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.

Looking Forward: Top Nearshoring Trends for 2012

When Patrick Haller from Nearshore Americas asked ThinkSolutions for insight into how the nearshoring space will evolve in the next year, here's what we had to say:

Nearshoring Trends for 2012

1. India’s total cost of outsourcing (TCO) continues to increase and the advantage gap over Nearshoring continues to close especially due to inflation and attrition differences. 

2. Remote sourcing from LatAm, such as remote monitoring, will increase as technology continues to support it and India TCO rises.

3. There will be an added impact of the recent Free Trade Agreements (FTA) that improve upon the WTO’s General Agreement for Trade in Services, especially in Colombia.

4. Brazil will struggle to increase export of services due to internal demand from domestic growth as well as attention in preparation for the Olympics and other events.

5. Colombia will have an increased profile, a growing economy, free trade, improving security and stability.

6. Crime in Mexico will stabilize due to increased government pressure and US attention but will remain problematic in localized areas.

7. Small and mid-size US companies will exploit the advantages of Nearshoring.

8. There will be a trend towards consolidation of smaller LatAm IT firms into medium and larger firms to meet the needs of US based clients.

9. More firms will seek out LatAm for shared service centers as an alternative to offshore locations.

10. Indian firms will continue to expand into the LatAm region as global IT delivery strategies more frequently include Latin America.

Read the full article here at Nearshore Americas.

As IT Outsourcing Services Decline, Nimble Providers see Opportunity

Denis Barker from Sourcing Line found that the IT Outsourcing Services Sector declined at a rapid rate last quarter, according to Ovum's IT Services Contract Quarterly Analysis.  The number of deals worldwide fell to 384, and total contract values dropped 40% compared with the second quarter of last year.  The Q2 numbers haven't  been this low since 2003.   There is, however, a bright side: alternatives to India, primarily destinations in the Asia-Pacific region, haven't been hit as hard by this trend and dropped a mere 4% last quarter.   Who's to blame? The "lousy US economy" makes the list, as does IT buyers' demand for "hard benefits".  Buyers need to know that in addition to cost savings, outsourcing spending is bringing innovative approaches to the transformation process.  Nimble providers with the ability to present buyers with a unique value proposition that could not be achieved in-house.  


Read it here from Softtek Blogs.

Mexico's Silicon Valley: Getting the Real Story

Let's face it - despite the fact that Mexico is 'close' to the USA, its unique IT talents, capabilities and achievements exist far from the spotlight of the IT business culture of the United States. But as the world continues its shift toward globalization, economically interwoven model - where cross-border bonds become deeply vital to sustaining a competitive position - the presence of Mexico at the doorstep of the US is becoming an important strategic opportunity for the next generation of IT services-focused enterprises.

For example, tier one IT giants like IBM, Dell, HP, Intel, TCS and others have found a home in Mexico's Jalisco state, drawn by its powerful mix of IT talent, world-class infrastructure and stable economics. Jalisco, in fact, boasts over 12 nationally-recognized universities, 12 technological universities and 14 technological institutes. These schools graduate more than 6,000 engineers a year, and many of those students walk out of their university environments as fully bilingual professionals.

Isn't it about time US business and IT leaders got to know the real Mexico?

Come join us for a very special executive briefing on September 8th at The Roosevelt Hotel, where Nearshore Americas will host a business-driven discussion about the opportunities that Mexico and its thriving 'Silicon Valley" of Jalisco are offering to the world.


Sponsors

Puerto Rican Director of Economic Development Talks Outsourcing

Not all offshore locations for business are outside the U.S. Juan Aguayo of the Puerto Rican Department of Economic Development and Commerce spoke with AVweb's Russ Niles about the benefits of setting up shop in the U.S. territory.

Here are some of the key benefits that Aguayo mentioned:

• Puerto Rico provides cash grants and tax incentives to start up a business.
• Just as if you were operating in the US, PR has similar regulations, IP Protection, and legal requirements. 
• For companies interested in leasing commercial space in Puerto Rico provides funding to revamp office buildings.
• Puerto Rico offers highly trained laborers for engineer and design and parts and manufacturing. Puerto Rico’s School of Engineering Mayaguez is one of the best in the nation, attracting recruiters from companies like NASA and Lockheed Martin.  

Listen to the interview with AVweb here.

Nearshore vs. Offshore

Bogotá Losing Competitiveness in IT Industry

Due to the recent lack of investment in the IT sector, Bogotá is no longer as competitive as other cities in Latin America.  Colombia's ICT minister, Diego Molano, said that the city has dropped from 5th place to 9th in competitiveness among Colombian cities alone, and this lack of competitiveness has caused the Bogotá's internet penetration rate to drop to 12.78%.  Colombia as a whole demonstrates a weakness in internet penetration.  To compare, internet penetration is 63.5% in Buenos Aires, Argentina, 48% in Santiago, Chile, and 29% in Lima, Peru.  Molano calls for increased IT investment, which will in turn increase competitiveness, create jobs, and reduce poverty.

Read it at Business News Americas.

Feature City: Aguascalientes, Mexico

When thinking about doing business in Mexico, cities like Mexico City, Guadalajara and Monterrey immediately come to mind, but what of Aquascalientes?  The state is home to 60 IT firms, including Hildebrando and Softrek, and has a low crime rate, modern infrastructure, and a growing talent pool. The workforce in the area is skilled and career-oriented, keeping attrition rates low, all for a lower cost than many other areas in Mexico.  The problem?  Lower salaries and a lack of outdoor activities and night life are keeping young people away from the city.  This means that English language services are lacking.

Ann Harts performed a market study of the city, and here's what she found:

·         The city is planned around three beltway loops allowing for ease of transportation and access 

·         Electricity ring around city equals 100% blackout free

·         7 fiber optic rings cover the city, providing 100% coverage

·         A lack of available real estate, but the government has not released any quantifiable data on this issue

·         The city and streets are very clean with a strong police presence

·         One of the lowest (if not the lowest) crime rates in Mexico

·         As of 2007 it is mandatory to teach English in the schools 

·         English reading and writing skills are good, but spoken is average

·         25+ educational institutions (colleges, universities) with 35,000 plus students

·         Eight museums

·         Four live performance theaters

·         Cultural centers

·         55 movie theaters and an Imax screen

Of the focus group respondents:

·         86% have either lived in or recently visited the US

·         100% have internet

·         100% see English as the language of commerce and critical for future success 

·         100% viewed call center work as a career opportunity  

Read it here from Nearshore Americas.

Cyberattack in Brazil

Just one week after Brazillian IT buff Mark Hillary posted an article on IT Decisions expressing concern over Brazil's lacking cyber security measures, the country experienced its largest cyber attack in history.  

The worst part of this attack occurred Friday, when hackers briefly posted an ominous message on the IBGE (Brazil's main statistical institution) website:

"This month, the Brazilian government will suffer the highest number of virtual attacks in its history.  These attacks are a protest by a nationalist group that desires to transform Brazil into a better country."  

Apparently, hackers from Fail Shell and the Brazilian arm of LulzSec took down the government site through use of robotic computers, using billions of access requests to bombard the site until it finally shut down.  The Brazilian government reported no evidence of data loss, but websites that have suffered attacks include the Brazilian Tax Authority, the IBGE, the Brazilian Senate, and the Ministry of Sports.  

Displayed below, LulzSec won a hacking competition and placed its mascot on the Black & Berg Cybersecurity Consulting homepage.

Brazil received below average marks from the Global Competitiveness Report in the Cyber Security and IP Protection category, ranking 89th out of the 139 scored countries. To date, all attacks have been directed towards governmental agencies, but such vulnerability in Brazil's cyberspace could mean trouble for the country's reputation for world-leading financial and banking software.  

Read more on the attacks from the Wall Street Journal.

Mexico as a Nearshoring Technology Partner

Mexico offers the dual advantages of proximity and cultural affinity. Time zone alignment with your local team in USA or Canada while outsourcing to Mexico is an important benefit. With a growing pool of technologically talented employees and reduced delivery costs adding to an already highly attractive package, outsourcers are looking closer to home in Mexico.
 
This webinar will discuss key elements that can help enhance your team's efficiencies in an outsourcing engagement in Mexico. From government support initiatives to ease-of-trade agreements, we will break down cost factors as they apply to outsourcing in countries around the globe as compared to Mexico. You will discover why more delivery centers have opened in Mexico than any other country in Latin America.
 
This timely webinar is designed to help you to negotiate and succeed in Mexico. You will listen to Geetha Ram, Principal Director, Texas Instruments, Inc., Luis Saldaña, VP, Business Development, Dextra Technologies and Bob Hartmann, Global Outsourcing Consultant & OI Senior Advisor and learn from their vast experience as the following topics are covered:
 
The growth of IT and mathematics talent in Mexico What factors impact Total Cost of Engagement positively in Mexico? How does NAFTA encourage and improve your outsourcing engagements?
 

As the nearshoring environment develops, you can not afford to miss this important webinar! Register now to gain the insights you need to outsource effectively in Mexico.

Click Here to View the Webinar.

  

Indian Outsourcing Vendors are not Very Competitive in Brazil

David Shpilberg , co-founder and vicechairman of CPM Braxis Capgemini, talks with Shruti Sabharwal about the local market in Brazil and competition from Indian service providers. With Brazil's market for outsourcing and software services set to cross $10-billion mark this year, top India tech firms are looking for a piece of the industry. The country's biggest IT vendor , CPM Braxis, was a hot acquisition target for many Indian tech firms until European outsourcing vendor Capgemini picked up 55% stake last year.

Read it at The Economic Times.

Outsourcing in Latin America: What a Vendor Won't Tell You

The outsourcing market in Latin America has undoubtedly matured leaps and bounds in the past 5 years, but there are some potentially less obvious disadvantages to the region that should factor into your decision.  

Here is what potential provider won't tell you about the Latin American outsourcing industry:

1.The workforce lacks a sense of urgency: More follow-up may be needed with It or BPO providers.

2. The political situation could be a threat to your business: Anti-business and Anti-American governments are currently in power in Venezuela, Nicaragua, Ecuador, and Argentina

3. Prices are rising quickly: Labor arbitrage has faded, and inflation can dramatically affect your TCO.

4. Not all Latin American countries are equal: Closely examine the wide array of business, legal, and economic climates in each country.

5. They will say no: Unlike less direct cultures like China or India, Latinos are more likely to challenge customers if they feel something is wrong.

6. Don't expect perfect English: Even call center providers may not speak as clearly or accent-free as advertised.

7. Process is not their strength: India's strong IT services reputation is built on quality repeatable processes, but Latin American providers are less rigid.

8. Don't expect scale similar to India's: Populations in Latin America are smaller, and many inhabitants are already employed in the IT and BPO sectors.

9. Physical security is a risk: This doesn't speak for every country, but violence in Mexico and Guatemala could detrimentally affect the mindset and physical environment of IT or BPO sectors.

Read it at Network World.

Chile Invests in IT Future

IT spending was at $2 billion last year and is projected to increase to $3.4 billion by 2014.  Their IT growth of 5.7% makes them the LATAM leader, ahead of Argentina at 4.7% and Brazil at 4.5%.  Students are choosing tech careers over business careers, with majors in electric engineering, software studies, and computer science.

Read it at Nearshore Americas.

Chile Wants to Borrow US Entrepreneurs for $40,000

In an attempt to build a stronger infrastructure, Chile will offer grants to any entrepreneurs willing to work on a project within their borders.  While this project intends to make Chile “more than just an outsourcing hub”, their movement toward innovation will make Chile a recognizable competitor in the IT outsourcing market.

Read it at Forbes.