All Posts By

Kushagra Singh

Dark Horses Challenging Mexico City’s Status as Top Mexican Services Delivery Location | Blog

By | Blog, Outsourcing

Mexico continues to be the destination of choice for global services delivery across Latin America. Indeed, our  research for our “Global Locations Annual Report 2019: Demand for Next-Gen Services Defining Locations Strategies” report found that 26 percent of LATAM’s new set-ups established during 2017 to 2019 were in Mexico, including those by Atento, Continental, Harman International, Hexaware Technologies, Neoris, Tech Mahindra, and Zensar.

There are multiple reasons that Mexico is the top LATAM global services delivery destination. First, while voice and non-voice business process services continue to grow moderately, the country is the leader in digital due to an increase in support for services including analytics, cloud, mobility, big data, IoT, and artificial intelligence. Second, very few locations offer a better cost-talent proposition to North American enterprises than does Mexico. And third, the fact that it’s a nearshore location makes it highly attractive to North America-based companies.

So, what are the top delivery destinations in Mexico?

Mexico City has the largest share of the Mexican market and is the most mature location in terms of breadth and depth of IT and business process services delivered, including IT consulting, digital, accounting, tax, and actuarial services.

However, despite being the country’s capital city and biggest business hub, Mexico City lags behind most of its Mexican counterparts in quality of life aspects including crime rates, traffic congestion, and air pollution. And, it ranks second to last of 32 cities assessed across Mexico on “ease of doing business.” All of this, coupled with the fact that clients care most about the talent capabilities in the destination, is opening the door for several other Mexican cities to carve out greater portions of the Mexico services delivery pie.

Let’s take a quick look at these dark horses.

Guadalajara

Guadalajara, often referred to as the “Silicon Valley of Mexico,” continues to grow due to its availability of IT-related talent and delivery of key skills such as IT-ADM, cyber security, and IT consulting. Large pools of talent from adjoining areas have been migrating to the city. Today, Guadalajara is home to some of the top service providers, including HCL Technologies, IBM, and TCS.

Monterrey

Monterrey continues to grow in the finance and accounting space and is one of the country’s most mature locations after Mexico City. The city also delivers some of the more complex functions including tax and accounting. Given its proximity to the U.S. border, the English language proficiency and scalability potential of its global services workers is the highest in the country. The city also offers the best overall business environment, primarily due to better quality of life, infrastructure, and connectivity.

Queretaro

With its proximity to Mexico City, Queretaro has grown steadily as a delivery location across functions over the past several years. The city has had maximum percentage growth in graduates across Mexico since 2015, albeit on a smaller base. However, its development is still nascent, so it’s largely being leveraged as a smaller spoke to a larger hub within the region. From a cost standpoint, most global companies view it as a low-cost alternative, primarily driven by lower people- and non-people costs.

 

To learn more about the dynamics shaping the global services locations landscape, please read our recently published report, “Global Locations Annual Report 2019: Demand for Next-Gen Services Defining Locations Strategies.” We developed the report based on deep-dive discussions with regional investment promotion bodies, leading shared services centers, service providers, recruitment agencies, and other market participants.

For more information on Mexico as a global services delivery location, please contact us at [email protected], [email protected], or [email protected].

Middle East and Africa: An Emerging Frontier for Global Services | Blog

By | Benchmarking, Blog, Outsourcing, Talent

Numerous locations in the Middle East and Africa (MEA) are emerging as upcoming destinations for global services delivery. Several multinational companies have set up their centers in the MEA region to deliver services to Europe and North America, and tech giants including Apple, Facebook, Google, Microsoft, and Uber are leveraging it for global services delivery.

What’s the appeal?

Availability and quality of talent pool

There’s been a consistent increase in the pool of entry-level talent and experienced professionals with domain-specific skills. Egypt is the leader in the region; due to various government measures to improve education quality and a significant rise in contact center operations in multiple languages, including English, French, and Arabic, the country posted an enormous 35 percent increase in the headcount for global services exports in 2018.

There’s also been a considerable rise in R&D centers and Centers of Excellence (COEs), where talented professionals with relevant and often advanced technological skill sets work to develop state-of-the-art solutions.

Less competition for talent

Because there’s a relatively large population base, limited jobs, and high unemployment rates throughout much of the region – for example, South Africa is at 27 percent and Nigeria is at 23 percent – organizations can procure talent easily and train the workers as per their specific business needs.

Cost arbitrage

Some of the countries in the MEA region offer highly attractive cost arbitrage compared to source geographies. For example, Egypt, Nigeria, and Kenya come in at 70-80 percent less (although Nigeria and Kenya are primarily leveraged to serve domestic markets), and South Africa (for non-voice F&A) and Morocco (for voice-based services) offer cost savings of 40-60 percent over source geographies.

Proximity to Europe

Proximity with various European countries is a big selling point of many African locations. For example, because Morocco offers both cultural and geographical proximity to France and Spain, companies are increasingly leveraging it for French and Spanish voice-based business process services. Because the English language was introduced by British colonists, and because there’s shared cultural affinity, South Africa is becoming a popular destination for voice-based services delivery for U.K. companies. Additionally, because most African countries share similar time zones with Europe, delivery and client teams are able to collaborate in real time, thereby, optimizing work in both the geographies.

The leading locations in the MEA region

The map below highlights key locations leveraged by global enterprises and service providers for global services delivery. While the emerging locations house 20,000 to 100,000 FTEs across global services, nascent locations employ less than 20,000 FTEs in this space.

 

A snapshot view of the top five global services delivery locations in MEA

  • Egypt: Offers the most attractive cost-talent proposition, with strong multilingual skills, especially in English, French, and Arabic languages. However, relatively higher operating environment risk with concerns around high inflation rates and repressive government policies
  • Morocco: Primarily leveraged for French and Arabic language voice-based BPS and IT services. Morocco offers moderate-high competitive intensity and strong government support (especially for the IT-BPS sector through financial, tax, and customs advantages)
  • South Africa: Characterized with large, high-quality talent pools and the highest maturity across functions, South Africa houses multiple organizations delivering voice and non-voice BPS, including complex processes. It has a stable geopolitical environment, well-developed infrastructure, high ease of doing business, strong government incentives for the IT-BPS sector, and limited safety and security concerns
  • Mauritius: It is leveraged for IT (both ADM and infrastructure), non-voice business process services, and R&D services to serve French and Canadian markets. It offers a favorable business environment, with government incentives for the IT-BPS sector, such as tax-free dividends and foreign tax credits
  • Israel: Leveraged for delivery of advanced IT (including IoT, ML, and AI) and R&D services, primarily to support the U.S. and Europe. Israel offers a highly favorable business environment with lower tax rates and conducive government incentives, such as low corporate tax and grants up to 20 percent of the amount of the investment.

For a detailed view of each of these locations, please read our latest Location Spotlight reports. Each report analyzes the individual country’s global sourcing profile, key opportunities, drivers, challenges, talent and skills availability, financial attractiveness, and environment risks.