Costa Rica. A top nearshore IT outsourcing destination for the Americas

Transcription

1 Costa Rica A top nearshore IT outsourcing destination for the Americas A GFT & CINDE Point Copyright of View 2015, GFT GFT

2 Why choose Costa Rica for IT outsourcing? Costa Rica is the leading Latin American country for financial services firms based in North America to undertake complex project implementation in a nearshore location. The key elements of Costa Rica s value proposition include a highly skilled workforce, proximity to the United States of America (USA), attractive tax incentives, low environmental risks, cultural affinity with the USA and Canada, multilingual capabilities, and close alignment between academia and the human capital requirements of the financial services sector. Located in the center of the Americas, with 120 years of uninterrupted democracy and a stable political system, Costa Rica is now the hub for a range of multinational companies including Procter & Gamble, Amazon, Dell, Microsoft, Cisco, Oracle, IBM, Hewlett Packard, Intel, Wal-Mart, Bank of America, and Citigroup. Over the last decade, Costa Rica s development strategy has included sustained investment in education, continued political and economic stability, social progress and the promotion of an economy based on knowledge and high value-added products and services. As the safest country in Latin America 1 and the second most politically stable country 2 (with no standing army since 1948), Costa Rica is able to provide an environment guaranteed to support long-term investment and risk reduction for companies. Recent commentary from around the world regarding Costa Rica s services and potential for nearshore outsourcing includes: 1st Outsourcing City of Latin America (San Jose) Top 100 Outsourcing Destinations 2013, Tholons Due to its solid value proposition, ( ) Costa Rica is rapidly emerging as one of the most credible locations in Latin America Everest Group, 2013 Costa Rica attracted 80% of new service projects set up in Latin America in 2012 Everest Group, 2013 In 2012 Costa Rica attracted a record number of service projects, on a par with China and only behind India Everest Group, 2013 Costa Rica the Silicon Valley of Latin America Tiger Ramesh, CEO of CSS, 2013 Top five Global Services Location in America Global Services Locations Index 2011, AT Kearney 1st High-Tech exporter in Latin America and 4th exporter of industrial products in the world CINDE based on data from the World Development Indicators 2013, World Bank Costa Rica attracted 80 % of new service projects set up in Latin America in Copyright 2015, GFT 1 LATAM Chronicle, 2012 / 2 World Bank, 2012

3 Geographical advantages Costa Rica has become an important nearshore location for companies based in the USA and Canada, as well as a strategic offshore location for European companies with global operations. It is geographically well situated in the middle of the Americas and can be reached easily from most cities in North America. The country has two international airports, which handled more than 140 flights per day in 2012, with direct flights from cities such as New York (less than 5 hours), Houston and Atlanta (4 hours), and all Florida cities (within 3 hours). The time-zone of the country coincides with the U.S. Central Standard Time Zone (GMT-6) and aligns well with most work schedules in North America, thereby enabling efficient coordination among local (client-facing) and remote (development) teams and allowing the execution of projects based on Agile approaches. Business advantages Business climate and culture The business climate in Costa Rica is highly attractive for foreign companies and provides a solid basis for both trade and tourism, supported by a culture that is very open and friendly to all foreign partners, particularly those from North America. This business climate is built upon Costa Rica s long history of democracy and the political, social and economic stability that has existed there for many years. Costa Rican employees in the IT services industry have been adapting to incorporate the work disciplines and daily practices that are the norm in the culture of multinational companies. Good communication skills and the ability to work in multidisciplinary teams are skills commonly found among Costa Rican workers. Over 90% of energy used in Costa Rica is from renewable sources including hydroelectric, geothermal and wind, which results in very low energy costs for business operations 3. The table below demonstrates that Costa Rica appears very favorably on the Global Competitiveness Index (GCI) Costa Rica aligns well with the working day in the US and Canada, allowing teams to interact all day long. GCI GCI Country /economy Rank Score Rank Change Switzerland United States United Kingdom Canada Spain Costa Rica Mexico Brazil India Figure 1: The global competitiveness index, 2013 to 2014 rankings (SOURCE: 2013 World Economic Forum 3 Industrial Mid-Tension electricity rates range between $0.11 and $0.16 per Kwh (ARESEP 2013). Copyright 2015, GFT 03

4 Intellectual property protection Costa Rica has always supported strong intellectual property laws and regulations, earning recognition as the third ranking country in Latin America according to the international property rights index (IPRI), published by the Property Rights Alliance (PRA) approving the data protection legislation, establishing a Data Protection Agency in 2011 and, implementing a guideline that provides guidance and rules on issues regarding data protection. A new modern data protection law in Costa Rica was came into effect in 2011, providing for the protection of data in a similar way to that of the most advanced countries. Business process outsourcing (BPO) services and data protection There are a range of companies providing business process outsourcing (BPO) services from Costa Rica in both English and Spanish. These services have focused on data collection, data entry, and data processing. Such level one customer support, the recording of data to report and provision of a data help desk all rely on the robust data protection policies that exist in the country. As a result of continued investment and diversification, BPO services are now being expanded to include financial analysis, procurement, finance and accounting, engineering and design, human resources, entertainment and media, information technology, and business transformation. Costa Rica now offers a one-stop-shop, allowing companies to carry out end-to-end processes 24x7 for 365 days per year, with the additional benefit that these services can be offered worldwide in a wide array of languages, such as English, Dutch, German, Finnish, Polish, Russian, Mandarin, Cantonese and Malay, among others (see Figure 2). Free trade agreements During the last two decades, Costa Rica s foreign trade policy has shifted from a position of protectionism to promoting openness and engaging in active international trade negotiations. This effort to establish free trade agreements has produced positive results and currently 87% of goods exported from Costa Rica are done so under free trade agreements. Costa Rica currently holds Investment Promotion and Protection Agreements with 15 countries including, CAFTA DR (Central American and Dominican Republic), Panama, CARI- COM (Caribbean States community), Chile, Canada, Mexico, China, Peru and Singapore. Quality of infrastructure Prior to 2008, Costa Rica s telecommunications were under the control of a state monopoly. In the last few years, this infrastructure has been significantly improved and today there are more than 100 companies authorized by the regulatory authority (SUTEL) to provide private networks, Internet and mobile phone services, which allows seamless integration of voice and data systems. Costa Rica has a solid and secure telecommunications infrastructure an the country is able to provide global corporations with redundant fiber optic submarine cables (Maya and Arcos and Pacific Global Crossing) NORTH AMERICA COSTA RICA AFRICA EUROPE ASIA There is a satellite and terrestrial microwave network in place to meet the demand of land lines, mobile and Internet services SOUTH AMERICA Figure 2: Costa Rica enables companies to serve the world in more than fifteen different languages (Source: CINDE, 2013) Outsourced BPO services require a legal framework that enables businesses to comply with international regulations in terms of data protection. Costa Rica has already taken important steps towards: New multinational suppliers are entering the market, providing private networks, Internet and mobile phone services Costa Rica has always supported strong intellectual property laws and regulations, earning recognition as the third ranking country in Latin America according to the international property rights index (IPRI). 04 Copyright 2015, GFT

5 The political and economic climate Key economic indicators Costa Rica has one of the most stable economies in Latin America and in 2012 had a Gross Domestic Product (GDP) of USD $45.1 billion, a GDP per capita (ppp) of USD $12,606 and a population of 4.7 million. The economic growth rate was 5.1%, the inflation rate was 4.6% and the unemployment rate approximately 7.7%. Historically, Costa Rica had a traditional agricultural exportbased economy. In recent years, the government s focus has changed to promote high value-added goods and services including both hardware and software and this investment has boosted exports. Data from the Central Bank of Costa Rica (BCCR) indicates that sales of computer and information services, combined with other business services in 2012 represented 5.8% of the GDP. IT services has grown from USD $153.4 million in 2002 to a record USD $1.8 billion in 2012 (increasing almost twelvefold in a decade). In addition, in 2012, IT services accounted for 33% of total exports throughout the service industry. Incentives and costs Costa Rica offers the most attractive tax incentive package in Latin America: 0% corporate income tax (CIT) rate for corporate and high tech services companies 0% withholding tax rate with no time limit Duty-free goods importation with no time limit No sales tax and no excise taxes Approximately USD $2,000 cash savings per employee per year 4 Immigration Procedures Streamlined immigration applications and visa granting, and no limitation on number of foreigners working in companies Attrition rate of only 9% in Global In-House Centres (Deloitte, 2012) Costa Rica ranks first for Innovation and Business sophistication in Latin America (GCR , WEF) Strategic location: Close proximity to the USA, with more than 120 flights worldwide, daily The Right Conditions Excellent Business Climate Second most politically stable country (World Bank, 2012) and no army since 1948, have guaranteed a safeguard of long-term investment and risk reduction Solid Utilities infrastructure 100% redundancy through three fibre optic submarine cables Safest country in Latin America (LATAM Chronicle, 2012) These incentives are more attractive and cost-effective than those offered by: Figure 3: The right conditions: An excellent business climate Mexico (CIT=17.5%) Colombia (CIT=15%) Chile (CIT=20%) IT services have grown from USD $153.4 million in 2002 to a record USD $1.8 billion in Cash savings come from comparing the tax expenses of a company when it operates under the Free Trade Zone regime, and when it does not. Copyright 2015, GFT 05

6 A proven track record Currently, there are more than 250 multinational companies operating in Costa Rica. The services industry began to develop between 1995 and 2003 with the establishment of back office operations mostly in the area of Business Process Outsourcing (BPO). Between 2004 and 2011, there was strong sector growth that included diversification into Information Technology Outsourcing (ITO), Knowledge Process Outsourcing (KPO) and broad-spectrum services. Moving forward, the country shows strong potential to upgrade in the BPO and ITO segments, grow in the KPO segments and move towards niche activities that leverage knowledge from other industries. In 2000 there were six services companies operating in the country, rising to more than 120 in Employment also rose dramatically and is now 40 times higher than in 2000, with more than forty thousand employees in a sector that offers a wide array of sophisticated employment possibilities. In less than fifteen years, Costa Rica has been able to transition from delivering very basic commoditized services, to the current situation in which the very complex and bespoke services can be provided. This diversification of the services sector has played a critical role in the financial stability of the country, and between 1999 and 2012, total services exports have tripled from USD $1.68 billion to USD $5.5 billion (see Figure 4). Since 2010, services exports (excluding tourism), have represented more than 50% of the total services exports of the country and have grown at an annual rate of 16.6% since These exports have increased in sophistication and value-added services exports increased from 12% in 1999 to 48% in 2012 (see Figure 5). Companies are capitalizing on the opportunity to leverage experience, knowledge and expertise, and in so doing are adding real business value rather than simply applying cost reductions. Average output per employee is now USD $45,000 and has grown 28% since ,7 % 3,4% 22,6 % 65,3% 33,4 % 41,9 % 14,7 % Other IT & IT enabled services Other business services Tourism Figure 5: Costa Rica services exports composition 10,0 % Total Services Exports (US$ millions) 7k 6k 5k 4k 3k 2k 1k 0 $1,682 $5, Figure 4: Costa Rica services exports (Source: CINDE based on data from BCCR, 2013) Since 2010, services exports (excluding tourism), have represented more than 50% of the total services exports of the country and have grown at an annual rate of 16.6%. 06 Copyright 2015, GFT

7 Living in Costa Rica The expansion in the country by multinational companies such as Hewlett Packard, Fujitsu and IBM Global Technology Services (IBM) has positioned Costa Rica as a hub for Information Technology Outsourcing (ITO). Additionally, the digital technology market has grown substantially and the availability of educational programs specializing in IT, which were established more than 30 years ago, make Costa Rica a strategic location with enormous potential (see Figure 6). In 2012, digital technology exports represented 25% of the total goods and services exports 55% of digital technology companies have presence in Latin America, North America, Europe, Asia, and Africa Costa Rica quite rightly calls itself the happiest place on Earth, since it is difficult to find an equivalent quality of life in Latin America, or indeed in any other country. Costa Rica is also the safest country in Latin America, and ranks in the top five globally, based on environmental and other performance indicators. Costa Rica ranks 12 th globally and 1 st among Latin American countries for social progress 5 and, according to The Economist Intelligence Unit, San Jose is ranked as the 4 th city in Latin America, with the best quality of life. Costa Rica also ranks 2 nd among Latin American countries in the Global Gender Index 6. The sector employs 4% of Costa Rica s labor force Digital technologies represented almost 10% of the GDP in 2012 In 2012, the Digital technology sector grew by 17% IT enabled services 50 % 36 % Software development 5 % 9 % Direct services Hardware Components Costa Rica ranks 12th globally and 1st among Latin American countries for social progress. San Jose is ranked as the 4th city in Latin America. Figure 6: IT services companies in Costa Rica (Source: Chamber of Commerce, 2012) 5 Social Progress Imperative, Social Progress Index, 2013 / 6 World Economic Forum, The Gender Gap report, 2012 Copyright 2015, GFT 07

8 It is all about highly skilled talent Top tier education Costa Rica is known for its exceptionally talented workforce. The capabilities of the IT services sector in Costa Rica is a consequence of the country s historical commitment to education and a track record of executing a solid education policy. Education has been free and mandatory in the country since 1870 and nowadays a strong emphasis is placed on providing students with early grade computer science and English skills. Overall, Costa Rica s educational system is ranked 21 st worldwide and is the highest in Latin America 7. As a consequence, Costa Rica has one of the highest literacy rates in the American continent (96.2%). Since the abolishment of the armed forces in 1948, available resources have been invested in education (8% of GDP) and health (10.9% of GDP). A total of 113 technical schools and 59 universities prepare future professionals to the highest of international standards. These institutions offer training in several areas, including electronic, electric, mechanical, and processing engineering. The National Training Institute (INA) offers free technical training in many fields. The primary universities providing technical studies include Universidad de Costa Rica (UCR) and Instituto Tecnológico de Costa Rica (ITCR). Both institutions are focused on aligning with the demand of the outsourcing market, to produce a highly educated workforce that can comply with the evolving needs of the market. On average, 95% of employees in multinational companies are local, and there is a large bilingual labor pool available to work for multinational companies. Quality of IT development Skilled developers in Costa Rica are able to work within standard global IT project frameworks, and agile methodologies are widely adopted within the outsourcing market. IT services in Costa Rica are flexible and able to adapt to current trends in software development and project management. Many IT professionals in Costa Rica have technical certifications, and it is common for these to be complemented by industry related certifications such as ITIL, PMP and Six Sigma. Microsoft has estimated that there are 27,000 IT professionals working in Costa Rica who are proficient in Microsoft technologies. When CIO Magazine defined Costa Rica in 2011 as the 3rd outsourcing destination in the Americas behind Brazil and Chile, it stated: the main appeal of the location is its embrace of Western business practices along with English language proficiency and talented software developers Best educational system in Latin America (WEF, ) Best MBA in the region INCAE: #1 business school in Latin America (WEF, ) Second in Latin America and 15 th worldwide in talent retention (WEF, ) 14 new majors and technical programs in IT related careers sinse 2005 (WEF, ) Cost efficiencies Highest english proficiency in Latin America First in TOIEC and second in TOEFL (ETS, 2012) The Right Conditions Qualified human resources High number of people certified in SAP, PMI, Six-Sigma, Oracle, Cisco certifications Impressive 430% increase in university graduates between 1991 and 2011 (Jofré, 2013) Government investment of US$450 million in human capital initiatives in 2013 (IADB, WB) Enrollment has undergone a twofold increase in 6 years. Between 2005 and 2011, enrollment increased by almost 20% (WEF, ) Costa Rica multilingual A comprehensive program to become a bilingual country by 2017 Figure 7: The right conditions: qualified human resources (Source: CINDE, 2013) Global companies have outsourced BPO and IT services to Costa Rica both to tap into a large and available talent pool, but also to achieve cost efficiencies compared with their home markets. In Costa Rica, salaries are approximately 40 to 50% of those for a comparable position in the USA. In addition, the close proximity of the country to major US markets allows for reduced travel time and costs, enabling the close and involved management of the nearshore center. Real estate, support services, satellite and ground-based microwave networks, point-to-point connections and direct worldwide fiber optic network access are all available at highly competitive rates. A total of 128 technical schools and 60 universities prepare future professionals to the highest of international standards. 08 Copyright 2015, GFT 7 World Economic Forum

9 An investment for the long term: The digital technologies evolution Costa Rica has attracted one of the highest levels of foreign direct investment per capita in Latin America, as a direct result of its strategy to evolve towards a services-based economy. In the early seventies, two of the most important public universities created the schools of computer science and informatics. Subsequently, the information technology sector received an important boost through the National Program of Educational Informatics, plus tax reductions on computer equipment when it signed the Information Technology Agreement (ITA). These two decisions further increased the establishment of domestic software development companies such as TECAPRO, Exactus (later acquired by the Spanish company Softland), Avantica, and ArtinSoft. The boom in software development companies favored a new academic supply in informatics, both in public as well as private universities, and in the technical education system. With a clear policy to attract foreign direct investment, the Costa Rican Investment Promotion Agency (CINDE) made the decision to target companies from the corporate and high technology services sectors. Early investments were made by Intel, Western Union, LLBean, Sykes and Equifax to establish their operations in Costa Rica. In addition, enhanced policies in export promotion matters further bolstered the ability of Costa Rican companies to connect with international markets. This timeline of investment by international companies is demonstrated in Figure 8. New areas of specialization have been created in order to meet the needs of international companies. Figure 8: The transition from low value to high value services (Source: CINDE, 2013) Copyright 2015, GFT 09

10 A strong basis for multi-national companies to operate from As a result of its ongoing investment, Costa Rica has taken a quantum leap forward and is strengthening its position as a top high tech exporter in Latin America and globally: Today Costa Rica offers a unique BPO and ITO experience, having provided a medium-scale nearshore destination for more than a decade. Like India, Costa Rica has now become a major player in the BPO, global in-house operations and IT service industries The Information Communication Technology (ICT) sector employs 4% of the Costa Rica labor force (approximately 80,000 Costa Ricans) Costa Rica produces over 6,000 technical high school graduates per year, in strategic areas such as IT, software development, informatics, bilingual accounting, technical support and customer care. The IT labor force, excluding telecommunications, has been growing on average 6.5% since 2005 (22,000 by 2015) New areas of specialization have been created in order to meet needs of international companies, such as: computer engineering (embedded software), financial analysis, bilingual accounting and informatics Services delivered from Costa Rica have evolved from low complexity operational functions to high-end development, technical and complete end-to-end client services (see Figure 9). Finance and Accounting Accounts Payable/Billing & Billing Adjustments, Invoicing & Collections; Auditing; Cost Accounting; Financial Reports; Revenue Cycle; Tax Filing and Analysis Back Office Business Presentation Design; Data Mining; Forecasting; Portfolio Analysis; Investment Research Engineering and Design Application Engineering; Design of Gas Propelled Engines; Orthopedic Reconstruction & Design; Process Management; R+D&I Human Resources Ex-pat Relocation & Training; Payroll; Regional Recruitment; Talent Management Contact Centers Collections; Consecutive Interpretation; Customer Service/ Care; IT Support (Tier 1-4); Telemarketing/Sales Entertainment and Media 3D Animation; Creative Conceptualization; Interactive Advertisement & Web Development; Marketing Strategy; Motion Design Procurement Bidding; Global Procurement; Procurement-to-Pay; Purchasing; Suppliers Regional Centers Distribution of raw material; Inventory Management; Logistics Services; Sales and Marketing Strategies Software Development Back-End Programming; Business Intelligence; Embedded Software; ERP Programming; Front-End web development; Legacy System Support; Quality Assurance & Testing Business Transformation Business Analysis; Compliance & Fraud Control; Legal Process Outsourcing; Research and Data Analysis Figure 9: A sophisticated platform of services delivered from companies operating in Costa Rica (Source: CINDE, 2013) 10 Copyright 2015, GFT

11 Essential Costa Rica Costa Rica as a location that, besides being recognized as the ultimate natural beauty destination, concentrates on high technology and innovation, and has a wide range of high quality products for export, all thanks to the talent and entrepreneurial spirit of its people. Costa Rica is a country where global companies can be sure they can easily work alongside a committed and talented people who are taking steps to ensure a future of progress, success and innovation. Rule Financial has made a major investment in its Costa Rica facilities and is supporting its financial services clients with strategic IT outsourcing deployed via nearshore models. Combined with its facilities in Barcelona and Poland, Rule Financial is able to offer a global nearshore capability to the global financial services industry. Costa Rica is a country where global companies can be sure they can easily work alongside a committed and talented people. Copyright 2015, GFT 11

12 Featured specialists Alex Fernandez Sandro Zolezzi Costa Rica Country Head for GFT CINDE s Director of Research Alex is the Costa Rica country head for GFT. Alex supports GFT s clients via talent development, operations, customer relations and public and private sector relationships in the country. Alex and the GFT Costa Rica team are focused on efforts to improve quality and innovation for software development in the country. Alex, who started his career as a lawyer, has an MBA in Marketing and Executive Management, and has studied for a PhD in economics, innovation management and technology policy. He has also accumulated over 16 years of experience in various senior positions in multinational companies, including Oracle Corporation, Schlumberger and Microsoft. Prior to GFT, Alex served as General Manager of Microsoft Costa Rica, where he led business planning and sales, marketing and services. Among his notable accomplishments are significant improvements in customer satisfaction, enhanced partner integration and record sales growth. Sandro is an innovative and strategic international business advisor. Since 2008, he has carried out economic studies to decrease information asymmetry and to help mitigate the inherent risk that companies face when considering Costa Rica for potential investments. Sandro provides insight and leads complex initiatives. He has written and published academic studies on e-business issues. Sandro holds a civil and industrial engineering degree, Magna Cum Laude, from Universidad de Chile and an MBA, Summa Cum Laude, from INCAE Business School in Costa Rica. About GFT GFT is one of the world s leading solutions providers in the finance sector offering consulting, implementation and maintenance for a broad range of IT applications. Combining technological expertise and seamless project management with a deep understanding of the financial industry, GFT is a reliable partner for well-known companies all around the globe. About the Costa Rican Investment Promotion Agency: CINDE The Costa Rican Investment Promotion Agency (CINDE) is a private, non-profit and apolitical organization. During its 31 years, CINDE has attracted more than 250 companies to Costa Rica, including worldwide leaders such as: Intel, Procter and Gamble, Hospira, Baxter, St. Jude Medical, Western Union and many more. Headquartered in Germany, GFT has stood for technological expertise, innovative strength and outstanding quality for over 25 years. gft.com cinde.org 12 Copyright 2015, GFT