Tag: contact center outsourcing

Central America and the Caribbean: Calling all Nearshore Locations | Sherpas in Blue Shirts

Over the past several years, Asia has been leading the offshore growth momentum in provision of English-language contact center services. But recently, there has been a steady movement towards nearshore delivery of these services to North America, particularly the United States. Nearshore, in the context of this discussion, primarily refers to Latin American locations that have the advantage of being in the same time zone as North America and share cultural similarities.

Central America and the Caribbean are also gaining importance as part of this burgeoning group. Cities like San Jose, Guatemala City, and San Salvador have established themselves in this market, while locations such as Santo Domingo (Dominican Republic) and Montego Bay (Jamaica) are emerging as strong contenders. What makes this geography unique when compared with the rest of Latin America?

Overview of the nearshore contact center market

Distribution of contact center industry 2014

The figure above depicts the nearshore contact center market in terms of FTEs among Central American and Caribbean locations. As is shown, well established Costa Rica and Guatemala comprise 50 percent of the market, while El Salvador, Panama, Dominican Republic, Jamaica, etc., make up the rest of the pie as emerging locations. Consistent with trends observed in other regions of the world, global/regional service providers are the primary adopters of the emerging areas, while buyers’ global in-house centers (GICs) continue to be concentrated in established locations like Costa Rica and Guatemala.

And out of the confluence arises talent

The key attractiveness of this geography lies in its talent pool. Most of these locations offer large relevant graduate pools, especially for Spanish language delivery. However, challenges with employability of talent for English language skills affect the scalability potential in the region, especially for emerging locations. To overcome this issue, companies typically augment the graduate pool with part-time university students and high school graduates not pursuing further education.

An interesting trend emerging in these locations is that the service providers have tied-up with investment promotion agencies and other government bodies to set up language training institutes. Other providers have adopted staffing models that enable constant access to the best talent in the country. One example involves co-locating the contact centers within university campuses. Part-time university students are employed as contasct center agents, and are given incentives in the form of subsidized tuition fees. This arrangement also helps reduce attrition, which is a constant challenge in the contact center space.

In addition, many locations are taking proactive steps to increase the visibility of the nearshore contact center industry, and make it an attractive and viable employment option. For many, these jobs create the difference between poverty and prosperity. It is no wonder, then, that the Dominican Republic has been dubbed “The Call Center Republic.”

Everest Group has conducted a deep-dive analysis of this region, covering the current nearshore contact center landscape, relevant talent pool, and costs and risks associated with setting up operations. For more details, please see Everest Group’s latest report,Central America and the Caribbean Answer the Call for English-language Contact Center services.”

Three Possible Directions for Contact Center Outsourcing | Sherpas in Blue Shirts

The contact center outsourcing (CCO) marketplace is mature. It’s a large market, and companies across a wide number of industries and geographies use the services. The market is now $70-75 billion, which is approximately 20 percent penetrated by third-parties vendors and 80 percent by in-house captives. Now that this space is mature, what will happen to the industry? I believe that there are three likely directions.

Optimization trend

As in similar mature marketplaces, customers are looking to extract more value from the service. One way to optimize it is to embrace new disruptive technologies such as social media and analytics.

Alternatively the market is increasingly recognizing that not all work should be in low-cost locations. Consequently, they’re repatriating some of the work from low-cost locations such as India back onshore and matching it with workloads that demand more intimate services with better language skills or local knowledge requirements.

As the CCO market further matures, I believe providers have three choices.

1. Stay the course

Providers that choose to stay the course will need to meet customer demands by continuing to refine the model through actions such as embracing the multi-channel social media and integrating analytics. They will also need to add more value to the existing offer base and further optimize it. In this world, providers can expect ongoing pressure on margins and on price, increased requirement for investing in technologies and also can expect slow growth.

2. Consolidate

This is a fractured industry now with few large players, and the large players control only a small portion of the total volume. So I expect industry consolidation. Providers will get big or sell and go home. I also expect that several players will execute a roll-up strategy where they build economies of scale and economies of presence.

3. Disrupt

The third possible direction for the mature CCO space is to be disruptive. I believe a segment of this market will follow the path that data centers have gone in that there will be a cloud or cloud-like as-a-service offering that will bring a different business model to this segment.

New providers coming in and disrupting the space will likely capture high rents far exceeding those of the first two alternatives. Like their cloud and SaaS counterparts, they will operate very different business models with much more focused value propositions. These business models will deliver similar as-a-service benefits that SaaS and cloud deliver. However, they will accomplish this not by building a multi-tenant platform but by turning every aspect of the supply chain into a consumption model. This service model will be much more finely targeted at a customer’s needs rather than the service components such as people and technology, and it will allow customers to move away from the FTE take-or-pay model that currently dominates the industry.

2015 will be an interesting year for contact center outsourcing, as we’ll see segments of this market diverging on all three paths.

Capita Expands in Ireland | Sherpas in Blue Shirts

Capita has acquired SouthWestern Business Process Services Limited from private equity group Ion Equity, for €35m (£28m). SouthWestern provides customer relationship management, financial shared services, data processing and inspectorate services to private and public sector organizations. It has delivery centers in Ireland, the UK and Poland. Clients include the Department of Agriculture Food and Marine, Bord Gáis, the Department for Environment, Food and Rural Affairs, Bord Bia, Eircom and Failte Ireland.

SouthWestern is expecting revenues of €33.6m and an operating profit of €3.4m for 2014.

This is not the first Capita acquisition in Ireland. In 2011 it invested €33 million to acquire the international financial services business of Allied Irish Bank, AIBIFS. It integrated the acquired business with its own investor and banking services division, which at the time employed 2,000 people in Ireland, the rest of Europe, and India.

Capita already operates in Ireland, including as “servicer” to the National Asset Management Agency (NAMA) and contracts with Prudential International Assurance, St James’s Place International and Ireland’s Department of Communications, and Energy and Natural Resources to manage the delivery of a new postcode system across the country.

In 2013 it opened new offices in Dublin and at the time it had a target of employing circa 800 people in Ireland. That target has grown to 1600 since and SouthWetsern brings circa 1000 FTEs. These are mostly based in two sites at Co Cork, at Clonakilty and Little Island, as well as at smaller sites in Lodz, Poland, Dublin and Milton Keynes in the UK.

SouthWestern enhances Capita’s contact center capabilities. It offers multilingual customer services, supporting in up to 14 languages with 24/7 voice and multichannel services. Its other services, such as financial services administration, debt collection and risk management are a good fit to Capita’s existing but currently largely UK-focused services. SouthWestern also brings Capita a bigger presence in the Irish public sector market, which it will be able to expand fast given its long and successful experience in the UK public sector.

Capita’s plans for SouthWestern are ambitious. It is aiming to more than double SouthWestern’s operating profit to €7m and increase its revenue by 40% to €47m in 2016. An investment in SouthWestern’s IT systems in 2015 is to support this growth. Another factor to take into account is a strong pipeline of opportunities. In its H1 204 results, Capita indicated a pipeline of £5.7bn. These included 27 bids of which 90% relates to new business and 10% to contract renewals.

Both Capita and SouthWestern have delivery centers in Poland (Krakow and Lodz respectively). The Polish centers are likely to be consolidated but any additional capacity would help Capita with its plans for growth in Continental Europe. The move to expand into Europe was signaled by Capita’s acquisition of tricontes, a specialist customer management company based in Munich, Germany, for an undisclosed sum in July 2014.

While Capita has always been very acquisitive, a strategy for expansion beyond UK borders is emerging since the new head, Andy Parker, took over from long-term CEO Paul Pindar, this year. We will be watching this space to provide additional commentary in the future.


Photo credit: Charles Clegg

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