By Kristin Crispin

A great deal of noise has been made about offshoring customer care on a global basis. Cost savings, multilingual capabilities and business diversity have made it much more attractive for outsourcers and clients alike as the international economy becomes much more integrated. It has also become a hot topic in many developing markets; principally due to the fact that offshoring can benefit countries in terms of technology development as well as employment creation — aspects that can be lacking in the local economies.

While countries like India and the Philippines quickly took center stage in this movement, slowly but surely Latin America has assumed an important place in the offshoring trend. The region is now becoming more attractive for the Spanish services, especially as U.S.-based companies develop specific strategies toward local Hispanic consumers. Thus, outsourcers can differentiate themselves by becoming a full service provider and offering their clients both English- and Spanish-speaking customer care solutions. Moreover, local governments have gone out of their way to attract in-house and outsourced facilities to their countries, as increased foreign investment and job employment directly benefit the development of their market.

A US based multinational made the venture in customer care outsourcing early on and reaped initial benefits in terms of cost and efficiency. However the backlash towards poor client service became so strong it was forced migrate its call centers to the home market.

However, simple cost savings — or even language differential — is not enough to make offshore services a compelling proposition. In the long run, the cost difference between the developed countries and what Latin American countries can offer is likely to narrow. The major challenge for the region will then be in developing better-quality customer services, as will its growth to continue in the future.

Case in point: those companies that have strong strategies toward client relationships seek superb customer service and first-call-resolution. Due to these needs, they are generally more apprehensive in offshoring their calls (due to a perception of lower quality) and prefer to keep their strategic services onshore and in-house, thus today remaining outside the addressable market for Latin American-based offshorers. If and when they do venture into offshore operations, the services offered will be of a less strategic, more opportunistic nature, where companies receive high benefits in succeeding and low risk if failure were to occur. It will also likely be through an outsourcing regime, as outsourcers take on the risks of making investments in infrastructure, technology and staff, and allow more flexibility to shift operations to an alternate location in case of a change in conditions.

In this way, the majority of services outsourced to Latin America is related to telemarketing, customer loyalty programs (mileage programs, etc) and data management. These represent areas that are less mission-critical, would not demand any effort in first-call-resolution or even more automated work that does not involve direct interaction with the customer, and thus would not impact the strategic nature of the company’s business.

How, then, can Latin America begin attracting customers and their strategic customer care needs? Offshore outsourcers have already started to address this by preparing the labor force and increasing the availability of highly skilled agents. This can be achieved through extensive training and preparation, in some cases even supported by local country university systems. Moreover, contact centers can seek to adapt themselves to different cultures and understanding consumer behavior, and in this sense be better prepared to handle strategic interaction with end users. Ultimately, these factors can lead to the offering of top service quality, and put the region in a better position to be competitive, not just in costs but also in being a reliable and top-notch offshore service provider.

After offering offshore services for two years to the US market, a Brazil-based contact center outsourcer decided that IP technology would be the key strategy for their expansion plans. Investments were not restricted to their offshore operations, and technology was implemented for all 5000 inshore and offshore seats

Cost-cutting benefits mean little if customer care operations are based upon unreliable infrastructure that places client interactions at risk. Setting up a reliable infrastructure to transport calls overseas is a complex and costly process, and thus this has been a priority for contact centers that want to position themselves well in the international market. In this sense, along with other operational factors driving the growth of offshore services in Latin America, technology development has also been a strong contributor.

Recent advances in VoIP technology in the region has enabled strong adoption by call centers and is making the option of doing offshore business significantly easier and more cost effective to implement; it also allows for true location independence, favoring operational cost reduction. Furthermore, IP contact centers allow for rapid installation, thus providing flexibility for outsourcers in peak times and businesses in experimenting with a new location.

This trend has been clearly evident in countries such as Panama, Dominican Republic, Chile, Jamaica and, most recently, in Argentina and Brazil, where IP penetration has been driven by offshore services and thus has permitted an improved infrastructure in those countries.

Additionally, the growth of multimedia contact through applications such as e-mail and live collaboration has expanded demand for culturally neutral forms of communications. Integrated voice response (IVR) allows calls to be routed according to the complexity of the client or the need for a certain language, thus proving to be a useful tool — especially in companies that combine onshore and offshore services. On the other hand, computer telephony integration (CTI) screen pops and multi-channel integration are becoming almost standard in new seats deployed in the region, ensuring the effectiveness of customer interaction.

While the need to connect to the Hispanic market culture drove a large telecommunication company to outsource in a nearshore location, the priorities for one other service provider were low labor and infrastructure costs, thus considering also more distant countries.

At the moment of choosing the most suitable location for offshore contact center services, there are significant differences among countries in Latin America. The first factor stressed by companies evaluating the opening of a site in the region has to do with cost. Latin America can be very attractive for U.S. and European companies, providing reductions of about 40-50%. This still remains, though, about 30-40% more expensive than setting up similar operations in India, the Philippines or Eastern Europe.

However, while cost can differentiate one market from another, it is not the only issue that outsourcers look at when rating Latin American sites. A good example is a country such as Argentina, which has become more cost competitive as a consequence of local currency depreciation, and thus has garnered quite a bit of attention in recent years. However, the uncertainty surrounding market evolution and stability prevents new customers from bringing business, leaving them apprehensive about any drastic change in the economic scenario.

On the other hand, Chile not only presents a stable market, but also offers government incentives for the industry, so as to attract investment. This provides some balance to negative factors such as higher labor costs and, in particular, the distance from the U.S. market, but does restrain its competitiveness. In comparison, highly populated markets like Colombia and Mexico are still behind in supporting actions toward this industry, yet outsourcing companies have been very proactive in searching for business in developed markets, with special focus on the U.S. Hispanic market.

Finally, in the Caribbean and Central American countries, more than outsourcers there has been a strong trend of multinationals opening their own offshore operations, supported by government investments, partnerships with contact center solution vendors and initiatives to attract foreign investment, thereby ensuring that operational processes, procedures and technologies are consistent across sites. Growth is currently mainly inCosta Rica, El Salvador, Puerto Rico and Guatemala; as the countries in this region have limited capacities, in the medium term other countries are likely to appear on the list of top offshore destinations.

Latin America is here to stay.

Despite the challenges in setting up and managing a successful long term outsourcing operation in Latin America, the benefits will continue pushing companies to consider multiple regional locations for future investments. And as the expansion of business internationally can also pay off by lower agent turnover and access to an educated labor force (especially Spanish speaking), there is no doubt that offshore facilities in the region will only increase over time. Thus, offshoring customer care in Latin America is definitely here to stay.

Kristin Crispin is Industry Manager, Enterprise Communications, Latin America, with Frost & Sullivan

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