While Latin America’s Business Process Outsourcing market represents just five percent of global spending, or around U.S. $7 billion, according to a report by research firm Gartner, it is growing and there is innovation in the region. Gartner’s report predicted annual growth of nearly 10 percent on average through 2017, up from 5.3 percent in 2013. This, the report noted, would be led by Colombia, Mexico and Chile, all of which are expected to grow at over 10 percent over that period. Then there is Brazil, which still dominates the region’s BPO activities. All of this points to a robust and potentially significant shift in Latin America’s part of the BPO pie.
The key countries certainly seem to be changing. A report by KPMG Brazil noted that while “Brazil continues to lead the region in terms of market size, [it] has been losing competitiveness if compared to other locations such as Mexico, Colombia, and Central America.” It went on to say that one obstacle is the country’s “unfavorable” labor regulations— despite the experience and creativity of Brazilian technicians which are beneficial in providing technology and services that require innovation.
The report also noted that “the need for global integration in the region has never been so urgent and, in addition to rising costs, this motivates companies to opt for models of Global Business Services (GBS), including shared internal services and outsourcing.”
The growth of the sector has attracted attention from academia as well as industry, with the publication of a book titled Latin Americaʹs emergence in global services: A new driver of structural change in the region?, which highlights the increasing impact of the sector on the region.
The book, published by the Economic Commission for Latin America and the Caribbean (ECLAC), focuses on how several countries in Latin America have entered “the offshore services sector both through the attraction of multinational companies and the internationalization of domestic service suppliers. Both strategies have induced new patterns of structural change in a sector traditionally characterized by large productivity differentials between service industries and between large transnational corporations and small and medium-sized enterprises (SMEs).”
The book goes on to relate that “the offshore services sector has furthermore provided an opportunity for Latin American countries to become more firmly anchored in the knowledge economy and, in turn, to reduce their dependency on extractive industries, particularly in South America.”
According to ECLAC, the size of the ITO industry in Latin America and the Caribbean reached $8 billion in 2010, compared to $5 billion in Eastern Europe, despite having entered the industry almost a decade later. It highlighted the job creation stimulated by the sector in Chile, Costa Rica, the Dominican Republic and Uruguay.
Alexandre Colcher, Accenture Operations BPO lead for Latin America, said that they have identified two specific drivers for BPO in Latin America. First, he said, multinational companies in Latin America are being driven to outsource processes, not only for cost cutting, but also as a way to gain local process expertise, to improve quality of service delivery, and to grow their business without requiring large direct outlays.
The second driver, according to Colcher, is that of local companies growing in the region and using outsourcing to scale and gain world-class capabilities. “Specialized outsourcing as a competitive advantage will dominate the Latin American landscape. Demand in the entire region remains steady with Brazil leading the way and Chile, Colombia and Mexico growing in its wake,” he said.
Colcher noted that BPO in Mexico has rapidly evolved over the past few years, with leading providers focused on the automation of services, and the greater use of technology to drive business value.
Mexico is not the only country to benefit from the growth in BPO and Latin America’s prime positioning in the sector. Colcher added that BPO in Latin America is very dynamic. “It is a critical offshore location for Spanish and Portuguese speaking countries and has the advantage of being in a similar time zone to the U.S, with market confidence in its Internet and telecommunications infrastructure. We see a mix of local companies growing to be multinationals and using BPO as a way to speed growth,” he said.
Looking to the future of BPO in the region, Colcher said that they expect BPO clients in Latin America to increasingly want their service providers to transform back, middle and front offices, to improve business performance, and to nimbly enable shifting business directions. “The BPO industry is becoming more focused on delivering strategic business impact, not just operating cost reductions,” he said.
He added that Accenture’s experience and research shows that BPO can provide significantly more value – cost savings and end-to-end process excellence are just the price of entry.
“Today’s BPO leaders are achieving measurable business outcomes, spanning reduced speed to market, increased revenue and improved customer satisfaction. Achieving these kinds of results require delivering business value through industry and domain expertise, operational excellence, analytics, technology assets and platforms and end-to-end solutions,” said Colcher.
Mexico in particular seems set to benefit from the growing interest in BPO in the region and could potentially topple Brazil from its throne. The evolving needs of BPO clients and the possibility of innovative approaches from a region set to cement its mark in the sector provides opportunities for those savvy enough to grasp them. It is unclear yet which countries will benefit the most—Mexico is almost certain to be one—but what is clear is that BPO in Latin America is on an upward trajectory