Colombia has been trying to make a name for itself as an outsourcing destination. It wants companies, particularly from the United States, that are looking to move their IT and back-office work offshore to start thinking about Colombia.
Photo: Colombia Minister of Technology David Luna Sánchez address a crowd while promoting IT development in the country. (Credit: Ministerio TIC Colombia)
While the nation has made steady progress, there is a lot more to be done before it can truly compete with the likes of Mexico, Costa Rica, and some other Latin American rivals . The improving security situation has been the best boost so far, with some U.S. decision makers starting to realize there is a large population center — much closer than cities in Brazil, Argentina, or Chile — that is now safe and capable of doing high-level work.
More marketing, education, and training still needs to be done, however, if the country wants to continue its growth in IT outsourcing (ITO), business process outsourcing (BPO), and related areas. To learn more, we recently sat down with Prashray Kala, practice director at Everest Group.
The Dallas-based management consulting firm recently published a report on IT Services Delivery from Latin America. The study compares Bogotá with nine of the region’s other notable cities, analyzing factors including talent pool, operating cost, market activity, and risk analysis.
In an interview with Finance Colombia, Kala shared some insight about Colombia stacks up against its peers.
Finance Colombia: In the Everest Group report about IT services delivery from Latin America, were there any big changes that stood out compared to the last time that you published a report of this type? How do things seem to be evolving in Latin America generally?
Prashray Kala: Well, the way I look at it, U.S. enterprises are asking us more and more for setting up — or for helping them set up — delivery centers in Latin America. What we used to see a few years ago was that Costa Rica and Mexico used to be the top-choice destinations. But now we see that people are very comfortable opening beyond that into South America, whether it be in Colombia, Chile, or Uruguay. So we see a growing comfort with Latin American options.
The depreciation of the local currency in most of the countries in Latin America has definitely helped. The costs we see right now for service delivery are at least 40% lower than what they were three years ago. So it has definitely made an attractive proposition for enterprises.
Finance Colombia: Historically Mexico and Costa Rica have been the leaders. I also see smaller countries like Uruguay trying to have an impact. And they’re known for having strong talent but are held back by a very small population and relatively high costs. What have you found as far as Colombia outsourcing? How does it seem to be evolving as a destination for global services, for IT services, compared to others in the region?
Prashray Kala: One thing that is great about Colombia is that has a neutral accent. That is one thing that we have heard from a lot of people. We have also heard that the gentle friendliness and the helpful behavior translates much better into customer service. That cultural aspect really helps Colombia.
You mentioned Uruguay, and you are right. Or Argentina — where 40% of the population resides in just one city. Colombia has a fairer distribution, but within Colombia we see enterprises firmly interested only in Bogotá. We haven’t heard of enterprises — I’m talking about global enterprises — evaluating options other than Bogotá.
The Colombian currency also has moved significantly. I remember in 2014 the exchange rate was something around 2,000 pesos to a dollar. Right now it’s more than 3,000 to the dollar. That’s a 50% shift. So what we have seen is that the devaluation enables the enterprises that are already there to grow even more. And the global headquarters realizes that the gross proposition is getting sweeter.
Beyond that, to be very frank, in IT, that has been a low attraction for Colombia. On the service providers, yes. We’ve seen IBM, TCS, and to some degree Unisys. These are three of the largest global service providers. But if you talk about enterprises and leading technology organizations, that option has still yet to come through in Colombia. On the IT side, we haven’t seen large enterprises, apart from Oracle, being based out of Colombia.
Finance Colombia: What holds Colombia back compared to its peers? Does it have the talent? Are there other issues that keep Colombia from catching up? Of course, Mexico is so much bigger. And Costa Rica has a first-mover advantage and has strong education — but then again, it also has high costs, relatively speaking, and a small population. What are the factors that hold Colombia back as it tries to develop its reputation as a destination for IT, BPO, and ITO?
Prashray Kala: Sure, sure. So, you’re right: Mexico has a proximity advantage. The flight time and the multiple flight options make it really easy for U.S. clients to have centers in Mexico. Plus the visas are not a hassle. Costa Rica, yes, it has the first-mover advantage.
Now, having said that, I think those who are promoting investment in Colombia should realize that these two locations do definitely have a head start. Things have to be done drastically differently in Colombia.
In Costa Rica, for example, what we’ve seen is that the education system has evolved around the industry. We have companies that are looking to hire technical graduates, which are not even full college degrees. They’re more like technical high schools. So what we’ve seen is that the education system has modified itself to support the talent needs. Costa Rica is such a small place. The talent ought to have run out years ago. But they consciously made the talent pool large, and people are still growing there.
So, that’s what Colombia should definitely think about and plan about: how talent can be provided in large numbers — and ensuring that it is the type of talent ready to work in the IT/BPO sector. So, with the education system being one factor, there has definitely been a difference in the levels of marketing.
Mexico doesn’t need to market itself too much. Most Americans are aware of the proposition. But Costa Rica, I think they have been fantastic in marketing. Colombia needs to step up to the plate, definitely, in marketing. There definitely needs to be a consolidated document — one single document — which talks about the value proposition of Colombia.
There have been case studies with leading enterprises — the example of Unisys — and these need to be spread out there amongst other decision makers. They need to get more comfortable by knowing that five or 10 other companies have already moved there. Something that makes them think, “So maybe it’s time we also evaluate moving to Colombia?” Definitely, more marketing and better documentation of the value proposition are the things that have to be done for Colombia.