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CX Insight Magazine

October 2021
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in this issue

Delivering a Top-Notch Customer Experience For DevelopersEmpowering Customers to Take Control of Their JourneysBPO Site Insights: Up and Coming BPO Locations Around the Globe — Part 2The Three M’s of Vendor ManagementThe State of Digital Customer Experience in 2021CX Trends for 2022Transforming the Exceptional into the Predictable Back to Table of Contents

BPO Site Insights: Up and Coming BPO Locations Around the Globe — Part 2

By: Execs In The Know

A common question among customer experience (CX) executives when outsourcing is, “Which markets should I consider for my sourcing strategy?” The answer is, of course, “It depends,” — especially as the industry continues to evolve, organizations’ priorities and requirements change, and regional capabilities expand. It is challenging to keep up with, so Execs In The Know (EITK) aims to provide updated information about emerging or growing markets. In 2020, EITK published articles highlighting emerging Business Process Outsourcing (BPO) markets including Jamaica, Egypt, Nicaragua, Guatemala, and Columbia. As discussed in those articles, India and the Philippines continue to be attractive outsourcing destinations. But as companies assess their short- and long-term sourcing needs, other markets are worthy of consideration. In this article, insights into the benefits and challenges of three additional markets are covered — Brazil, Malaysia, and Poland.

BRAZIL

While Brazil as an outsourcing destination may not be emerging per se, it continues to be an attractive market for many organizations. It has the largest economy and is the most mature South American BPO destination, with its infrastructure and capabilities continuing to evolve. AT Kearney conducted a study which ranked Brazil fifth in the top outsourcing countries based on financial attractiveness, people skills, and business environment index. Brazil’s BPO market is valued at $4 billion and estimated to grow to $5.1 billion in 2022, with 1.5 million call center workers. In addition, the outsourcing law that was passed in 2018 makes outsourcing to Brazil easier to navigate as Brazil now has the freedom to provide many outsourced services to global organizations. Considering the market size and maturity level, Brazil offers many benefits as well as some challenges highlighted below.

Benefits

  • Government investment and infrastructure – The Brazilian government offers a host of federal benefits and tax incentives to appeal to call center industry investments. In addition, they have made significant investment in boosting the country’s business ecosystem to support the expansion of the BPO industry. These measures have proven successful in driving economic growth so these will likely continue. In fact, Brazil has over ninety technology parks with advanced digital infrastructures to support its growing IT and BPO sectors.
  • Proximity to the U.S. – For U.S. based companies, Brazil offers a near-shore, convenient location just one hour later than the Eastern Time Zone with plenty of flights from major US cities, facilitating ease of management and involvement
    as needed.
  • Multilingual capabilities – While Portuguese is Brazil’s native language, BPO providers also offer capabilities in English, Spanish, and French. While English-speaking workers are still in high demand, the growing number of companies outsourcing to Brazil has accelerated English proficiency among workers.
  • High maturity level – As previously mentioned, Brazil is the most mature of the Latin America BPO countries, making it an attractive option with little to no growing pains. Additionally, it is reported that employee turnover is one of the lowest in the Latin America region, an obvious benefit for those considering Brazil as an outsourcing destination.
  • Skilled talent pool – The Brazilian workforce is technically savvy and highly educated, with over half of the 209 million population being of working age and 85% under the age of 55. Considering that there are currently 1.5 million call center workers, the potential labor pool is strong and sustainable.
  • Cost savings – There are significant cost savings compared to U.S.-based companies, but as noted in the challenges below, these savings depend on many factors,
    including location.

Challenges

  • English proficiency – While English is becoming more common and the country offers multi-lingual capabilities, it is still a second language. It is recommended to understand some Portuguese to ensure communication with leadership is effective.
  • Cultural differences – Brazilians prefer face-to-face interactions so ongoing management may require more onsite involvement than other near- or offshore destinations. Additionally, Brazilians tend to hold back on offering critical opinions, so it is important to develop a solid relationship from the beginning with clear expectations about the partnership.
  • Cost consideration – Like many countries, the location chosen in Brazil will dictate costs. For lower budgets, outsourcers in smaller cities are more appropriate. Otherwise, companies in technical parks in major hubs such as Sao Paulo or Rio de Janeiro will be a good fit. It is important to understand total cost of resources. For example, Brazilian employees start with a 14-month salary which includes one extra month of vacation pay plus a bonus. There are also additional taxes, transportation, meal subsidies, and retention costs just to name a few.
  • Complex laws – It is important to understand the laws surrounding outsourcing relationships as they can be complex to navigate.

For more information about Brazil’s BPO industry, refer to:

MALAYSIA

While the Philippines, China, and India remain top outsourcing destinations in the Asia-Pacific region, Malaysia continues to grow as a contender. Its share of the APAC BPO industry is expected to grow from 1.7% to 7.9% in 2021. Other noteworthy statistics include the fact that AT Kearney ranked Malaysia at three on their 2021 Global Services Location Index (GLSI). And in 2020, Malaysia was ranked 12th of out of 190 economies on the Ease of Doing Business Index, 25th on the IMD World Competitiveness Index, and 34th on the 2020 global connectivity index. These reasons, plus the benefits in the following bullets, make Malaysia worthy of consideration depending on business requirements. With these benefits come some challenges as well, also included in the following bullets.

Benefits

  • Policies and infrastructure – The Malaysian government has instituted pro-business policies to support the country’s BPO sector, in addition to its commitment to digital innovation. In fact, many BPO companies are driving digital transformation initiatives such as artificial intelligence (AI), big data, and robotic process automation (RPA) to provide even higher value services. Cybersecurity is also a high priority, with some of the strongest IP and cybersecurity laws in Southeast Asia. The government’s commitment to improve digital connectivity is evident through its National Fiberization and Connectivity plan, which further enables the country in supporting remote working models. The Information and Communication Technology (ICT) sector boasts an estimated $25 million budget in support of all digital infrastructure and capability development. And the Ministry of Housing and Local Government launched the Malaysia Smart City Framework, which aims to transform urban areas into smart cities to support global organizations, including the BPO industry.
  • English proficiency – Improving English proficiency among students and workers is a priority, with several programs to support that goal. For example, the Malaysian education ministry launched a 10-year initiative (2015-2025) called the English Language Education Reform. Its goal is to improve English beginning in preschool. Due to these efforts, Malaysia is currently ranked third on the English proficiency Index, ranked just behind Singapore and the Philippines.
  • Skilled talent pool – About 15 million of its 32 million citizens make up the country’s workforce, of which over one million are ICT professionals. In the 2000s, IT outsourcing surged in Malaysia which contributed to the growth of the country’s labor pool. Since then, there have been numerous educational initiatives to upskill the country’s workforce. For example, the Malaysia Digital Economy Corporation (MDEC) provides university students and young workers training on digital skills to add more skilled workers and grow the country’s BPO industry.
  • Cost savings – Compared to the U.S., the cost of living and salaries are less than the U.S. and Europe, providing cost savings to global organizations.

Challenges

  • Political instability – A concern for investors and global organizations doing business with Malaysia is political instability and uncertainty. This is something to be cautious of and worth considering in how it could impact an outsourcing relationship.
  • Cultural factors – This is not a challenge per se, but something to be aware of and align operating procedures with when working with any country which may have unfamiliar cultural norms and practices. As a conservative Muslim country, there are certain business and social practices which leaders must be aware of and follow to ensure a smooth working relationship.
  • Workforce scalability – While the labor pool is young and growing, it could hit some limits as BPO and IT outsourcing continues to grow substantially.

For more information about Malaysia’s BPO industry, refer to:

POLAND

Poland, located in Central Europe, is an increasingly attractive outsourcing destination. In fact, it ranks 14th (up 10 points from 2019) on the AT Kearney Global Services Locations Index. As of 2019, there were over 1400 business service centers (including BPOs) with over 300,000 jobs (up 43% since 2016) across 10 cities. With a population of 38 million, Poland has a consistently stable economy focused on innovation and education, specifically in the technology sector. Furthermore, Poland ranks 40th in the world for ease of doing business. Its scalability, stability, diverse language skills, technical labor pool, and other benefits make Poland a destination worth considering depending on needs.

Benefits

  • Security – From a risk perspective, Poland represents extremely low risk compared to other countries. According to the Global Cybersecurity Exposure Index, Poland ranks 16th in Europe and 22nd in the world, which is better than China, Israel, or Mexico.
  • Young, educated, and tech savvy talent pool – The educational system in Poland places a great deal of importance on education, providing students the ability to receive free education for 22 years. There are 102 universities in 59 Polish cities, graduating 60,000 students each year.
  • Bilingual capabilities and English proficiency – Poland is a multi-cultural country, with the ability to support many languages including English, Italian, French, German, and Spanish, just to name a few. Poland is also considered to have elevated levels of English speakers as English proficiency is standard for graduates (where more than 50 languages can be studied in school) and workers alike. The country ranks 11th globally on the 2019 English Proficiency Index, and the best in Central–Eastern Europe.
  • Location – While not a “nearshore” option with time zones like the US, it is only six to seven hours ahead of East Coast time, making it manageable or even preferable to other locations. Plus, if one is outsourcing to Poland to support various countries and languages across Europe or Asia, it is perfectly suited.
  • Cost savings – There is a cost savings associated with outsourcing to Poland, even with multilingual and experienced workforce, but this is also a challenge as the savings may not be as high as other
    countries deliver.

Challenges

  • Location – Poland is in Central Europe, and while it is closer than some outsourcing destinations, if nearshoring is a desire, the distance and time zones should be considered.
  • Costs – The cost of operating in Poland may be more than other countries, but still represents a cost savings, especially if an educated and multilingual workforce is a priority, and a need for support of more complex transactions.
  • Labor pool – While the labor pool is young and growing, with increased sector growth could come competition for labor. However, with additional cities and locations being developed in the BPO and SSC industry, it may or may not be an issue depending on specific needs.

For more information about Poland’s BPO industry, refer to:

Stay Head of the Outsourcing Curve.

The BPO industry is growing in many countries across the globe, and many of them are investing heavily to position themselves as a leader among many competing markets. As always, it is important to carefully determine your organization’s unique needs and conduct the due diligence across many factors to determine which emerging (or mature) market is right for your organization. The landscape is changing quickly, so staying updated on what each market (and partner) can provide is important for any long-term sourcing strategy. Business requirements have changed dramatically for most organizations over the last 18 months, and capabilities have changed for most BPO partners with accelerated digital transformation strategies and work-from-home options. Considering all this, it might be a good time to review existing partner portfolios, capabilities, and roadmaps to ensure you have the right partner network for your own
strategic objectives.

 

Sources:

  1. https://execsintheknow.com/magazines/january-2021-issue/bpo-site-insights-up-and-coming-bpo-locations-around-the-globe/
  2. https://nearshoreamericas.com/brazil-latin-america-kearneys-index-sao-paulo/
  3. https://www.reuters.com/article/us-brazil-outsourcing/brazils-top-court-upholds-unrestricted-outsourcing-idUSKCN1LF2T5
  4. https://www.kearney.com/digital/gsli?utm_source=PRNewswire&utm_medium=pr&utm_term=DT&utm_campaign=2021GSLIPressRelease&utm_content=
  5. https://www.doingbusiness.org/content/dam/doingBusiness/pdf/db2020/Doing-Business-2020_rankings.pdf
  6. https://www.businesstoday.com.my/2019/09/27/malaysia-rises-one-spot-in-world-digital-competitiveness/
  7. https://www.huawei.com/minisite/gci/en/country-profile-my.html
  8. https://www.ef.com/wwen/epi/regions/asia/
  9. https://www.kearney.com/digital/article/?/a/the-2021-kearney-global-services-location-index
  10. https://www.statista.com/statistics/1012604/poland-ease-of-doing-business-ranking/
  11. https://passwordmanagers.co/cybersecurity-exposure-index/
  12. https://www.ef.com/wwen/epi
 

Is Outsourcing a focus for you?
Considering joining us for our next Outsourcing Briefing on December 9, 2021.

Learn more: https://execsintheknow.com/events/outsourcing-dec2021/

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