Latin America on the Outsourcing Competitiveness Map Services LatAm... · 2016-07-19 · Star...
15
Latin America on the Outsourcing Competitiveness Map Mario Tucci Founder & Partner
Transcript of Latin America on the Outsourcing Competitiveness Map Services LatAm... · 2016-07-19 · Star...
Latin America on the Outsourcing
Competitiveness Map
Mario Tucci
Founder & Partner
What you will get out of this
• Is Latin America growing in Global Business
Services?
• What are those services that are more
popular?
• Which locations are best for service lines?
• What are the future trends to watch?
24%
15%
<5%
7%
LATAM - Market heatmap2
2014
Brazil
Argentina
Chile
Costa Rica
Mexico
Guatemala
Panama Colombia
Nicaragua
Uruguay
Peru
Honduras
El Salvador
Belize
Emerging
locations
Mature
locations
Nascent
locations
Latin America has witnessed fastest growth in
global services headcount over the last 3 years
Others1
APAC
LATAM
Nearshore
Europe
1 Others include Africa and Middle East region
2 Analysis based on headcount for global services exports in 2014
Note 1: Includes global services exports for 31 leading locations. Excludes domestic market
Note 2: APAC: Asia Pacific; LATAM: Latin America
Source: Everest Group Global Locations Annual Report (2015): Everest Group (2016)
CAGR of global services headcount
(includes both shared services and
service providers) by regions:2013-2015
Latin America has 13-16% share in new shared
service center set-ups during recent years
Breakup of new center set-ups(GICs) by region2010-Q1 20161
1 Includes data for Q1 2016 (January-March 2016)
2 Others include Africa and Middle East region
Note 1: APAC: Asia Pacific; LATAM: Latin America
Source: Everest Group Global Locations Annual Report (2015): Everest Group (2016)
58% 58%53%
33%
8%14%
13%
16%
26%25%
26%
44%
8%3%
8% 7%
2010-11 2012-13 2014-15 2016Q1
APAC
LATAM
Nearshore
Europe
Others2
100% = 86 106 27179
31%
46%
31%
90%
10%
20%
BPS IT EngineeringServices/R&D
Increasing share of BPS in new shared
service center setups in Latin America
Breakup of new centers in LATAM by functions supported
2014-2015 2014
2015
Note 1: Includes GICs; centers may be supporting multiple functionsNote 2: Excludes centers where function is not specifiedSource: Everest Group (2016)
Includes both voice
and non-voice
While BPS services are more mature for Latin America
delivery, only certain locations support other functions
Source: Everest Group (2016)
Voice BPS
Non-Voice
BPS
Knowledge
processes
IT services
R&D and
engineering
Significant evidence of delivery from
multiple locations in Latin America
Key regions served from Latin America
locations include Latin America, North
America, and Europe
Select list of locations support these
functions from Latin America
Evidence of support for Latin America
only, with limited offshore service
delivery
Functions
Medium LowHigh
Comments
Only some locations within Latin America
support offshore IT services delivery due
to requirement of specific skill sets
Evidence of support largely for Latin
America and North America region
Maturity of serv. delivery
Everest Group’s MAP Matrix™ provides a comparative
assessment of cities specific to a market function
Everest Group’s Maturity | Arbitrage | Potential (MAP) Matrix™ provides a comparative assessment
of cities specific to a market function (e.g., IT-ADM, knowledge services, European language BPS)
Maturity Relative maturity of locations in
terms of the breadth and depth of
services offered
Arbitrage Cost savings or arbitrage over
typical source markets
Potential Emerging opportunities or potential
of these locations from a talent and
risk standpoint
Leaders
Relatively the most attractive locations - significant talent availability and low costs
Characterized by presence of large GICs or service provider centers
Often exhibit high competitive intensity owing to presence of many large players
Major Contenders
Offer an attractive mix of talent availability and cost savings
Sufficient talent pool to support mid- to large-sized centers
Lower competitive intensity compared to Leaders, however, lower maturity
Aspirants
Suitable for small- to medium-sized centers
Offer early-mover advantage and low costs, however, require investments in talent
development
Typically, less mature locations as compared to other clusters
Star Performer
Leaders
Major ContendersAspirants
Availability of talent
Op
era
tin
g c
os
t
MAP MatrixTM assessment covers 60+ cities
for the following seven functions: Information Technology – Application Development
and Maintenance (IT-ADM)
Contact center (English language)
Transactional Business Process Services (BPS)
Complex / judgment-intensive BPS
Bilingual (Spanish and English language) BPS
Multi-lingual (European languages) BPS
Knowledge services
FRAMEWORK
MAP Matrix™ | IT-ADM
Low
Op
era
tin
g co
st1
1 Fully-loaded, ongoing operating cost, including compensation, facilities, and technology expenses
2 Considers relevant entry-level and experienced talent
Source: Everest Group (2016)
China tier-1(Shanghai)
Kuala Lumpur
Philippines tier-1(Metro Manila)
Singapore
Colombo
Ho Chi Minh City
Buenos Aires
Sao Paulo
Santiago
Bogota
San Jose
Guadalajara
Mexico City
San Juan
Montevideo Sofia
Tallinn Budapest
Dublin
Vilnius
Belfast
LisbonBucharest
Glasgow
Bratislava
Kiev City
Johannesburg
Port LouisCairo
Tel Aviv
Casablanca
Poland tier-2
HighAvailability of talent2
LEADERSASPIRANTS MAJOR CONTENDERS
India tier-1
(Bangalore)
Poland tier-1
(Krakow)
Prague
India tier-2 (Kochi)
Favorable, but some concerns Significant challengeHighly favorableRisk
profile
Star Performer
Mexico City is a star
performer owing to strong
nearshore value
proposition and abundant
talent pool
Buenos Aires is a major
contender owing to
attractive cost savings
and access to talent
San José (Costa Rica) is
an aspiring location and
offers opportunity for
players to set-up small-
scale center or a spoke
for nearshore locationsHigh
Low
MAP Matrix™ | Bilingual BPS (English
and Spanish)
Low
1 Fully-loaded, ongoing operating cost, including compensation, facilities, and technology expenses
2 Considers relevant entry-level and experienced talent
Source: Everest Group (2016)
Buenos Aires
Santiago
Bogota
San Jose
Santo Domingo
San Salvador
Guatemala city
Guadalajara
Monterrey
Managua
Panama City
Lima
Montevideo
Op
era
tin
g c
os
t1
LEADERS
Kingston
ASPIRANTS MAJOR CONTENDERS
HighAvailability of talent2
Buenos Aires and San
Jose are the leaders for
bilingual BPS work;
Buenos Aires presents
challenges in terms of
high macroeconomic and
fiscal risks
Guadalajara and
Monterrey have emerged
as strong alternatives in
the last three to four
years
Favorable, but some concerns Significant challengeHighly favorableRisk
profile
Star Performer
Low
High
MAP Matrix™ | Transaction-intensive
BPS
1 Fully-loaded, ongoing operating cost, including compensation, facilities, and technology expenses
2 Considers relevant entry-level and experienced talent
Source: Everest Group (2016)
Low
High
Low
Op
era
tin
g c
os
t1
HighAvailability of talent2
Dalian
India tier-1 (Delhi NCR)
Kuala Lumpur
Philippines tier-1 (Manila)
ColomboHo Chi Minh City
Buenos Aires
Santiago
Bogota
San Jose
Guatemala City
Guadalajara
Montevideo
Prague
Budapest
Dublin
Belfast
Lodz
Poland tier-1 …
Bucharest
Glasgow
Bratislava
Cape Town
Cairo
CasablancaVilnius
India tier-2 (Kochi)
LEADERSASPIRANTS MAJOR CONTENDERS
Buenos Aires, San Jose,
and Guadalajara are the
major contenders for
transaction-intensive BPS
Availability of sizeable
talent pool, bi-lingual skills,
and significant time-zone
overlap are the key drivers
for leverage of these
locations
Favorable, but some concerns Significant challengeHighly favorableRisk
profile
Star Performer
US Dollar appreciation is creating
opportunities in Latin America Latin America economic
performance contracted in
2015, currencies have
depreciated and inflation
has raised
Currency depreciation
improves location
attractiveness for global
services delivery from
locations like Chile,
Argentina, Mexico,
Colombia and Brazil
Significant depreciation of
the currencies has helped
countries and companies
in relation to the export of
services, which still
manifests itself as a bright
spot
5% 5% 5%
1%
4%7%
24%22%
4%3%
8%
11%13% 12%
8%
-1%
19%
32%
9%
53%
13%
19%
14%
42%
-10%
0%
10%
20%
30%
40%
50%
60%
2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015
Chile Chile Costa Rica Costa Rica Colombia Colombia Argentina Argentina Mexico Mexico Brazil Brazil
Inflation & Devaluation
Inflation Devaluation
Latin American incentives for shared service centers
1 HQ - headquartered
Source: Deloitte
Country Incentive Detail
Costa Rica Free Trade Zone Regime
Uruguay Free Trade Zone Regime
Panamá Free Trade Zone Regime
Argentina Export services regime
Perú CCO & BPO incentive
Income Tax 100% exemption 8-10 years
Income Tax 50% exemption following 6 years
Exemption from custom duties, VAT and general sales tax
Multinational Headquarters regime
Income Tax full exemption
Exemption on VAT and withholding tax on dividend remittances
SSC executives – income tax exemption
SSC, Distant Attention Center and Free Zones Regime
Income Tax 90% exemption 5 years
Free Zone 100% exemption import-export taxes
Distant Attention Center 100% Tax exemption
Export services not subject to VAT
Recovering VAT incurred on costs
Software Industry: BsAs Indirect Tax exemption
New regime for entry-exit of foreign currency
BPO & CCO not subject to VAT
ZOFRATACNA regime exempt from income Tax, VAT,
excise Tax
Latin American incentives for shared service centers
Country Incentive Detail
Chile Export services regime Back office Services not subject to VAT
Other services rendered to other countries may be
exempted
Brazil Certain cities regime Special incentives in certain cities
Reduced service Tax, reduced property taxes
Colombia Tax Free zone regime
VAT and customs duty benefits
Income tax at 15% rate
Strong double tax treaty network
México No special regime Reduced indirect taxes, strong double tax treaty
network
Future trends to watch
Source: Everest Group (2016)
Global services view
Look for changing functional proposition of locations, e.g.,
Costa Rica emerging as a new location for IT services1
Watch for legislative changes (e.g., labor, tax related laws) in
the region, which can impact services industry2
Be mindful of trade-offs between opportunities and risks (in
particular security and political), especially as risks continue
to evolve3
Seek opportunities for penetration into domestic/regional
demand markets4
