Beyond the Hype... Make a Fully Informed Outsourcing Decision

Transcription

1 Beyond the Hype... Make a Fully Informed Outsourcing Decision PAGE 1 When Nearshore May Make More Sense PAGE 2 Case Study: Optimizing Business Relations through Innovative Solutions PAGE 3 Customer Success Story: Mortgage Default Services Provider PAGE 4 Nearshore Outsourcing in Colombia: The Strategic Advantage PAGE 5 Why Bogota and Barranquilla? PAGE 6 Setting up Nearshore Operations in Colombia

2 Introduction In an increasingly global and technologydriven marketplace, the outsourcing of support services and back-office functions to offshore companies has become an accepted part of doing business in the U.S. The practice of outsourcing has been around for 50 years, started by Ross Perot creating EDS in 1961, but with the advent of the new millennium bringing with it backto-back recessions, being cost competitive and operating efficiently became crucial to corporate survival and more companies emerged globally to meet the need. Many companies developed a strategy of focusing on core business and critical processes and identifying areas that could be outsourced. Often, these were functions necessary to run the business, such as accounting, human resources, data processing, etc., but were not specifically related to the company s core competencies or how they differentiated themselves. This trend continues today as U.S. businesses look to India, China, and, increasingly, Latin America to provide the resources and infrastructure for information technology and business process outsourcing. Over the last two decades, India has been the clear leader in offshore outsourcing services. The country offers a large, diverse, well-educated, English-speaking, low-cost workforce that has successfully met the back-office needs of many well-known organizations, including GE, British Airways, Hewlett-Packard, IBM, American Express, and Citibank, to name a few. More and more, these companies and others are outsourcing highly interactive functions such as customer support, client contact centers, application development, and software engineering. However, language issues (English speakers from the U.S. often have a hard time understanding Indian-accented Queen s English), cultural misunderstandings, proximity and time zone challenges, as well as growing concern over data theft, privacy, protectionism and quality in India, China, Russia and other Asian countries has leading companies increasingly seeking other locations, particularly Latin America, as a means to address the risks inherent in the traditional offshore outsourcing model. Latin America has emerged as a viable and attractive alternative to offshore outsourcing. As a nearshore location for U.S. companies, Latin America ranks third, behind India and China, for IT outsourcing, according to Capgemini s 2010 Executive Outsourcing Survey. Of the executives responding to the survey, 56 percent of them believe that doing business in Latin America is becoming easier than doing business in other parts of the world. This is good news for companies like VSI, who provides software development and business process outsourcing from world-class nearshore facilities in Barranquilla and Bogota, Colombia. Very often, the soft skills and cultural compatibility abundant in places like Colombia more than compensate for the initial hard dollar savings from Asian-based 1 outsourcing. Citing its importance, Wendell Jones, Chief Executive of The Society for Information Management commented, Successful offshore outsourcing starts with an understanding of the cultural context and an appreciation for the people involved in both companies. From the cultural and people perspective, outsourcing management involves blending the different cultural values and norms, people, processes and technologies into a cohesive team. When nearshore may make more sense... Dell was among the first technology companies to outsource customer service and support calls to India. Within a couple of years, though, Dell moved a portion of the call center back to the U.S. because of a growing number of complaints about the quality of service. Call center customers were frustrated by the Indian-based Dell agents seemingly inability to effectively communicate with them and their hesitation to either depart from the script or route the call to properly resolve the customer s problem or question. Challenges with outsourcing in India are not just limited to quality issues with call center and customer support operations. Cogent Road, a firm that provides web-based software applications for the mortgage industry, backed away from a software development project in Calcutta that took twice as long as anticipated because of the language barrier and the 12-hour time difference between India and its San Diego office. Today, in addition to continuing to use Indian and other offshore companies, Dell has set up a nearshore customer technical support and consumer sales and care operation in El Salvador that serves both U.S. and Latin American markets.

3 Case Study: Optimizing Business Relations through Innovative Solutions VSI, a U.S. headquartered company, is the outgrowth of a corporate strategy that recognized the value of nearshoring in Barranquilla and Bogotá, Colombia, to provide call center, customer contact, back-office and software services. Originally established in 2005 as a captive service provider to a Fortune 1,000 U.S. financial technology and services company, VSI has proven its ability to improve profits by combining attractive labor costs, skilled and motivated employees, proximity, cultural compatibility, and a focus on continual process optimization. The cultural shift from being a captive cost center to a for-profit service provider allows VSI to develop partnerships with its clients focused on improved efficiency and business outcomes as opposed to the lift and replace approach taken by many outsourcing providers. VSI based its operations in Colombia to provide a convenient, accessible nearshore solution for their customers complex, interactive and high-touch projects. According to executives surveyed by Capgemini, this puts VSI in an ideal position. Colombia and the rest of Latin America offer a variety of benefits including robust technology and infrastructure; skilled, educated labor; economic stability; compatible language and cultural affinity; easy access due to similar time zones and close proximity; and various tax benefits and other government incentives. Customer Success Story One of the largest title production companies in the U.S. turned to VSI to outsource its mortgage closing scheduling function so that its staff could more effectively deal with core business functions and increase its productivity, which in turn helps its customer to generate more revenue faster. Challenge: The client, a centralized provider of property valuation, closing and escrow, and title insurance to the mortgage industry, is responsible for working with the lender, buyer, and seller to schedule hundreds of closings across the nation on a daily basis. The process required agents to spend innumerable hours on the phone; hours that could have been better spent processing critical documentation needed for the closing on the property. Solution: VSI offered an attractive option through its bilingual call center in Colombia. The VSI staff spoke excellent English, which was critical to communicate complex in- formation to a number of different parties. The center s proximity and time zone (U.S. Central Standard Time) enabled real-time conversations, face-to-face visibility, easier oversight and control of processes. For the initial pilot project, VSI trained its highly capable staff in two to four weeks, faster than the anticipated six to eight weeks of training. Beginning with a pilot, using a sample of lower volume states, VSI quickly proved itself, smoothly and rapidly implementing key processes and demonstrating high quality communications with all involved parties. Results: VSI exceeded the company s expectations, accomplishing the scheduling process approximately 50 percent faster than the company s internal staff and lowering costs nearly 40 percent. One year later, VSI has ramped up operations and currently schedules mortgage closings for the company across the U.S. The client is so satisfied with the program that it is currently expanding its relationship with VSI to include more critical pieces of its process, including reviewing documentation for compliance. 2

4 It's no secret that the Hispanic population in the U.S. is the fastest growing segment and expected to reach majority status in the next decade. With most industries slow to adopt multilingual solutions for portals, self-help and advanced speech recognition to drive transactional efficiencies, nearshore contact center solutions are an effective, low-cost alternative for serving this critical customer segment. And with the quest for sustainable customer relationships more important than ever, there is no better means than live, productive interactions for driving long-term engagement. ~ Bonnie Tichman Outsourcing Management Consultant and former VP of Global Marketing, Convergys Customer Success Story VSI recently assisted the largest provider of mortgage default services with development of a complex software application to dynamically aggregate critical information needed to enhance the client s process. Challenge: When mortgages go into default and parties are required to go to court, significant real estate information is required to support specific claims. The company already excelled at gathering and analyzing the data, but its staff was spending a lot of time retrieving data from various databases as well as physically inspecting properties and then pulling that information together to create an accurate picture of the property in default. The company was looking for ways it could more easily aggregate both the public and non-public data (for example, property appearance, maintenance, and upkeep), streamline the overall process, and differentiate its services from the competition. Solution: VSI s nearshore location, methodical and collaborative approach to software development, and cost competitiveness encouraged the company to implement a test project outsourcing development of an analytical software application that aggregated the needed data. Positive management response led to outsourcing the full application development project to VSI. In order to meet its own needs, the client company established an aggressive timeline of approximately six months. However, midway through the development process, after VSI had delivered nearly 80 percent of code, customer management modified its priorities and asked VSI to rewrite a significant portion the application that had been developed internally. VSI, regarding its relationship with the customer as a partnership, went into high gear and worked 24/7 to implement the new requirements, while still meeting the original deadline. What was important to us, said Esteban Reyes, VSI s Managing Partner, was the outcome of the project that we delivered a high-quality product that met the customer s needs. We have a core belief that if we exceed expectations and delight our clients, the business will flourish. So far it seems to be working well for our customers, for VSI and for our employees who feel rewarded and valued when we give them the support and empowerment do the impossible. Since then, the company s relationship with VSI has grown about two-hundred-fold, and VSI continues to receive software application development work that enhances the customer s way of doing business. 3

5 Nearshore Outsourcing in Colombia: The Strategic Advantage Colombia, a tropical and lush country that boasts both beautiful beaches and scenic mountains, has historically been stereotyped as a land of good coffee and illegal drugs. Over the last decade, though, Colombia has transformed itself into one of the best locations to do business in Latin America. Once perceived as unsafe, it now ranks solidly with the progressive, industrializing countries worldwide that have well-diversified resources and productive capacities. With a population of 45 million, Colombia is the third largest country in Latin America, behind only Brazil and Mexico. Colombia is a top market for U.S. exports, and the home of significant technological innovations including the artificial heart valve and LASIK eye surgery. In recent years, beginning in Alvaro Uribe s presidential term and continuing under the current president, Juan Manuel Santos, security has improved and crime rates have fallen dramatically to be in line with many industrialized countries. At the same time, the perception of Colombia as a viable business location has risen the country is fast becoming a major success story in both the sphere of Latin American outsourcing, and on the larger global stage. The technology research firm, Gartner, Inc., ranks Colombia as one of the top locations for offshore services. The Colombian government wants foreign investment and, in conjunction with the private sector, is making significant strides to create an attractive environment for offshore companies. Several programs promote public-private partnerships, and government reforms and initiatives are enabling the country to go head-to-head with other countries looking to service both Spanish- and Englishspeaking information technology and business process outsourcing markets. So, what distinguishes the Latin American and, more specifically, Colombian nearshore outsourcing model from the more standard Asian/Indian offshore model? As many technology companies, including VSI, Unisys, SAP, and Telefonica have discovered, it has much more to do with the Total Cost of Ownership than just the basic labor costs. The proximity, infrastructure language compatibility, and cultural affinity of Colombia all play into creating a unique collaborative and creative business environment that is crucial to the success of ITO and high-touch BPO and that is simply not available on a similar scale in the Asian marketplace. In fact, many large Asia-Pacific ITO and BPO outsourcing providers are increasingly seeking to acquire nearshore capabilities in order to plug the gaps in their traditional offshore model. Colombia, located near the equator, is in the middle of five time zones and an easy flight from major business centers such as Miami, New York, Los Angeles and Toronto. Business can be conducted in real-time, face-to-face, and during regular business hours. By contrast, New Delhi, Beijing, and Manila require 18- to 24-hour transcontinental flights from many U.S. locations and require altering the business day to accommodate U.S. time zones. For the last several years, Barranquilla has been making significant investments in infrastructure, education and incentives for companies to strengthen the BPO & ITO industries in the city and the surrounding areas. As a result of these efforts, outsourcing companies were responsible for creating 42% of the new jobs in the region. The BPO companies in Barranquilla increased their headcounts by 34% during the same period. Such growth highlights both the commitment of the suppliers and great satisfaction experienced by clients that are being served from Barranquilla. With more than 3,200 jobs generated by this industry recently, the BPO & ITO industries are one of the key strategic sectors for growth and investment for the city. ~ Tatyana Orozco CEO ProBarranquilla 4

6 Colombia has the 2nd largest population in Latin America. Barranquilla 1.1 m Cartagena 0.9 m Cúcuta 0.6 m Medellín 2.3 m Cali 2.2 m Why Bogotá and Barranquilla? Ibagué 0.5 m Bucaramanga 0.5 m Bogotá 7.2 m Bogotá, the Colombian capital and largest economic center in the country, boasts a population in excess of seven million. The eligible workforce is young and well educated with 115 higher education institutes graduating approximately 95,000 professional and technical experts each year. The city also offers BPO and IT students and employees intensive English-language training through Talk to the World and access to training programs designed specifically to meet the needs of outsourcing companies. Bogotá s competitive salaries, real estate prices, and business services that, when combined with its proximity to major U.S. cities (3 ½-hour flight from Miami, 5-hour flight from New York), in-place and proven infrastructure (five submarine cable systems connect directly with its fiber optic network, and the city ranks fourth in broadband penetration among 46 Latin American cities), overall high-quality of living, and business-friendly environment, provide a clear cost-benefit to nearshore outsourcing companies that choose to locate there. As the fourth largest Colombian city, the World Bank views Barranquilla as one of the most business-friendly Latin American cities. With a population of 1.3 million people, Barranquilla offers the IT and BPO industry many of the same benefits as Bogotá, including a growing bilingual Spanish-English workforce; comprehensive telecommunications services with a high-redundancy, low-latency infrastructure; and dynamic economic growth. The city is committed to growing its outsourcing business sectors, putting in place an investment and growth plan to provide assistance to national and foreign companies. The plan is jointly operated by the Office of the Barranquilla District Mayor, Office of the Governor of the Department of Atlanticó, the Chamber of Commerce, universities, compensation funds, and telecommunications operators. Positive moves such as these play a significant role in increasing the value proposition of nearshore outsourcing in Barranquilla. With a robust infrastructure and continuing investment around creating large, complex data centers (e.g., Terremark in Bogotá), Colombia is well positioned to offer outsourcing companies resilient, highavailability technical solutions that enable service delivery. In addition, the omni-presence of companies such as Hewlett- Packard and Dell, as well as a high rate of computer and Internet users provides the resources and intellectual capital needed to outfit and staff robust ITO and BPO operations. According to Internet World Stats, at the end of 2009, nearly 50 percent of the Colombian population regularly accessed the Internet, versus 24 percent of the population across Asia. Also, the Colombian government is highly proactive about IP and data protection and has laws in place to regulate personal data protection in compliance with U.S. and European Community standards. Colombians speak a neutral, easy-to-understand Spanish, and English is the second most spoken language in the country. Working with the BPO industry, the government has created a national registry for certified speakers of English to make it easier for companies to recruit qualified employees. Also, the city of Bogotá, in partnership with several companies, has created a program to finance Englishlanguage education for call center employees. Given that the U.S. is home to over 45 million Hispanics, the outsourcing industry is finding that it is imperative to offer bilingual services if it is to remain competitive and attractive to its customers. Colombia is the second largest Spanish speaking country in the world, behind only Mexico. Language is only a small part of the cultural affinity shared between Latin and North American people: similar histories, religious backgrounds and educational expectations help to establish a natural connection in an industry that often requires high-touch and onthe-spot resolution to technology issues that goes beyond the standard call center script. An ethos that emphasizes employment stability, customer service, and creative, innovative approaches translates into an extra level of productivity that cannot be measured by cost alone, but certainly impacts the bottom line. While focusing only on labor arbitrage, dollar-for-dollar, the outsourcing labor costs in Asia/India are less than in Latin America. But when things such as travel, employee attrition, customer retention, real-time communications, and the ability to solve problems faster are considered, the total cost of doing business is lower in Latin America. 5

7 Setting up Nearshore Operations in Colombia Choosing to outsource back-office business functions can frequently free up critical corporate resources, reduce operating costs, and allow a company to focus on its core competencies. Outsourcing non-core processes have become a standard part of operating a business. These days, the only questions are what to outsource, where to locate the outsourcing function locally, offshore, or nearshore and whether to build or buy the outsourcing function. In addition to the actual costs of doing business, certain risks often impact the decision of where to outsource, including geopolitical concerns; proximity, cultural, and language issues when the outsourced function is high-touch and interactive; and data rights, privacy, and intellectual property challenges. For these very reasons, many businesses are looking to Latin America, in general, and Colombia specifically, as a nearshore destination for their operations centers. Whether to build or buy the nearshore outsourcing function depends on how much investment in money and time a company is willing to make. A captive center (build) is attractive because the company maintains full management control of the function, implements its own quality standards, and resources the facility with an eye toward achieving the lowest operational cost. Companies such as Citi, Henkel, Wyatt, Abbott, Hewlett Packard, and Dell have successfully set up captive outsourcing centers in Colombia that handle backoffice functions such as customer support, sales and marketing, data processing and analysis, etc. On the other hand, in partnering with a nearshore outsourcing provider (buy), the company contracts the operations of specific business functions or projects to third-party service providers that are responsible for the process management, staff and resources, the infrastructure and software used, and, quite often, much of the risk associated with the program being outsourced. Benefits include in-place, established operations and experience in the foreign environment. Many global companies, including AT&T, Telefonica, Tracfone and Greyhound outsource their software development, document processing and contact and call center support to Colombia The Colombian government, recognizing the potential of attracting outsourcing partners to its various cities, has put in place a number of attractive incentives to encourage U.S. and other multinational companies to set up operations there. For example, they have established free trade zones that can be created around single companies based on investment and headcount commitments, structured a favorable tax environment that includes eliminating the value-added tax on BPO exporters, and implemented intellectual property protection and regulatory stability agreements. In addition, the government continues to make significant investments in transportation and communications, recently announcing a $28 billion public-private infrastructure plan. Establishing and maintaining a successful nearshore IT/BPO operations center in a Latin America country depends a great deal on creating a work environment that is client-focused, measures qualitative and quantitative performance, communicates effectively internally and externally, leverages the talent and resourcefulness of the workforce, and strives for quality in all areas. The people of Colombia are known for their can-do attitude and commitment to When considering Outsourcing, on-shore, offshore, or near shore, to avoid certain disappointment later, one must do a thorough, rigorous and objective analysis of the vendors, the services to be outsourced and the business case supporting it, as well as the geographic pros and cons. Better to pay a little more now and ensure a smooth, effective deal, than to rush to cost savings only to redo the deal later because it failed to meet other expectations that were not properly assessed from the start. ~ Thom Mead VP of Marketing, Alliances & Channel Management Firstsource 6

8 The Colombian government and the private sector have joined forces to elevate Colombia into a world-class outsourcing destination. Through the alliances that ANDI and its Chamber of BPO&IT has established with associations such as NASSCOM and IAOP, and at the same time with key Government institutions such as Proexport and SENA, the country is developing a new approach to strengthen local talent, infrastructure, and business incentives to attract the world s leading companies. Colombia is now a prime destination for both quality and economic reasons. These efforts have resulted in Colombia becoming one of the fastest growing and highly desired outsourcing destinations globally. We are fully committed to supporting the sector. ~ Santiago Pinzon Executive Director Chamber of BPO & IT ANDI working hard and smart. Frequently, as the first point of contact in dealing with customers who have an issue, question, or complaint, the Colombian agent sees problems as an opportunity to demonstrate their commitment to resolve any concerns. In addition, Colombians are polite and patient, always striving to improve, and are skillful at offering a new product or service to bring in more sales. A successful outsourcing operations center will recognize these unique qualities and expend significant resources to recruit, train, nurture and retain its Colombian workforce. Performance measurement and feedback is crucial to any outsourcing operation. It provides the basis for effective communications both internally with the staff and externally with the customer. Colombia s proximity to the U.S. allows for near realtime performance measurement, which, in turn, allows for the ability to proactively and rapidly meet a customer s changing priorities or to re-deploy resources to address potential issues. This is one advantage for companies that develop software using Agile methods, which require daily communication. VSI demonstrated this type of flexibility when their customer s requirements for a data aggregation software application were significantly modified after nearly 80 percent of the product had been delivered. VSI was able to successfully accommodate the new requirements, rewrite the software code, and still deliver the product on time. As the Colombian technology industry continues to grow at a rapid pace, IT/BPO firms with operations centers in the country are committed to implementing quality processes that adhere to international standards. PSL, a Colombian software development company, was the first Latin American company, and the eighth in the world, to achieve CMMI Level 5 certification. In addition to CMMI, a number of companies, including VSI, have been actively committed to excellence and investing in talent development programs focused on achieving certification in disciplines like CMMI, Six Sigma, Customer Operations Performance Center (COPC), esourcing Capability Model (escm), Information Technology Infrastructure Library (ITIL), ISO, and others. 7 The bottom line is that Colombia, with its talented, scalable workforce, stable and robust infrastructure, close proximity and cultural/language affinity with the U.S., and core commitment to customer service and quality offers a low risk IT/BPO outsourcing solution to companies looking for ways to maximize their strategic and market positions. Given the country s emergence on the world stage for ITO, BPO English speaking and bilingual outsourcing, any prudent evaluation done today would need to include Colombia to assure they have truly made a fully informed decision. For more information please visit or call VSI