Picking Locations for BPO

A reader, Phil, recently asked about which geographies are particularly strong in certain skill sets for BPO (see my post If not China, then where?)

 Before I go on though, there’s an important consideration that is making previous BPO decisions look bad, and my case for diversifying your portfolio of locations look good! The slide of the dollar relative most currencies is making offshore expensive! In fact, my view is that if the US dollar slides another 10-15% against the Indian Rupee, Euro, Yen, Real Yuan etc., a perfectly plausible scenario, the US will be hard to beat as a low-cost location!

 A good strategy, especially for larger firms, is to split offshore work across a couple of currency-type locations: one that moves with the dollar (such as Mexico, Costa Rica, Panama, Chile, Australia) and one that tends to move against the dollar (such as India, Europe, China, Brazil, Russia, Canada). Coupled with flexible enough agreements, volume can be shifted from one to the other as currency fluctuates. There are lots more considerations that should go into picking a location, but currency and projections for its behavior are frequently ignored.

At the end of the day, most go abroad for either labor arbitrage, to get closer to a group of customers, or access to talent they would not have otherwise. Diversification applies to all three, but its easiest for the arbitrage part.

 I can only comment from my experience and personal observations, but here is what I see:

Canada: Call centers (cost advantage has all but disappeared due to currency change)

India: Application Development, transactional BPO, research, medical,

Mexico: Most untapped relatively mature market–lots more that could be done here. Check out Neoris‘ big push here. Lots of good people to be hired in Mexico.

Central America: Costa Rica and Panama lead, with good engineering, IT, HR, and call center services. Because they are both small and Costa Rica started first, I would say right now Panama has more upside.

Brazil: Great engineering and IT talent. Lots of good business and engineering schools to recruit from. Getting better with English fluency by the day. On the downside, a super-strong currency and small fiery hoops you have to jump through to actually set up shop there.

Chile: Good business services in general, more on the BPO side. Stronger in F&A.

Argentina: Good IT capability and availability. One of the few very favorable exchange rates relative to the USD

Eastern Europe: Very well established around F&A, some HR and IT many other types of BPO, but expect to pay a premium.

South Africa: I am really impressed. I have only seen F&A so far, but what I did see was very cool. Interesting time zone alternative to India, plus a great place to visit if you can!

Rest of Africa: some very credible data entry and processing capability popping up here and there. Outrageously inexpensive on a per-hour basis, but infrastructure is still both challenging and expensive.

China: Very tough labor market all around. Focus your efforts here on serving the Chinese market and you will be OK.

Philippines: Traditional strength in IT and call center being caught up  by other locations.

Singapore: a credible knowledge hub for the region, maybe the world really soon.

Now for a different opinion. I don’t know much about some of these places, but if you look at where the Indian services firms are diversifying to, that’s a really good clue from people that know the “remote delivery” BPO business really, really well. TCS, the most “global” of the Indian majors, has gone to Hungary and Uruguay and a host of other countries. Others are in Brazil, Malaysia, Indonesia, and Sri Lanka, China, and Mexico. And I am sure there are a few service centers in areas I haven’t come across yet.

To get started researching your destination, the CIA’s World Factbook is a good place to start.

Quality resources are scarce everywhere. Remember to keep your eye on the dollar to know when its time to “come home”, or better yet, to diversify for currency risk.

Which locations have you had success with? For what disciplines and skills?