End users of nearshore ITO and BPO services plan to either increase or maintain their presence in Latin America throughout 2015, according to a recent survey conducted by Nearshore Executive Alliance (NEA) and Sourcing Industry Group (SIG).
The maturing global sourcing market presents service providers with evolving buyer needs and preferences including increased geographic scope. The NEA (the trade association for the Nearshore Services industry) and SIG (an organization that provides thought leadership and networking opportunities to executives in sourcing, procurement and outsourcing for Fortune 500 and Global 1000 companies) partnered to develop a comprehensive survey that polled over 80 C-Level executives, VPs and outsourcing decision makers to learn about their presence in Latin America and plans for the region.
The findings of the online survey presented below are an effort to provide key stakeholders (buyers, service providers, advisors) with information about the next-generation global sourcing challenges and opportunities to assist in guiding their business objectives and strategies.
1. Even though LatAm represents a small part of the global services portfolio, plans are to either maintain or increase presence in the region
For close to 70% of the executives polled, less than 25% of their contracting services is spent with LatAm based service providers. Though offshore leverage continues to dominate the outsourcing economics and is an accepted reality for staying competitive in the global services business, the good news for nearshore is that for both BPO and ITO, only 4% of respondents are planning to decrease presence, and 24.49 % (BPO) and 18.37% (ITO) are interested in increasing.
2. Economic fluctuations are the main concerns for expanding to LatAm
When asked for the single greatest reason preventing buyers from including or expanding their nearshore services with Latin American vendors and geographies, the results showed that economic fluctuations (29.03%) were the main concern. Other factors, including lack of awareness and lack of focus on the region represent 32.26% and geo-political risk accounts for 16.13% .
3. Geographical proximity and overall cost are still the main drivers for nearshoring
According to the survey results, Latin America's importance as a provider of global IT and business process outsourcing services is growing mainly due to its close proximity to U.S. operations (38.78%) and favorable overall cost (22.45%). The third relevant factor was time zone and agile practices (10.20%).
There is still a large untapped market for nearshore services. The main reasons? Economic fluctuations, lack of awareness, lack of focus on the region and geo-political risk. What can be done to change this? Certainly, governments need to continue to promote their countries in the U.S. to overcome the negative perception some potential clients continue to have on the risk of doing business in Latin America.
This could also mean that there is a need for increased joint marketing for the region. Nearshore can improve its overall image and increase awareness about its capabilities as a service provider by implementing a different PR strategy and presenting itself as an entire region not as individual countries competing for attention. Many of the suppliers have a presence in different countries in order to leverage the individual advantages of specific locations. Why not pass on that message to the potential clients? While each country still needs to work on their individual economies and faces its own set of challenges, the promotion efforts could provide better results if done in a more integrated manner.
About Nearshore Executive Alliance (NEA)
Established in 2011, the Nearshore Executive Alliance (NEA) is comprised of a broad selection of industry leaders and business executives focused on the promotion of information technology outsourcing (ITO) and business process outsourcing (BPO) solution providers across the Americas. The NEA contributes to the nearshore industry by facilitating the collaboration of industry thought leaders, sharing intelligence about different locations and offering best practices. For more information, please visit www.nearshoreexecutives.com.
About Sourcing Industry Group (SIG)
SIG is a membership organization that provides thought leadership and networking opportunities to executives in sourcing, procurement and outsourcing from Fortune 500 and Global 1000 companies. It has served these professionals and opened dialogues with their counterparts in finance, HR, marketing and other business functions throughout its 24-year history. SIG is acknowledged by many as a world leader in providing "next" practices, innovation and networking opportunities through its: global and regional events, online webinars and teleconferences, member peer connection services, content-rich website and online Resource Center, which was developed by and for professionals in sourcing and outsourcing. The organization is unique in that it blends practitioners, service providers and advisory firms in a non-commercial environment. For more information, please visit www.sig.org.