborate) 0%


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NEO IP: SUPPLIER MATURITY LE

AD

ING

PR

AC

TIC

ES

Process §  Standardized and predictable §  Optimized to operate at lowest possible costs §  Tightly controlled and monitored

Technology §  Use technology as differentiator §  Look for automation opportunities to enhance productivity §  Skills across multiple technology domains

Productivity §  Established productivity metrics §  Continuously monitor productivity and efficiency §  Provide employee incentives based on productivity and quality

Decision Making

§  Data driven §  Rapid and closer to the customer §  Establish management information system to support decision making

Compliance §  Routine audits to comply with client compliance requirements §  Follow relevant industry compliance standards

Quality §  Zero error focus §  Quality certifications §  Consistent, metrics driven

Human Capital §  Nurture talent; Create empowered employees §  Focus on training and development §  Provide opportunities to progress career and compensation

CAN BE IMPACTED BY LOCATION


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QUICK POLL #2


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LOOKING THROUGH THE RISK FILTER

Factor Summary Description

MACRO-ECONOMIC Key macro-economic indicators, including inflation, foreign direct investment, credit risk, currency risk and market fluctuations

FINANCIAL Key labor cost metrics for each of IT, BPO, KPO, as well as operational costs and taxation factors

GEO-POLITICAL Political risk and stability, social and security risk (e.g. terrorism), and natural disaster risks

INFRASTRUCTURE Government support and incentives to source (including forward availability), plus power and utilities, cyber risk, transport and facilities

BUSINESS Ease of doing business (permits, start up, etc), Regulatory and statutory requirements

LEGAL Legal and regulatory policy and acts, IT and BPO industry trade union activity, and key in-market labor and work day laws

SCALABILITY Size and growth characteristics for ITO and BPO, provider and process maturity, worker population spreads, attrition / hiring measures

QUALITY OF LIFE Expat quality of life measures, business support and amenities, ease of international travel

Source: Supply WisdomSM


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NEA/SIG CXO SURVEY 2015

What risks concern you about leveraging Nearshore?

Other: Lack of awareness; lack of focus on region


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QUICK POLL #3

QUICKPOLL

Which location are you most interested in? Poll Results:

Colombia 25%

Costa Rica 25%

Mexico 25%

Other (Feel free to use the chat feature to elaborate) 25%

Brazil 0%


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LATAM HOTSPOTS

Mexico •  Most developed BPO industry in LATAM •  Low English proficiency •  High end digital talent

Nicaragua •  Mature contact center market •  Opportunities for lower cost voice

services •  Lack of skilled labor pool

Peru •  Excellent Spanish fluency •  Strong back-office BPO services •  Lack of skilled labor

Costa Rica •  Emerging market •  Small but skilled labor force, strong

location for high-end voice talent •  Good government support for

education directing at the industry

Colombia •  Excellent software skills •  Small labor force, multi-lingual •  Excellent in IT professional services,

technical & business services •  Suitable for niche operations

Brazil •  High turnout of IT

graduates, nearly 250,000 engineers a year

•  Huge Labor pool, suitable for large operations

•  Good people skills and availability

Uruguay •  Liberalized immigration policies to

meet labor pool demands •  Excellent political stability, •  Good English-speaking labor pool

with good accent •  Lacks in innovative technologies

Argentina •  Excellent software skills and digital

services •  Small Labor Force, multi-lingual •  Excellent in IT professional services,

technical & business services •  Suitable for niche Operations

Chile •  Small and focused industry •  Similar business culture to US •  Ideal for small scale outsourcing,

especially analytics

(Bubble scaled to size of Industry)

Source: Neo Group & Supply Wisdom


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LATAM FREE TRADE ZONES

Mexico •  4 Free Trade Zones •  No tax on goods exported to

U.S, no export requirements required

Nicaragua •  8 Free Trade Zones mostly comprises

manufacturing companies •  Exemption from income tax, sales tax and

value added taxes

Peru •  4 Free Trade Zones •  Goods are codified and classified - 90% of goods

are taxed at 15% and the rest at 25% •  No quantitative restrictions, exchange control or

licenses required

Colombia •  11 operating Free Trade Zones and 55 approved •  Income tax – only 15%, no sales tax •  Export products to international as well as domestic

market

Brazil •  Total 4 Free Trade Zones •  Manaus free trade zone - most

developed, more benefits •  Tax reduction and exemption, Value

Added Tax exemption and Value Added Tax Credit are few incentives

Uruguay •  12 Free Trade Zones •  Free trade zones offer the possibility

of free entry and exit of currencies, securities and precious metals

Argentina •  10 Free Trade Zones •  Exemption from import duties on

capital goods •  Reduction in Value Added Tax

Chile •  3 Economic Zones •  Enterprises operating in the zones are

exempted from value added and import duties •  25 years exemption from corporate tax

Costa Rica •  21 Free Trade Zones and Industrial parks •  100% tax exemption for import and export duties,

excise duties and remittances repatriation tax

(Triangle scaled to # of Zones)



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Mexico •  High levels of violence in the country •  Earthquake prone •  High epidemic risk

Nicaragua •  One of the safest country in Latin

America •  Low incidence of street crime •  Highly prone to earthquakes •  High levels of corruption

Peru • Extreme risk of floods • Highly earthquake prone region, falls in the seismic zone 4

Costa Rica •  Increase in crimes such as petty

theft, gang muggings and robbery •  Highly prone to earthquakes and

volcanic eruptions •  Sharp increase in Dengue since 2014

Colombia •  Terrorism (FARC) •  Domination in drug trade

Brazil •  Crime – a major threat

Uruguay •  Low terrorism threat •  Minor incidents of crimes are

common •  Occasional large storms can

cause severe damage

Argentina • High risk of seasonal floods and volcanic eruption

• Minor street crimes • Moderate political stability

Chile • Highly prone to earthquakes and volcanoes

• High air pollution in Santiago during winter months

LATAM: VIEW ON GEO-POLITICAL RISK



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TALENT TRENDS – SALARIES (SAMPLE)

ITO KPO

BPO: Voice BPO: Non-Voice

Predicted LatAm ITO/BPO/KPO salary growth for 2014-15 is in the range of 4.5%-6.5%. Brazil has one of the highest salary ranges in the region, due to high demand for IT/BPO workers.



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TALENT TRENDS - TALENT POOL

Labor Pool (Millions) Annual Graduate Pool (Millions)*

Headcount Growth Rate** Attrition Rate

LatAm is expected to experience lower attrition than many offshoring regions over the next decade. Although Brazil has one of the largest labor pools, labor demand is beginning to outstrip in-country supply.



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QUICK POLL #4


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CONCLUSION

Selecting the right LatAm location requires:

DEMAND "  Understand your scale and skill requirement (Now and in

the future) "  What risks really matter to you (Risk tolerance) "  Own or contract (Capabilities and readiness requirements

are uniquely different)

SUPPLY "  Understand the unique opportunities and challenges

in each country "  Understand comparative value "  Understand Total ROI


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THANK YOU

ATUL VASHISTHA Chairman & CEO [email protected] +1.415.839.8050 www.NeoGroup.com www.SupplyWisdom.com [email protected]

REBECA HASSAN Executive Director [email protected] www.NearShoreExecutives.com

Selecting a Sourcing Location in Latin America

Business

Transcript of Selecting a Sourcing Location in Latin America