New Horizons of

Business Process

Outsourcing in

Africa

Latin America

&

Caribbean

Kevin S. Parikh, Esq.

Dr. Pradeep K. Mukherji

Avasant Publishing

Avasant Publishing

Avasant: 1960 East Grand Avenue

Suite 1050, El Segundo

Los Angeles, CA 90245

+1 (310) 643 3030

Copyright © 2013 Avasant LLC & its affiliates

This book was self published by Avasant using Amazon Publishing Services. No Part of this book

may be reproduced in any form by any means without the express permission of Avasant and its

editors. This includes reprints, excerpts, photocopying, recording, or any future means of

reproducing texts.

If you are interested in reprinting, or any of the above activities, please write to us at

contactus@avasant.com

All rights reserved, including the right of reproduction in whole or in part in any form.

This book was self published using Createspace (www.createspace.com) – an Amazon

Company

ISBN-13: 978-1492183426

ISBN-10: 1492183423

Table of Contents

Preface ..............................................................................................................

Evolving Globalization Landscape .....................................................................

Promoting BPO in Emerging Regions.................................................................

Africa a Global Sourcing Hub ............................................................................

Latin America & Caribbean Viable Nearshore Option ........................................

Part One: BPO The Growth Catalyst

THE BPO LANDSCAPE: NOW AND BEYOND ..........................................

OUTSOURCING IN THE “FLAT WORLD” CARE FOR YOUR GOOSE

TO ENSURE GOLDEN EGGS ......................................................................

PRIMER TO CREATE BUILDING BLOCKS OF A CONTACT CENTER ...

REENGINEERING THE DNA STANDARDS & CERTIFICATIONS. ..........

WEIGH AND MITIGATE RISKS VIRTUE OF PRUDENCE ........................

DESIGNING AN INVESTMENT PROMOTION STRATEGY......................

Part Two: Africa Awakening

DESTINATION AFRICA: IS AFRICA EMERGING AS A VIABLE

OUTSOURCING DESTINATION? ...............................................................

AFRICA ON THE MOVE INVESTMENT IN ICT IS CATALYZING

ECONOMIC GROWTH ...............................................................................

ICT & E-GOVERNANCE IN AFRICA..........................................................

OPPORTUNITIES & HURDLES IN SETTING UP A BPO & SHARED

SERVICE CENTRE IN AFRICA ..................................................................

THE IMPACT SOURCING IMPERATIVE ..................................................

Part Three: Latin America & Caribbean Armada Sails

THE NEARSHORE VALUE PROPOSITION ...............................................

COMPETE OR COOPERATE? BRIDGING THE NEARSHORE &

OFFSHORE DIVIDE ....................................................................................

JAMAICA’S ‘TO DA WORLD’ ...................................................................

HAITI - RISING FROM THE RUBBLE .......................................................

TRINIDAD & TOBAGO - THE HIDDEN CARIBBEAN GEM ...................

BELIZE – THE BIG LITTLE BPO DESTINATION .....................................

NURTURE LOCAL OR ATTRACT GLOBAL FIRMS ................................

REFERENCES .............................................................................................

ACRONYMS & ABBREVIATIONS ............................................................

CONTRIBUTORS ........................................................................................

EDITORS .....................................................................................................

Abstract

The landscape of Business Process Outsourcing Sourcing (BPO) is rapidly

changing with a emergence of new service delivery locations in different

geographical corners of the world. Countries in Africa, Latin America &

Caribbean (LAC) have been very active in taking advantage of the opportunity

provided by BPO and are poised to corner a significant part of the growing

opportunity. Business Process Outsourcing has transformed economic landscape

of many countries by creating large number of jobs for its populace, and

providing alternate means to improve their livelihood. A new initiative called

“Impact Sourcing” is being piloted in various countries in Africa and Asia to

create jobs in BPO sector in those countries for economically disadvantaged

sections of the society. India, Philippines, and a host of other developing nations

have benefited significantly from the BPO initiatives , which is also known as IT

Enabled Services (ITES) industry. Many countries in Africa , Latin America &

Caribbean have analyzed the success of countries like India and Philippines in

the BPO sector and are in the process of building their own capabilities to

provide ITES services. New Horizons of Business Process Outsourcing in

Africa, Latin America & Caribbean is a collection of articles and research

papers on the way the BPO industry is growing and transforming in these

geographical locations.

This book provides a perspective on the global BPO landscape and discusses

few key factors for growth of the industry. It provides a regional analysis of the

global sourcing of business services. The analysis includes countries in

Northern Africa, Sub-Sahara Africa, Latin America and Caribbean, and

provides an objective assessment of the business opportunities and risks in each

country relevant for the sector. It is a must read for Governments, Government

Agencies and Industry Associations in these regions who aim to grow the BPO

sector. Buyers of BPO services will benefit by getting an insight of these

emerging regions and decide on managing their service delivery risk by sourcing

BPO services from these regions. Service delivery organization who are

considering evaluation of alternate delivery locations to take advantage of “Near

Shore” capabilities and de-risk their operations will find the content useful.

Lastly, the academic community and students can benefit by expanding their

vision, outlook and understanding about the expanding landscape of global

sourcing of business services.

Preface

New Horizons of Business Process Outsourcing in Africa, Latin America &

Caribbean discusses the challenges, best practices, and lessons for buyers and providers seeking to build ITO and BPO capabilities by countries in Africa and Latin America regions.

The idea for this book emerged from our work with investment and aid agencies, governments, private organizations and service providers to promote ITO and BPO industry in Africa and Latin America. With their unique value propositions, many countries in these regions offer enormous opportunities for the growing number of businesses actively looking to operate and source their business services demand.

Despite their potential, both of these regions have their own set of challenges, for growing the IT & BPO industry. The book reveals how some innovative business models and approaches can help overcome these challenges in areas including education, transportation, resource management, and infrastructure. The book addresses the issues with practical guidance and solutions that can be adopted for outsourcing service providers and their clients.

Additionally, the information in this book provides a regional analysis of the global sourcing landscape, highlighting typical Northern African, Sub-Saharan African, Latin American, and Caribbean countries, and providing an objective assessment of the business opportunities and risks in each country.

New Horizons of Business Process Outsourcing in Africa, Latin America &

Caribbean is a must read for businesses looking to take advantage of the new emerging frontiers in IT and BPO. The future of sourcing is unfolding in Africa and Latin America right now, and you owe it to yourself to find out more.

Part ● One

BPO: The Growth

Catalyst

1 THE BPO LANDSCAPE: NOW AND

BEYOND

Business Process Outsourcing (BPO - also at times referred as IT enabled services) is defined as the delegation of one or more business processes to an external provider, which in turn owns administers and manages the selected processes, based on defined and measurable performance criteria. BPO generally involves outsourcing processes that are not strategically core to a company. By outsourcing these processes, organizations aim to reduce operational costs while increasing service levels. Some examples of outsourced processes are customer management, payroll, and accounts payable.

Figure 1: Evolution of IT Enabled Business & BPO Services

Beginning in 1970s, over the last fifty years, IT Enabled Services have evolved and matured over time. BPO has matured from being a transaction-oriented task to being process activity and now becoming a knowledge-based initiative. As shown in the figure above, the BPO industry has offered different services at different points in time, such as, Data entry, Data Processing of Payroll Services, Customer Integrated Services, and Business Transactional Services to cover

Knowledge Based Core Business Services that cover functional areas like Human Resources, Finance & Accounting, and Customer Integrated Services.

1970s -

Data

Entry

1980s -

Data

Processing

1990s -

Customer

Integrated

Services

2000s -

End-to-

End

Process

2010s -

Business

Services

BPO service lines can be broadly classified into vertical domain specific services, horizontal services applicable across organizations and knowledge based services, as represented in Figure 2.

Figure 2 : ITES-BPO Service Lines

Vertical specific service lines solve problems related to business processes that are characteristic to a particular industry. The BPO services or solutions created for a particular vertical are usually non-transferrable and are unique to a particular industry. Some examples of vertical BPO service lines are given below:

Banking & Finance

· Retail & Merchant Core Banking Solutions

· Consumer & Trade Finance

· Credit and Debit Cards Management

· Retirement Services

Healthcare:

· Clinical Data Management

· Medical Writing

· Clinical Trials Support

· Medical Transcription

Telecom:

· Network Management

· Billing Assurance

· Supplier & Partner Management

Utilities:

· Billing & Collection

· e-Registration

Horizontal Services cut across verticals and provide business supporting, and back office services that include customer interactive services, finance & accounts, human resource, training and procurement. Horizontal services cover following range of activities. Some examples of BPO Horizontal Service Lines are given below:

Customer Integrated Services (CIS):

· Collections

· Tele-marketing

· Product Enquiries

· Collections

· Customer Helpdesk

Finance & Accounting (F&A):

· Accounts Payable

· Accounts Received

· Expense Management

· Financial Reporting

Human Resources (HR):

· Payroll

· Compensation & Benchmarking

· HR Audits

· Time & Attendance

· Leave Tracking

· Recruitment

2012 were cost reductions, access to talent pool, need to focus on core competencies, modernization, and digitization of business and government systems. The year 2012 also saw demand growth for solutions that integrated technical features from Cloud, Analytics, and Mobility to provide platform based and solution based.

Out of the total BPO spend of $164 billion, $62 billion was estimated to be spent on services from in-house (Captives) operations, $56 billion was estimated to be spent on domestic sourcing (In-Country) and about $46 billion was estimated to be spent on sourcing business services from low cost countries- also called offshore destinations. The leading offshoring destination was India at about 39% market share followed by Philippines and Canada, at 20% and 17% respectively.

The total BPO market in Africa is estimated to be in the range of $2–$2.5 billion including both domestic and international demand. Currently, domestic and regional market contributes to about 75%–80% of the total spend. Leading offshoring destinations in Africa are South Africa, Egypt, Tunisia, Ghana, and Morocco. The Latin America & Caribbean (LAC) BPO market is estimated to be about $ 11 Billion with about 75%-85% industry revenue coming from domestic demand and rest from the export market. The largest BPO export markets for the LAC region has been US followed by other large regional countries like Brazil and European countries like UK and Spain. LAC is the fastest growing offshoring region, estimated to grow at about 12.5% CAGR until 2015.

Globally, Customer Care and Finance & Accounts account for the biggest share of BPO services; however, the fastest growth was seen in Procurement BPO services.

Services / Year Growth in

2011

Growth in

2012

Market Size

2011

(US$ Billion)

CIS 7% 6% 85.0

F&A 10% 6% 38.1

HR 6% 4% 27.3

Training 7% 4% 9.7

Procurement 17% 11% 3.9

BPO Services 4.3% 4.8% 164.0

KPO Services 24.0% 20.0% 10.8

Table 1: Growth of BPO Services and Market Size in 2011-12; Source: Avasant

Research

n terms of key BPO markets, US continues to be the biggest driver of business, but now other regions such as Asia Pacific, Middle East and Africa are growing

2 OUTSOURCING IN THE “FLAT WORLD”

CARE FOR YOUR GOOSE TO ENSURE

GOLDEN EGGS

The Debate

“Exporting America” through outsourcing has been a heated topic of debate

during the recent Presidential campaign in the US. The major contention was job losses and redundancies allegedly as an outcome of outsourcing. However, viewing outsourcing through the sole lens of job displacements is taking a myopic view of very important global economic phenomena. In the new world economic order, protective walls to prevent cross border flow of goods & services are being demolished. Countries are becoming progressively dependent upon each other to fulfill needs of food, livelihood, and lifestyle. Success of such changes and dependencies requires that both governments and businesses ensure that development and growth of the world economy is inclusive. Globalization and outsourcing must ensure that it contributes to the progress of those at the “Bottom of Pyramid”, thereby unleashing a new paradigm in global

economic growth. Multinational Companies (MNCs) are catalysts of globalization. MNCs view the world as a “Global Village & Marketplace” and

depend on multitude of countries, including poor and emerging nations, for their wealth creation. According to a McKinsey report, MNCs in the US contributed 31% to the real GDP and 41% to the labor productivity gains in 2007. MNCs also have a multiplier effect and contribution to the US economy making significant impact on US socio-economic growth. Is it not in order to expect from the MNCs then, as a part of their “Global Social Responsibility”, to give

back to the emerging countries, through job creation for the poor and vulnerable sections of society? Outsourcing provides an answer to this question.

The Golden Egg

Consider the following. Goods and services that are imported in the US would have been priced much more if produced domestically. Cheaper imports and lower production costs enable US citizens to save, buy, and consume more with their income. Rapid progress of telecommunication industry has given a boost to

globalization and outsourcing of services, which can be delivered by leveraging

and derive benefits focus on taking care of the skill development of local labor pool giving them a chance to capitalize on the opportunity.

Figure 3: Contribution of IT Services to GDP, NASSCOM, 2013

The Goose and the Golden Egg – Creating an Impact that also

makes Business Sense

Outsourcing to global locations is in reality an innovative business model, which provides a win-win platform for both the buyer and provider countries. US companies who benefit from globalization and outsourcing, instead of worrying about the adverse press opinion such strategies attract, should actively promote CSR (Corporate Social Responsibility) initiatives in the emerging economies, to foster inclusive growth. Impact Sourcing – a variant of outsourcing in the ITES-BPO sector is one such vehicle to achieve the CSR goals. Impact Sourcing initiative focuses on employing poor and disadvantaged individuals in the ITES-BPO sector, who would otherwise not have opportunities for sustainable employment. MNCs get the advantage of access to a large untapped pool of skills, from the bottom of pyramid, for an additional 20-30% lower cost. The additional savings envisaged from this pool, which had been ignored so far, makes the CSR initiative a viable business proposition, instead of being a mere charitable act. The training provided, not only prepares the poor & underprivileged people for immediate employment in the ITES-BPO sector, but also empowers them to work in a range of sectors in the local economy. Impact Sourcing has the potential to be a vehicle for releasing people out of the shackles of poverty. It is already being leveraged in places like Africa and Asia to contribute to the social goal. The concept can be deployed also in economically depressed regions in developed countries like US, suffering from

Part ● Two

AFRICA

AWAKENING

7 DESTINATION AFRICA: IS AFRICA

EMERGING AS A VIABLE OUTSOURCING

DESTINATION?

The unprecedented growth in the global sourcing of technology-business and knowledge services has led to the emergence of multiple geographies and countries as providers of these services. While the matured destinations like India, Philippines, Canada, Mexico and China address more than 85% of the demand for global sourcing of ITeS-BPO services, regional clusters like those in Eastern Europe, Africa and Latin America have also emerged. These locations offer certain advantages as nearshore providers to markets in Europe and US.

The ongoing economic downturn and rising cost of labor in countries like India, has prompted organizations in US and Europe contemplating global outsourcing to evaluate alternate service provider geographies. European companies, though relatively late to realize the benefits of outsourcing, have been pursuing an aggressive strategy over last few years. Many African countries, with the advantage of younger demographics and good English and French language skills, are realigning their focus to address this market shift. Governments in a number of African countries, with support from international organizations such as the World Bank and the Commonwealth Business Council have been proactively working towards attracting investment into the ITeS-BPO sectors.

While development has been initiated to build supporting infrastructure, revamp government policies and to create an enabling ecosystem to take advantage of the opportunity, negative perceptions of corrupt monarchies, civil wars, and health hazards needs to be addressed through a concerted branding initiative.

While the softer side of selling the region is addressed by comprehensive branding, it is important to analyze the maturity of the countries within the region in order to make an objective assessment of the business advantages and risks.

Vast Talent Availability

Second only to Asia, Africa provides access to a large pool of youthful workers. The majority of Africans are less than 25 years old. To illustrate, South Africa and Egypt are the leading nations, each contributing a labor force of over 20

a service delivery center in Morocco, and in addition, will work with the Central Depository of Morocco to build and deploy a modernized depository solution.

Regional Analysis

The global sourcing landscape in Africa can be broadly classified into two main regional hubs:

Northern Africa: The main countries involved in ITeS-BPO services are Egypt, Tunisia and Morocco; and

Sub-Saharan Africa: The leading countries being South Africa, Ghana, Kenya, and Mauritius.

The World Economic Forum’s Global Competitive Index ranks countries such as Tunisia, South Africa, and Mauritius favorably. In recent years, African countries are also ascending the list of competitive locations for global services.

Figure 4: Global Competitiveness Index; Source: World Economic Forum

A deeper analysis of the IT & BPO landscape of a few select countries allows for greater insight into the African sourcing market.

Egypt

Egypt boasts of a large multilingual workforce, reasonably good infrastructure and a competitive cost structure, which, by industry estimates, is 20 to 30 percent cheaper than India. Additionally, Egypt’s geographical proximity to

Europe and Middle East markets along with internationally accepted service providers are a definite advantage. Of significant importance to MNCs, Egypt also presents a lucrative opportunity in terms of a sizeable domestic market for penetration opportunities.

Over the past few years, IBM has leveraged the country's strong language skills by using its Egypt delivery center to service not only local but also French, German, Spanish, and American clients, taking advantage of the linguistic capabilities present within the country. Egypt also ranks favorably in the WEF Global Competitiveness Index in areas such as low taxation, time required to start a business, wage flexibility, and local market size. In terms of disadvantages, Egypt has had some challenges in terms of political unrest and maintaining its macro-economic environment with high fiscal deficits and inflation.

The Egyptian government has invested in a Smart Village, a 600-acre ICT Business Park located 20 minutes from Cairo. The selection of Cairo as a strategic location is a prudent one, as Cairo has long been the hub of education, not only for Egypt, but also for the Arab world. Al-Azhar University, Cairo University, and Ain Shams University are the three major universities in Egypt.

Many multinationals including IBM, Wipro, Satyam, Vodafone, Teleperformance, Microsoft, SQS, Google, and Orange Business Services have established operations in Egypt in past. The reasons for so many service providers to have established centers in Egypt are still present: price points remain low relative to onshore countries, large talent pool, and government investments in technology/network infrastructure are still intact. However, the political unrest and the negative sentiment will impact Egypt’s image as a

preferred location for outsourcing, regardless of the country’s above-discussed strengths.

Tunisia

Tunisia, with a size equivalent to the state of Georgia in the U.S., is one of the northernmost countries on the African continent. Its unique geographical location makes it a gateway to Europe, Africa, and the Middle East. Tunisia is one of the most competitive economies in the region as it compares favorably with developed economies in Europe and elsewhere. According to the World Economic Forum’s Global Competitive Index, Tunisia is the highest ranked country in the region. Ranked 36th, it is ahead of countries such as Italy, Portugal, India, and South Africa to name a few.

18 NURTURE LOCAL OR

ATTRACT GLOBAL FIRMS

The last couple of years have been good for Latin America, with unprecedented growth in the outsourcing sector and significant M&A activity resulting in entry of several large global IT and BPO companies into the region. Most U.S. customer surveys rank Latin America as the third most desirable destination for outsourcing (after India and China), and global rankings of countries in the region have been improving consistently.

The latest 2011 AT Kearney Global Service Location index ranks four South American countries i.e. Mexico, Chile, Brazil, and Costa Rica among the top twenty. While Costa Rica is a new entrant to the top 20, others have held on to their positions and Mexico has leapfrogged five spots to be within striking distance of perennial leaders India, China and Malaysia. This is a clear indicator of Latin America’s rise as a prominent player in the global sourcing arena.

On the M&A front, big ticket deals like Apax Partners‟ USD 950 million

investment in Brazil’s TIVIT and Capgemini’s USD 560 million purchase of

55% stake in CPM Braxis are helping the region rapidly achieve critical scale. While all these positive developments may point towards robust growth, they also underscore some looming issues that could potentially stall the growth or make it less equitable for the concurrent economic and social development of the region. Majority of the growth in Latin America’s BPO sector has come on the back of demand for Spanish and bi-lingual services.

However, the IT outsourcing sector has lagged behind BPO in most countries, barring Brazil and Chile. Abundant availability of ERP and industry specific skills as well as a large domestic market has resulted in a vibrant IT outsourcing industry in these two countries. The reason for the region's success – strong near-shore bilingual capabilities – could also become its Achilles heel. The challenge for Latin America is whether the industry is able to leap beyond the stereotypical image of low cost Spanish-centric services, and stake its claim as a global player for complex solutions and value-added services that would rival the likes of India, Canada, and Ireland. This is essential for the long-term sustainability of outsourcing sector in the region.

Local Companies for Global Role

Let us look at some startling facts about the state of the outsourcing sector in the region. Latin America has very few homegrown service providers of significant global scale, with only five companies booking revenues of $250 million and above, and none with revenues over $1 billion. Service delivery maturity still lags industry benchmarks, with only a handful of companies possessing CMMi Level 5, eSCM-SP, or Six Sigma accreditations. In fact, IAOP's Global 100 list of providers has less than 10 companies from the entire region.

While revenue is a function of scale, quality and service level maturity is an attribute that should be integral to service delivery at any size to ensure greater customer confidence. Latin American providers have excelled at service quality; however, they have not invested heavily in embedding process rigor or automation in their operations. This has resulted in challenges with scaling up and prevented many providers from taking on larger deals requiring significant upfront investments or economies of scale.

Increasing Service Value and Diversity

Economic conditions and a maturing market has brought about shifts in buying patterns, as clients now demand domain specificity, bundled solutions and transformative capabilities. Global providers have morphed their service offerings to address these needs, converging ITO and BPO as well as adopting a solution-centric approach. Mid-size providers in Latin America will need to evolve from offering a buffet of services to engaging in a solution-oriented approach, to thrive in a more mature market. This requires a higher discipline of service delivery and a consultative selling strategy. For many this may be a tough proposition, hence opening the door to collaborate with or be acquired by a larger global firm.

Another area that Latin American providers need to focus on is in the development of higher value services. Having become pigeonholed as a destination for contact center or generic IT services, the region has to do a better job of provisioning services that provide a higher yield on resources. This will prevent labor saturation and enable an upward career path for the workforce to aspire.

While a few countries such as Costa Rica and Chile have done a good job of steering its industry in this direction, others continue to pick the low-hanging fruit of a rapidly eroding tree. Development of higher-end IT and BPO services requires a significant investment from providers in training, up-skilling, process, and technology enhancements. Latin American providers can leverage the near-shore advantage to jump on the rapidly emerging opportunity for cloud business services.

This is an area where offshore providers face challenges due to infrastructure and latency issues, hence offering a window of opportunity. Another area of specialty where Nearshore providers have excelled is with Agile computing,

EDITORS

Kevin S. Parikh Esq.

Kevin Parikh is the Global CEO and Sr. Partner of Avasant. Mr. Parikh specializes in IT and business process (BP) outsourcing, contract and service level negotiations, joint ventures, captive centers, strategic management, business risk evaluation and software licensing. Mr. Parikh has also worked closely in support of government clients that seek to increase foreign direct investment. He has been an advisor to the U.S. Government, the World Bank and other United Nations funded projects. Over his career, Mr. Parikh has been involved in more than 300 outsourcing and business transactions.

Dr. Pradeep K. Mukherji

Dr. Pradeep K. Mukherji is the global lead of Avasant’s “Globalization” Practice. He regularly

advises the United Nations, the World Bank and governments in emerging countries on ICT sector development, capacity building, and investment promotion. His insights and understanding of buyer-supplier relations in the global sourcing market enables him provide a unique perspective on the risks and value in outsourcing Business and Knowledge services.

As a leading Management Consultant and Thought Leader on ICT sector, he is a sought after speaker in global conferences. Dr .Mukherji holds a Masters’ degree in Operations Research and PhD in Management Science & Expert Systems.