Latin America Offers New IT Outsourcing Challenge

It was always feared that as soon as the euphoria for offshoring everything that's ICT- enabled starts dying down and other countries realize that what India can offer they can offer too, India could well start losing its preferred-destination status for IT-enabled services. Although not a strong trend yet, it has finally started happening.

Experts say, having spent the last few years in acquiring competing skills for ICT-enabled back office services, Latin American countries like Brazil, Mexico, Argentina and Peru (as well as Philippines) have slowly started eating into India's until now dominance in the voice based back-office services pie. What's more; with increasing connectivity and more cost effective rates, these countries are even posing as tough competition to India's pre-eminent position as a back-office destination of choice.

"Although work has not started running away from India yet, over the last few quarters, few new businesses of inbound voice back-office processes are coming to India," says Ramesh Kamath of Aditya Birla Minacs, an IT-services company of Indian origin that claims to operate across 3 continents and 29 centers spanning Canada, Germany, Hungary, India, Philippines, the UK and USA. 

According to him North American customers are seriously evaluating Latin American countries and are even considering taking back simple call-center jobs back to USA for creating more jobs back home.

"This trend is driving us to open operations in Latin America and we are evaluating countries that are nearer shore to the USA," he added.

Kamath's company, may haven't yet started romancing in the region where Romance languages - those derived from Latin like Spanish, Portuguese, and variably French - are primarily spoken. But some of the marquee names in the IT-services world have already started wooing Latin America.

Reportedly attracted by the ready availability of, as Kamath says "fair number of skilled workforce", companies like IBM, TCS, Accenture and Unisys have set up centers in countries like Brazil, Mexico, Argentina and Peru, making them new back-office hotspots. 

Indeed back-office offshoring has turned the full circle. Industry sources say some North American companies are willing to pay even twice the Indian rates for moving some of the back-office processes because success rate is higher back home.

Right now though, the shift is headed mainly towards Latin America-and Philippines. These destinations- considered now as rivals to India- have started offering what India has failed to acquire despite several years of trying; strong emotional and cultural connect.

"With regard to telesales in particular, Latin American voice process service providers are scoring higher because, unlike India, they have been able to connect very well with North America customers," said an industry source requesting anonymity. 

Latin America is also getting fiercely competitive. "While Indian service providers are still conscious about margins, Latin American providers offer rates that are at least $3 to $4 cheaper than Indian voice process rates per hour," says Kamath.

"Consequently Latin America is not only emerging as more competitive in terms of cost, but many governments there are also reshaping their policies to encourage the back-office industry there," says Kamath.

Experts also say India is losing out because of its inability to upgrade its workforce. According to Raman Roy, who was the first to drive American companies to offshore their back-office services to India, the country has failed to fine-tune the skill sets of its back-office workforce. He says despite its large pool of English speaking labor, few have the required communication skills to interact effectively with North American clients.

The falling dollar is helping as well. Adverse currency movements and wage inflation in India are putting pressure on operating margins of Indian providers. In contrast Latin American service providers are hardly impacted by the fluctuations of the dollar, says research agency Gartner.  

Nevertheless, the moot question is, how serious is the Latin American threat to India? "Not so much now, as complex voice-based businesses like tech-support, or other knowledge-based processes are still coming to India," says Kamath. "But five years from now I expect Latin America to catch up with India."