More workers for less. But where's the beef?

Those with tacit knowledge of the industry will tell you with confidence that a fruitful outsourcing partner brings more than labor arbitrage and low-cost services. We hear it from every corner of the world: It’s about the added value, predictive problem-solving. It’s about the quality of human capital and knowledge work, as opposed to any quantity of working bodies.

Yet as we all know, industry knowledge is one thing and convincing potential clients is another. Indeed more work needs to be done to showcase Latin America as a strategic outsourcing destination. 

The latest HfS report on LatAm, How Latin America Powers Global IT Delivery, is a step in the right direction – providing research credibility and the weight of fact behind why a 'more workers for your buck' approach is not one that Latin America has relied on to produce sustainable, profitable or effective solutions.

Moving beyond labor rates, the report finds that LatAm has niche regional specialties. US firms are sourcing niche application services for e-banking/gaming, analytics for retail, and bilingual back-office support services for finance and accounting among much more  (see Appendices B, C, and D for highlights in Argentina, Brazil and Mexico; free download at right or at  nearshore.com).

"Cost optimization" will continue to be priority for businesses across the spectrum.  Low wages were arguably the name of the game in outsourcing,  but experience has shown us that labor arbitrage fades rapidly. Today's business world demands outstanding knowledge work management, intellectual property, automation and specialization; cheap labor is no shining differentiator.  Cost reductions are great, as long as your outsourcing partner doesn’t leave you wondering: where's the beef?

In my next post I’ll take a look at the role of cultural understanding in outsourcing relationships. Stay tuned!