IBM Wins Cemex Deal and Acquires Large IT Provider

IBM and Cemex just signed a recording-breaking deal in the nearshoring space.  Under the terms of the agreement, IBM will acquire subsidiary IT consulting company Neoris and provide IT and BPO Services for Cemex for the next 7 years.  Based in Monterrey, Mexico, Cemex is the world's third largest cement maker and also owns Neoris, the second largest IT consulting company in Latin America.  Cemex has been struggling to financially recover from the global construction slowdown and sent out bid requests to IBM, Tata Consultancy, Dell, Wipro, and Infosys before choosing IBM.  Nearshore Americas broke the story on July 5, and the full details of the transaction can be found here at Nearshore Americas.

2012 Katowice Summit Business Conference

With a sizeable educated population, a growing economy, and a reliable transport and energy infrastructure, Poland is a popular nearshoring destination for companies in the EU.  The conveniently located city of Katowice has been determined to be an attractive location for foreign direct investment and various sectors outsourcing.

Katowice offers a pool of IT and business management talent and actual innovation possibilities.  With new government-supported development initiatives including infrastructure and green technology projects, the potential for information technology outsourcing (ITO) and business process outsourcing (BPO) services is promising.  Within Katowice there exists a broad pool of talent/intellectual capital with over 25 higher education institutions.

The 2012 Katowice Summit business conference took place on Wednesday, June 27, 2012 at the Polish Consulate in New York City, New York, USA. For those interested in learning about the Silesia region of Poland, visit the Katowice Summit 2012 website to view videos from the event and to read more about the information provided.  Jolanta Jaworska and Mariusz Tomaka both spoke at the event on the advantages of outsourcing in Poland.

According to Jolanta Jaworska (IBM, ABSL), who is responsible for IBM cooperation with the local government and public administration in areas of business development support, investment policy, social policy and projects in Global Delivery Centers in Poland and CEE, the country has "many advantages, as Poland has a great number of highly-skilled people who are crucial for this kind of business.” Ms. Jaworksa is also a member of the Association of Business Service Leaders in Poland (ABSL), a partner of Katowice Summit 2012.

Mariusz Tomaka, Director of the U.S.-Polish Trade Council and CEO at DisplayLink, also commented on the region. “There’s a lot of advantages [in the Silesia region] like resources, well-organized office space, good infrastructure of the area, but what I would like to emphasize is– many popular outsourcing destinations today represent a low level of services. In Poland, we have very well-educated staff, able to manage these offices. Poland can be a hub to which the high-level outsourcing services can be directed, and then distributed evenly throughout the globe.”

Uruguay's Role in the Nearshoring Industry

Uruguay's early entrance to the Latin American nearshoring industry has allowed the country to develop a strong sourcing market.  While the high cost of labor and taxes keeps Uruguay out of the top of our Nearshoring Destinations Index, Uruguay offers an experienced and educated workforce to potential buyers. The Global Delivery Report interviewed Mario Tucci, formerly the head of operations for Tata Consultancy Services in Latin America, about how Uruguay's role in the IT Outsourcing Sector.

Read the interview from Global Delivery Report below:

Q: How did Uruguay gets its start in the IT industry?

A: We started very early (educating) IT engineers in Uruguay and Argentina. That ignited the IT software development (sector). Since we’re far away (from other major markets) we had to learn a lot. You couldn’t call an 800-number in the 1980s for help. You had to develop something locally. As a result, for example, Uruguay is now home to two vendors of core banking software, with customers in Mexico, Costa Rica, Peru, Ecuador, Chile and Argentina among others.

Q: Has this been supported by government investment in training?

A: (In the 1970s) there was a university across the river in Argentina, the La Plata University where some people from Uruguay, some from Argentina, created the first Latin American IT engineering institute. It was a very well known and prestigious institute. All this builds on a very high cultural appreciation for education, as in Uruguay all education is free and public, from K-12 through the university level.

Q: What are some of the key areas where Uruguayan software developers are active?

A: Beyond banking, there is logistics. A logistics software solution developed for PepsiCo in Uruguay was taken by PepsiCo and adopted throughout the entire Asia Pacific region. Another is Artech, developer of the GeneXus Technologies cross-platform development and maintenance framework.

Q: When did the shift to also offering BPO begin?

A: It began when TCS came and put a stake in the ground in 2002. When TCS came here, nobody ever thought this operation could reach 1,000 people. In 2008 TCS senior management came to us, based on our ITO experience, and said “We know you don’t have any BPO experience, but you do have the people and attitude we need.” This operation has now grown to 400 people, and is the largest BPO operation of a service provider in the country and employs half the TCS employee base here. It was a very nice demonstration that if you have the right team, which is willing to grow, and to (take on) an ambitious task you can do wonders.

Q: How about other BPO operations besides TCS?

A: After ten years, this country, via the free trade zone and other (efforts) we have seen growth in BPO and IT services, not only for Uruguayan companies, but also many international companies. For example, MercadoLibre, which is the eBay of Latin America, is doing all their back office work from Montevideo. You can also see, a lot of smaller Uruguayan firms providing agile development and technology services and consulting services to companies in the U.S. and around the world. There are several companies here working with Africa, and several working with as far as Japan.

Q: How would you compare Uruguay with other Latin American countries as a source of BPO and IT services?

A: We’re a country of foreigners. Everyone here is the grandson of either a Spaniard, an Italian, a German or a Frenchman. As a result, the country is very cosmopolitan. A lot of people here speak different languages, which is good for this industry. Also, since we’re far away (from other markets) we had to create our own environment.

Finally, historically it’s very rare that Uruguay has fought or had a problem with any other Latin American country. It’s seen as a friendly country by the rest of Latin America. That helps to compete also.

Is Un-Sourcing a Problem for Costa Rican Call Center Workers?

At any given time in Costa Rica, tens of thousands of Ticos take calls from consumers in other countries who are in need of service and support. These agents work in call centers mostly located in the Central Valley, and the majority of the calls are handled in English -although demand for Portuguese-speaking agents is growing.

What would happen to the economy of Costa Rica if an army of unpaid workers decided to gleefully take over customer service and tech support from them? According to a recent article in The Economist, the new trends of“unsourcing” and peer-to-peer support could become a thorn on the sides of the outsourcing and call center economies of India and the Philippines. Should Costa Rica be worried as well?

Read it here at Costa Rica Star.

Firms Seek Alternatives to India for Outsourcing Higher-Level Jobs

In 2011, Latin America and Eastern Europe surpassed India in the growth of outsourcing facilities.  According to Everest Group, India opened 49 new outsourcing facilities in 2011 while Latin America and eastern Europe opened 54 new facilities.  The trend of shifting functions away from India and toward nearshore destinations is continues to grow as American companies outsource skilled white-collar jobs in research, accounting, procurement, and financial analysis.  As many companies have capitalized fully on their savings potential in India, it is natural progression to seek savings in other functions and geographic locations.   With higher-level functions that don't require mass processing or large numbers of workers, countries like Argentina and Poland are viable options.  While you won't find critical mass in any one Argentinian outsourcing firm, the laborers are skilled and offer a valuable service at a lower hourly rate than companies can find in the U.S.

Source: Bloomberg Businessweek

Outsourcing firms in India are catching on the the trend as well; Tata Consultancy has 8,500 employees operating in Peru and Paraguay.  Genpact, India's largest BPO firm, opened and F&A (Finance and Accounting) outsourcing firm in  Brazil.  Outsourcing is becoming increasingly popular in Eastern Europe.  Particularly in Wroclaw, Poland, 30 universities graduate a steady stream of skilled laborers each year.  Firms including IBM, Ernst and Young, and Microsoft have opened up outsourcing centers in Wroclaw.  Poland and other Eastern European countries offer a better environment for high-level outsourcing.  About 50% of Poland's 20-24 year olds are college-educated, compared with a mere 10% of 20-24 year-olds in India.  It's important to keep in mind that India's massive population means an incomparably larger number of college graduates; India has 109.4 million people between 20-24, compared with Poland's 2.9 million people in that age range.  Though the sheer numbers may always be in favor of India, nearshoring offers valuable benefits that India can't match, such as cultural alignment, language capabilities, and the ability to interact with clients.

Read more here at Businessweek.

Hugo Chavez Seeks Cancer Treatment

Venezuelan president Hugo Chavez spent the weekend in Cuba to receive another round of radiation treatment.  He intends to return to Venezuela in time to celebrate the ten year reunion of the failed coup against Chavez in 2002.  No specific details surrounding Chavez' battle with cancer have been released, and the type of cancer has not been specified.  Because of this, many have speculated about his political future.

Earthquake Rocks Central Mexico

In Mexico City, people ran into the streets seeking safety when they felt the quake.

MEXICO CITY 2:31 PM CST— A strong 7.6-magnitude earthquake hit Mexico on Tuesday, shaking central and southern parts of the country and swaying buildings in Mexico City. Plaster fell from ceilings and windows broke in the center of the capital, but the president said there were no immediate reports of major damage.

The initial quake in Guerrero state was followed by a less powerful, magnitude-5.1 aftershock that also was felt in the capital.

Frightened workers and residents poured into the streets of the capital just minutes after noon local time (18:02 GMT). Telephone service was down in the city and throughout the area where the quake was felt.

"I have problems with pressure, I felt I was going to faint," said Rosa Maria Lopez Velazquez, 62, outside a mall in Mexico City.

The quake was felt strongly in southern Guerrero state, where the epicenter was located about 15 miles (25 kilometers) from the city of Ometepec. Neighboring Oaxaca state also shook heavily, including two aftershocks.

"It was very strong, but we didn't see anything fall," said Irma Ortiz, who runs a guesthouse in Oaxaca. She said their telephones are down, and that the quake shook them side-to-side.

The U.S. Geological Survey set the intensity of the first quake at 7.6 and said the epicenter was 11 miles underground. The survey set the aftershock at 5.1.

Mexico City Mayor Marcelo Ebrard's Twitter account said the water system and other "strategic services" were not experiencing problems. 

Read it here at the Huffington Post

Brazil's Sluggish Economic Growth

Latin America's largest economy grew a mere 2.7% in 2011, far below the 4.5% GDP growth rate predicted by analysts.  Last summer, when President Rousseff declared an official goal of 4% GDP growth in 2012, it seemed attainable.  However, after a sluggish year in 2011, it is evident that the Brazilian government will have to work to creatively stimulate the economy to achieve the growth goals. The country's interest rates have served as a major obstacle to growth, and the Central Bank predicted that it would cut interest rates to 10.5% to stimulate the economy.  However, after meeting yesterday and being presented with lower-than-expected data, the Central Bank president Alexandre Tombini decided to make even more drastic cuts, lowering the interest rate to 9.75%. In the past, Brazil has avoided lowering the interest rate because of inflation concerns, but the country leaders hope that the lower interest rate will stimulate growth and foreign investment.

Read it here at CNN.

Fewer Tech Companies are Sending Jobs Overseas

A new survey reports a three year decline in outsourcing in the technology industry.  In 2009, 62 percent of companies outsourced services or manufacturing, but that number has dropped nearly by half to 32 percent.  More tech jobs are moving back to the U.S., and 50 percent of CFOs plan to increase their U.S. based labor force in 2012.  The survey predicts that despite the decrease in overall spend, Latin America will remain an increasingly popular sourcing destination.  BDO Technology Outlook survey asked the CFOs who currently participate in outsourcing to choose one location for future outsourcing, and Latin America was the most popular option at 23%, followed by Western Europe (20%) and then China (19%).  According to the survey, the advantages of proximity and skilled labor make nearshoring  increasingly attractive to tech companies.

Read it here at Market Watch.

2011 Fourth Quarter Nearshoring Destinations Report Released

ThinkSolutions, a management consulting firm with thought leadership in outsourcing, offshoring, and nearshoring, released its second quarterly report of “The Best Nearshoring Destinations.” Each quarter, the firm ranks 19 Latin American countries based on their appeal as outsourcing and shared services destinations, scoring the countries on 19 objective criteria in three categories: Financial Incentives, Business Environment, and Labor Force.

Firms continue to leverage nearshoring as an effective strategy for both Information Technology (ITO) and Business Process Outsourcing (BPO). Executives continue to look to nearshoring for benefits in cost reduction, ease of management, and portfolio diversification, so the model aimed to reflect these interests of potential buyers. Nearshoring requires careful consideration of the business objectives and an effective governance approach to manage the relationships.

ThinkSolutions has strategically selected and weighted criteria to emphasize the unique characteristics of Latin America such as cultural affinity, time zone alignment, and language capabilities. Last quarter, the nearshoring landscape changed when the U.S. signed Free Trade Agreements with Colombia and Panama, so ThinkSolutions adjusted the model to reflect these added trade incentives. Other changes in the financial environment of countries in the index led to the shifts in the rankings this quarter. Mexico ranked first again this quarter, followed closely by Chile, Costa Rica, and Colombia. Due to increased wages and higher inflation, Argentina experienced the most significant drop in ranking in the fourth quarter.


This outsourcing index is unique in its objectivity and flexibility in response to changing environments. While other global sourcing indices are updated annually, the ThinkSolutions Nearshore Destinations Model is updated quarterly or more often to reflect major events or changes in a country’s economic landscape. The evaluation model is designed to be proactive as well as reactive, penalizing politically unstable countries with higher levels of risk of future turmoil, while also emphasizing criteria that depict the current state of a country. Tony Mataya, Managing Partner of ThinkSolutions commented on the flexibility of the index, “We also work with clients to tailor the model to reflect their risk profile and business objectives to help determine the optimal location for sourcing services or locating operations in Latin America.”


Request the full report here.

Rio de Janeiro Building Collapses

Source: CNN 8:11 PM CST 1/26
Three buildings collapsed in the historic center of Rio de Janiero last night, just steps from the Municipal Theater where President Obama gave an address last year during his visit to Brazil.  Rescue workers have been working in the rubble all day, and so far four people have been confirmed dead and twenty two people are missing.  The cause of the collapse of the 20-story commercial building and adjacent 10- and 4-story buildings is still unknown.  The video below was produced by CNN on the morning of the collapse.

Can Brazilian President Rousseff Achieve 4% Economic Growth in 2012?

As Brazil's summer holidays come to a close, President Rousseff has been busy planning goals for Brazil's economy in 2012.  The broad goal? Four percent economic growth, which means and increase of one percentage point from 2011.  Concrete measures for how exactly the government plans to stimulate this growth will be presented by Rousseff in the weeks to come.  The country's leaders claim that Brazil will make every effort to promote responsible economic growth, however the country faces worries of a decline in demand for manufacturing exports.  This leaves the bulk of the economy in the hands of consumer demand within Brazil.  The UN forcasted Brazil to see about 2.7 percent GDP growth in the upcoming year, so there has been speculation about heavy stimulus spending to boost growth and meet the four percent target.  The government might also postpone its annual budget spending freeze to ensure that the economy can continue to flourish.
In general, Rousseff has made policy shifts during her first year that left foreign investors a little wary of Brazil's financial outlook.  Updates will come as Rousseff provides more details surrounding the measures by which Brazil will achieve four percent growth.

Read it here at Reuters