By Matt Jackson and Shannon Curley
The art of unlocking the potential of a country for call center operations can be directly tied to the operating model that is implemented in that country. The model must seek to optimize and enhance the capabilities of the market and reduce or accommodate the challenges or constraints that limit the market’s potential. Success lies in the ability to navigate around the country-specific challenges presented to an employer contemplating market entry and direct investment. This article focuses on Mexico to illustrate some of the typical business model considerations that a company must look at when expanding to a nearshore or offshore market.
The Case of Mexico: Nine years since Y2K, questions concerning the capabilities of nearshore and offshore markets being able to support call center activity have been mostly answered. While the evolution of “what” (business processes) are supported “where” (country and/or city) continues to undergo refinement, it is fair to characterize the ability to conduct work from an alternate country as proven.
Early adopters of nearshore and offshore markets utilizing both captive and outsourced models continue to seek new opportunities for where to support business operations to serve high cost countries (such as the U.S., the U.K., and Germany). While Asia – and in particular India and the Philippines – will continue to see significant call center investment activity, there is recognition that locations in the Latin American theater have merit for such activities even when the geography is typically unable to provide the same structural costs as found in Asia. Latin America is finally experiencing increased levels of direct investment because of an ongoing need for more global delivery capacity, desirable English language capabilities, bilingual capabilities, and a desire to limit travel. Mexico is one such location that has received increasing attention in recent years by both Fortune companies and global outsource service providers. It is also a location that reflects some of the unique challenges a company will encounter when expanding into a country where English is a second language.
Who: First and Foremost, Sourcing Language: The limited availability of bilingual professionals dictates that sourcing English capabilities is the primary and fundamental driver for customer service operations in Mexico. This limited pool of talent mandates a clear understanding of “who” in Mexico possess the language skills required to support English operations.
Candidates for English customer service positions can be divided into two main profiles: university students and bicultural individuals that have exposure to English beyond an in-Mexico educational setting. Each profile possesses unique characteristics, including economic background, English proficiency, career objectives, and physical location.
Where: Few Options, Many Trade-Offs: There are two main considerations concerning “where” in Mexico to establish operations: macro considerations and micro considerations.
Macro considerations are related to the selection of a city in which to support call center operations. Considering both geographic and population size of Mexico, there are surprisingly relatively few locations that are capable of supporting call center operations in scale. Options can be reduced to a handful of cities able to provide a concentration of the candidate employee profiles discussed above.
Potential locations can be classified in the following three groups: established, emerging, and pioneering. The difference between these classifications is due to the number of call center operations in the market, the competition for talent, and the availability of talent. Mexico City and Monterrey are two examples of established markets supporting companies such as Teleperformance, Atento, HSBC, Client Logic, GE, Chrysler, and Teletech. Pioneering markets include cities such as Chihuahua, Aguascalientes, and Hermosillo.
Micro considerations are related to the selection of where within a city to support an operation. In addition to identifying a city able to support customer service operations, it is also necessary to recognize that the exact location of a facility within a city is a fundamental contributor to the success of an operation. Due to the unique characteristics of the employee profiles that will staff an operation and commutation capabilities and patterns, two main considerations require contemplation when choosing a site for implementation: proximity to talent and access to the site. For example, university students typically do not own vehicles, and as such, a key requirement for a facility is access.
When: Timing Market Entry – To Pioneer or Not to Pioneer: The limited number of locations able to support significant bilingual operations creates a fundamental trade-off for companies seeking to establish operations in Mexico. This trade-off can be characterized as choosing to “pioneer,” (entering a noncompetitive market that has smaller quantities of available talent) versus entering an “established” market (characterized by a bilingual talent market but also higher levels of competition for the talent). It is important to note that Mexico lacks a location that could be considered “low-hanging fruit,” an undiscovered talent-rich market that is sustainable for an extended period from a labor perspective.
How: Designing the Right Model: There are many choices to be made in designing the right business model in Mexico, but all considerations should be focused on how to attract and retain talent. A successful business model will take the following into consideration: targeted employee profile (university student versus experienced professional); compensation (standard monthly wage versus pay-for-performance model); benefits (traditional fringe benefits versus cash rewards); flexibility (part-time schedules versus full-time); pipeline development (no university interaction versus active collaboration); image (low versus high investment); and implementation (existing facility versus build-to-suit). Each country and each city provides a range of options within each consideration, and it is important for a potential investor to identify the exact combination that will create success.
What: Anticipating What You Will Encounter: Depending on the business model designed to support who, where, when, and how, Mexico will provide a range of potential operating environments. While nothing in Mexico provides an easy solution for bilingual customer service needs, an accurate understanding of the market is required in order to be successful. There are six key operating considerations for call center operations, and a company must understand what conditions are likely for each consideration, given their business model. Considerations include labor costs, anticipated turnover, ability to scale employees, degree of competition for talent, crime risk, and total capital investment required.
In Conclusion: Developing an operating model appropriately aligned with a country-specific success formula in a nearshore or offshore market notably improves the probability of success. Unfortunately, many companies do not conduct the appropriate amount of due diligence before establishing operations in a city that is new or unfamiliar to the project team. A typical consequence is an unsustainable or significantly challenged business proposition, increased one-time costs, delayed return on investment, challenges in scaling and sustaining operations, and possibly a generally less-than-satisfactory experience in the market.
Evidence indicates that appropriate due diligence will typically result in the development of a customized country specific business model that contributes to the achievement of company business and financial and operating objectives.
Matt Jackson is consulting partner in Cushman & Wakefield’s Business Consulting Group, with fifteen years experience in assisting corporations with the global configuration and optimization of corporate operations to achieve revenue, margin, and innovation objectives. Shannon Curley is a consultant in Cushman & Wakefield’s Business Consulting Group and has experience with both global and domestic clients.
[From Connection Magazine – December 2009]