Dennis Barker
The annual Nearshore Nexus conference is a good time to take the virtual pulse of the region's IT outsourcing and BPO community. The event brings together a diverse crowd that enthusiastically espouses or embraces nearshoring but also recognizes the restraints and the challenges ahead.
If there were a triumphant headline from the conference, it would be "Nearshore No Longer Operates in Shadow of Outsourcing Giants," to paraphrase Nexus founder Kirk Laughlin. India and the Philippines and China continue to be where the biggest outsourcing action is, but "outsourcing to Latin America" gets the head-scratching "Say wha?" response less often now than it has gotten until recently. Even the Wall Street Journal is now paying attention.
Some of the region's success is due to the monumental social, business, and government changes that have taken place in many countries. Keynote speaker Alvaro Uribe, former president of Colombia, and a man who knows about country transformation, praised those changes that form a "triangle of cohesion": security, free investment, and social equality.
Uribe told CNN during a Nexus interview that Colombia built up its BPO industry with government measures like eliminating the VAT on business services and giving workers a chance to learn the skills that ITO and BPO require. Since enacting services-friendly efforts, Colombian BPO has grown from 2,000 BPO jobs to nearly 100,000.
The old "Latin America costs too much" issue came up, as did more evidence that nearshoring can often turn out to be the better deal. Depending, of course, on what you're looking for. If all you're looking for is lowest rates, then ok, Latin countries are probably out, said Mark Peacock, CIO of Pegasus Solutions. "But when you really, truly think about TCO, and start thinking about the cost of complexity in your operation, and the cost to coordinate and reach out and train people, and deal with people, there is a kind of hidden cost to going fully offshore."
That hidden cost is part of the equation that nearshore providers need to exploit.
And they also need to pay more attention to the image problems, especially Mexico. A reporter for the Wall Street Journal's CIO Journal blog attended Nexus and subsequently wrote a piece headlined "Outsourcing in Murder-Plagued Monterrey." That's what you're up against, Mexico IT providers and trade promoters.
Still, the piece did allow as to how IT outsourcing in Mexico has gone from around $4 billion in 2005 to around $8 billion this year.
And that's good news, and a fair snapshot of nearshoring's success in general. But it's not time to get carried away with the high-fiving or fist-bumping or affirmative hand signaling of choice. Uribe shouted out to education and advancement of skills as part of what's boosted business in Colombia, but it would be a surprise if he didn't. The fact is that the nearshore region needs to push hard on the human aspects if it wants to meet the demands of BPO and IT services going forward: early education, business understanding, technology skills, agile thinking.
Outsourcing is all about people, right? Guiding and developing and giving them opportunity. That's probably the big lesson at this juncture in nearshore outsourcing. As Softtek VP of marketing Alex Camino says in this report by Robert L. Scheier: "It all comes down to the talent that is serving the customer." While Mexico boasts of graduating 90,000 potential outsourcing employees each year from college, "the challenge," he says, is "bringing that talent to the next level."
