In an article from the most recent issue of CX Insight magazine, we focused on several emerging Business Process Outsourcing (BPO) markets that organizations are considering, including Jamaica, Nicaragua, Guatemala, and Egypt. There are quite a few emerging markets to consider as brands continue to assess their outsourcing needs as we head deeper into 2021, so as bonus coverage, we’re offering a glimpse into yet another market — Colombia.
In the wake of COVID-19, some organizations are looking at “nearshoring” versus “offshoring” solutions to meet their needs. Mexico has long been an attractive option in Latin America for many reasons, with Colombia now also climbing in its popularity and growth.
Colombia has a population of 50 million people with a young, well-educated, and technically skilled workforce. It is the third largest labor force and the fourth largest call center and BPO market in Latin America, valued at $280 million with over 230,000 customer contact center workers. There are over 200 foreign companies with current operations in Colombia. In 2016, Gartner Inc. ranked Colombia as one of five destinations in Latin America to offer Business Process and Information Technology Outsourcing, highlighting the country’s bilingual labor force and salary competitiveness within the sector. In addition, Everest Group, the global consulting firm, mentioned Colombia as an optimal market for finance and accounting outsourcing (FAO), legal process outsourcing (LPO), and BPO. Likewise, the company asserted the country’s strengths for its commerce, agriculture, and internal market growth, which complement each other making Colombia an investment destination.
Below are additional benefits to consider when looking at Colombia as an outsourcing destination, as well as some challenges to keep in mind:
- Foreign Investment and Incentives – In general, Colombia aggressively pursues foreign investments by offering tax incentives, Free Trade Zones, and other hiring and investment benefits. The Double Taxation Agreement that is in the works between the U.S. and Colombia is expected to bring more direct foreign investment into the country. According to the National Directorate of Taxes and Customs (DIAN), this agreement establishes rules to avoid double taxation between the two countries and is expected to be in place in the first half of 2021.
- Workforce Regulations and Incentives – Colombia offers flexible labor regulations which makes hiring, as well as flexible working hours, more manageable. Additionally, the Colombian government provides incentives for the hiring of young people for the first time by implementing regulations including one that provides 120% of salaries paid to employees (under 28) as a tax deduction.
- Technology and Infrastructure Investment – Colombia has a growing software and IT services industry in various verticals, with a commitment to digital transformation by 2022. It is currently one of the main technology-based service providers in the region, with Medellin known as the “Silicon Valley of Latin America.” Medellin is the only Latin America city, other than Sao Paulo, Brazil, to rank as one of the “Top 25 Most Innovative Cities in the World.” From an infrastructure standpoint, Colombia has 11 submarine communication cables in operation, ranking second in the region for highest number of cables, allowing for excellent international connectivity and fast data transmission and stability.
- Educated and Technical Labor Force – Colombia has a goal of being a global technology leader, which begins with a commitment to education, spending 4.4% of its Gross Domestic Product (GDP) on education. Colombia has one of the largest technology careers graduate populations compared to other Latin American countries with over 30 award-winning universities and leading technology centers. According to the QS World University rankings, four universities ranked in the Top 500 in the World and 12 are among the Top 100 in Latin America. It is reported that each year over 13,000 students graduate from Colombian universities with engineering and IT degrees, and over 14% of the university students graduate in areas related to technology.
- Proximity to the U.S. – For U.S.-based companies, Colombia offers a near-shore, convenient location in the Central and Eastern Time Zones with many direct flights from major US cities to both Bogota and Medellin.
- Bi-lingual Support – With English training and certification programs in place, Bogota in particular offers bi-lingual support including English capabilities. Ninety-eight percent of the shared service centers (SSCs) offer services in Spanish, 40% in English, 20% in Portuguese, 3% in French, and 1% in German. The Colombian government is committed to strengthening English proficiency with initiatives, such as the Foreign Language Competencies Development Program, with the goal of making the country bilingual by end the of 2025.
- Cost savings – It is reported that cost savings average 40-50% compared to U.S.-based companies.
- Possible Cultural and Language Barriers – Although bi-lingual capabilities are indeed a benefit, English is not the native language so could present challenges at times until the country achieves its goal. Additionally, the communication style may be more subtle and indirect, making negotiations and ongoing management an adjustment for some organizations.
- Preconceived Negative Perception – Due to previous history of reported violence and unrest in the country, there could be some challenges in overcoming those perceptions. However, these perception issues seem to be waning.
It is clear to see why Colombia is an attractive nearshoring option for many organizations due to the country’s investment and commitment to the industry, government support of foreign investment, a young and educated workforce, technology infrastructure and connectivity, bi-lingual capabilities, and proximity to the U.S. As with any outsourcing destination, it is not without its challenges so organizations should weigh their needs in considering their options.
Blog post, written by: Execs In The Know