Boat Share
Roundtable: Shared Services & Outsourcing In Latin America
She may not have the same profile as South Asia or Eastern Europe, but Latin America is becoming increasingly popular destination for organizations seeking to establish shared service centers, serving the domestic markets or as part of regional or even global strategies for shared services. Moreover, along with that industry growth in captivity of Latin America became the focus of increased interest from major outsourcing providers, whose entry had knock-on effects across the board. Throw in this already volatile mix the current economic instability and is easy to see why the activity is making waves in the region and beyond through shared services and outsourcing space in 2009.
The Shared Services & Outsourcing Network convened a panel representing practitioners, vendors and consultants to look at the current level of maturity the Latin American market and to examine how – and if – the economic crisis affecting much of the rest of the world economy is impacting on the operations in the region.
Present:
Bao Laura Castro
CR Controller FSSC
Intel Corporation
Esteban Carril
Director of Operations of America Latin Finance
EMC Corporation
Mauro Mezzano
Partner
Vantaz Consulting Group
Ricardo Neves
Global Sourcing Leader at PwC South America
PricewaterhouseCoopers
Son: I think the first question we should look at is: is it right to talk "service shared in Latin America "at all? Latin America region is too large geographically and in terms of population, which has less linguistic diversity that, for example, in Europe, but there are still large differences between, say, Brazil and Costa Rica. To what extent is it really possible for organizations – captive or BPO – to adopt a truly regional approach in Latin America? It is impossible to avoid having significant resources in each country?
Ricardo Snow: This is a region different from other regions of the world. If you talk about intra-regional services, you are talking about two main languages that are in some way close to each other, you also have an approximation of the total crop, and usually what you see with multinational operations or regional here is that the larger countries like Brazil, Argentina, Mexico, Chile represent a significant volume of transactions. Normally, if you look for most global companies and multinationals in the region, they have 50% or even 75% of its operations in two or three countries at most – and then 10, 12 other countries where it has operations, but they represent only 25% or less of their business.
This gives a challenge when creating a center regional, because there is a scale for bigger countries which is not present in the minors – and I've seen here is a blend of fully managed centrally shared services and a smaller local presence in small countries to ensure the scale is reached and the right support is done at regional level. There are companies based in Brazil I've seen that regional shared services – such as the brewer AmBev, now linked with InBev and AnhauserBusch, which has a large regional shared services based in Sao Paulo, serving not only the operations in the region but also the firm's operations in Canada for Labatt's operations. Unilever also created an HR Shared Services – and has just sold its finance shared services to Capgemini in the region.
In short, from the great operations that I saw, as I said I saw a mixture of some centralized services and some small countries combined with local services.
Esteban Carril: We are serving Argentina, Chile, Peru, Mexico, Colombia, Venezuela and Brazil. My team is divided into three functional areas in both countries. A team is working in Sao Paulo, Brazil, the other two functional teams are working here in Argentina. We run accounts payable, accounts receivable, credit and collection, billing, cash applications, payroll, commissions and bonuses. True, not divided linguistically, we found that had some good skills in Brazil to develop the credit and collections department there, so we decided to leave the group of existing services provided there in Brazil to provide services to the rest of Latin America. We wanted to have three functional groups, but we wanted to try to keep the same qualified people working and we do not want to have to move them from one country to another.
Bao Laura Castro: We are part of an overall strategy. We currently have two very large financial shared services center at Intel. One is located in Malaysia and the other is located here in Costa Rica, markets that are supported from Costa Rica are Canada, the USA, Mexico and Costa Rica, Colombia, Venezuela, Argentina, Chile and Brazil.
Sson: Laura and Esteban, who both come from large global organizations with significant presence worldwide. Do you think it is still the biggest companies that are creating shared services in America America or the minor, or perhaps mid-market, organizations also become involved?
Laura Castro Bao: I think the market average is coming. I was able to go to [sson Shared Services in Latin America 2008 in an event] Chile last year, and also attended the conference in Mexico City sson, and I was very surprised at the number of Latin American multinationals that have moved to this journey, or are in the process of doing so – especially in Mexico where I think many companies are looking at it, even with shared services in Mexico itself. The concept is right there, because they know they can reduce costs and produce more quality with shared services, and even in Mexico if the companies are developing shared service centers.
Mauro Mezzano: Actually we have seen this change as two or three years ago. In the beginning of many multinationals have begun to establish common services in the region, but when I went to conferences in Miami and Orlando were not many Hispanic-owned businesses present. Then in 2004, 2005 largest companies and local groups started with the concept. Now, smaller companies increasingly are doing so, some would call it really does not implement shared services, but they do and they take center some concepts of shared service centers, and perhaps a redesign process. The influence of shared services is spreading through many more companies than before.
Ricardo Neves: I saw an increase of interest: among midsize businesses is less regional. What I have seen is between big companies, they did a lot of streamlining in each of the countries where it operates, and a lot of discussion about regional shared services. What I saw in the mid-market, specifically in Brazil, there are still doubts about "the country" shared services, if you know what I mean. It's to ensure they leverage their operations locations, and then as a second stage – especially with some of the systems of work – is something of an agreement made to create something regional: when you have a systems platform regional, for example.
Sson: Let's change the focus a little and take a look at the outsourcing market in Latin America. Recent years have seen the entry for the region of some major global players – in particular some of the major Indian suppliers. What was the impact it had on the market – and companies are running services shared?
Esteban Carril: In my experience in running a shared service center that I have been trying to find different ways of doing things, and find suppliers that can offer services more efficiently and economically than we do it ourselves. When it comes to outsourcing sector, I think in Latin America things are still developing. When it comes to outsourcing, it is important to see how companies are well-organized, and how they provide services in several countries – and I see the challenge for many large companies is that they are still working as independent companies in each country, and not really organized regionally in order to service the multi-country shared service centers.
I think it's one of the key points that I I have found. Another key point is that some companies are regionalized, but unfortunately they could not have presence in all markets, so it becomes a problem in terms of finding a regional solution for outsourcing single meet our needs.
Bao Laura Castro five years ago companies offer service outsourcing has come to Costa Rica. Since then, these companies have grown, for example, HP now has about 8,000 employees. Although I can not be specific about their services or regions they serve, these companies look for people who speak Spanish, English, Portuguese, French, Italian – Even Chinese. We do not work specifically with an outsourcing provider at the moment – but that periodically re-evaluate our current strategy.
Ricardo Neves: One of the characteristics I have noticed a movement in the area of outsourcing in Latin America is that there were a lot of foreign exchange fluctuation between the dollar and real, and the U.S. dollar and other currencies, and I saw some discussions on the revision of the contract – especially for providers of services – from both sides: if customers want to take advantage of that, or even discuss the relocation of some work, or if the suppliers are saying that a cost increase is related to fluctuating currency putting pressure on its margins. Definitely, the fluctuations have been one of the biggest topics of discussion in the region.
Sson: OK, let's move on and solve the great problem of the moment, and perhaps many times to come: the financial crisis and global economic slowdown and its impact on shared services and outsourcing industry in the region. Ricardo, what do you see as having been major changes in the space from the beginning the main phase of the crisis in October?
Ricardo Neves: What I saw is basically a greater interest in discussing measures to reduce costs. Some of the plans that were aligned to be released in the future become more interesting to discuss now, specifically, if they can help reduce costs. The humor, the desire to do something now increased. Today, organizations want to do something more daring than they were willing to make up six months ago. We're used to hearing things from the business as "not stop my growth, "" Do not rock the Boat, "the executives are now coming and saying," Hey, where can we make this boat more How fast can rock the boat, but at the same time, to become leaner and more prepared? "
I saw this happening in one of two ways. One is Customers come to us looking for a comprehensive evaluation of cost reduction – which usually includes the topic of shared services. Secondly, we also have a series of discussions on the review of outsourcing contracts – or even make these contracts more extensive to ensure that they are capturing all the value it could based on the relationship. Generally what I'm seeing is a greater willingness to take bold measures to ensure the reduction costs.
Sson: Do companies still have money to spend on large deployments, or is about making changes as cheaply as possible?
Ricardo Neves: I think much of it is, as you say, do things as cheaply as possible, as quickly as possible. But I've seen some space to say "if I need to spend to get it back, so let me hear what you have to say." Again, I think companies are more willing to do things than they were before – but nobody is saying I have a big pile of money to reduce their costs. What they need to do is to support investment by cost reduction per se.
Sson: Moving to the practitioners: Laura and Esteban, how you have reacted to the crisis? Has had a major impact on your business and you are looking for operations in a different way?
Laura Castro Bao: Intel Corporation has been in the last 2.5 years in a program restructuring and efficiency resulting in savings run rate of over three billion dollars to avoid CapEx over a billion dollars, and a reduction of twenty thousand workers at our peak in 2006. We, as part of the Corporation are taking actions to contribute to this process. We are doing a major effort to reduce discretionary spending and an example is the journey. We are also increasing the number of meetings by phone and are focusing productivity and efficiency so that we can do more with it.
Esteban Carril: Laura mentions reducing travel and entertainment, and this is clearly an area where we have tried to pay attention – but as a matter of fact I think there is no doubt that the economic crisis will bring new opportunities Shared Services in Latin America here. I think this might now be a great time to demonstrate that Latin America is a region of confidence, especially for the global shared services. While speaking of my company is looking for new opportunities in emerging markets. Right now we are looking for a center shared services for sales operations here in Latin America, which could be a great opportunity for consolidation and cost efficiency.
As Laura have accelerated process improvements and efficiencies, and strengthened our internal controls over spending, we are also implementing new tools to give us a Improved visibility of customer usage patterns and performance of people in order to attract customers to more efficient services. The services that can be costly and not are being used by our clients are those who would like either outsource or discontinue. We have also identified other opportunities to expand our scope of services, leveraging our shared services to meet the new domestic customers, and redirecting our services to areas where they can add more value … [About discretionary] How to pass Laura mentioned, we have to do more with it, in my case, I'm trying to involve people from my shared services to drive some of these projects. In other cases, we will prioritize the projects in which we see that there is a clear benefit costs in the short term.
Mauro Mezzano: What I would say it's working implementations of shared services in 2000, 2001, all was looking for cost reductions. Then, moving up through 2005, 2006, 2007 and last year – Until October, of course! – I had as a consultant, many customers who were very focused on growth, so they were very interested in preparing for rates big growth. Now, after October of last year, since I'm getting many calls from people looking to reduce costs and be very proactive implementation of projects with quick results. I guess it's back to that, and I think that Esteban was saying, in our region, some countries have become even more interesting for the multinationals to make cost reductions medium-long term, because labor costs are at what you can see in other regions.
Something which is different from 2000, 2008, 2009, 2010, I think offshoring / BPO providers are actually showing up here in Latin America, and this could be an exciting time to leverage that outsourcing and offshoring business.
Sson: Are you seeing customers are coming to you with the need to do more with the same amount of money, or shrinking budgets?
Mezzano Mauro: I have seen them. Some of the clients who were working here in 2008, shared services have come to me and said, "Sorry, I can not come over with this budget, because my company is in crisis," but at the same time I had calls from new customers who were not working with us before, but who really wants to work with us because they have a new approach to services shared. The market is still very open and diverse, but I think it will decrease in cost reduction from March onwards.
Sson: Obviously globally in recent years a few very big question has been how to attract and retain talent. Recently, however, as the economy worsened, has been the sensation elsewhere in the world that the acquisition and retention of talent is not going to be such an issue in the near future, because people will not be willing to leave secure employment. This is mirrored in what is happening in Latin America now?
Bao Castro Laura: You know, Costa Rica is behaving very differently from other markets, specifically in the service sector. This year is no different, and the projection is for 3,500 new jobs, so we actually have a very hot market. retaining talent is key to our success.
In terms of our sourcing strategy, we work closely with the technical schools – especially schools accounting technician – and the public university that offers professional accounting. We offer internship programs for technical school graduates and a program for college students: bring people while they are still studying for the part-time work for us – some them in a kind of stage, some like what we call "working student" – and by the time they graduate, and if we feel they have been delivered our expectations – we offer them full-time jobs. This has been a very successful strategy we have implemented six years ago, and have a conversion rate 95%.
We also offer English classes for employees to ensure that when they are converted they have reached the level of English we need to do our work because we provide services to the U.S. market and a lot of our work will require a certain level of English ability. So this is a sourcing strategy that I think has proven very successful for us, and this gives a continuous stream of new employees coming in.
In the area of talent retention, Intel is a company that believes in flexibility and we provide great flexibility to our employees. I do not know if you are familiar with the term "Generation Y" for people born after 1980, 80% of the population that I manage are the Generation Y, young people with very different mindsets – they have a chip on their minds than mine, for example – and they appreciate more flexibility, so we have programs like that call "teleworking", where they are able to work from home two days a week. They have different starting and final moments – some of these employees are going to school so they need flexibility to continue your studies – we have found through surveys and questionnaires that flexibility is one of main reasons they choose to stay with us. We provide laptops to all our employees that they can take home – and this generation are the producers of technology, of course, then they love it.
Those two things were actually proven to help us retain employees – as well Career Development course. One of the beauties of shared services is that you manage various functions, you manage different groups, and someone wants to start a career have the opportunity to go to these different groups and become a professional round.
Sson: Esteban, how you find the job market – and has been a shift in its acquisition and retention strategies as a result of the economic crisis?
Esteban Carril: In our case – and I would say this applies to all other shared services in Latin America – turnover rate is one of the most challenging areas shared services. We have been doing several things to retain our talent. We have been cross training – so, for example, when an employee comes to work in a department that offered them some exposure to other areas of operations, for other processes, so they can learn other activities and processes which, as Laura pointed out adds more value to your own career.
This year we are also offering a new service within shared services, What is that employees who loan to other areas, so for example if a business area needs one more person, because someone goes on leave Maternity, or even leave the company, provide them with people as a service. If our people are trained in other systems and other processes that can add value to move people to other areas where they can spend two or three months. We are offering one more service that, from our shared service center.
Another area is the flexible time. The nature of our business is 70% of our business takes place within three weeks of the quarter for what needs to be flexible with our people. We let them do some telecommuting, offer flexible hours, because – as pointed out by Laura – you should give them some kind of freedom within the company. We offer classes in English and Portuguese as well.
The key here is that we've signed some agreements with universities through which to bring new people on board, who usually train them in areas that are more transactional, so they gain experience – and then move them, not only inside but shared services abroad, providing them with career opportunities now in the company in different countries, our finance site. So we offer multiple routes to success within our company.
Sson: You're thinking that the turnover is still a problem for you in a worsening economy and a labor market, thus tightening?
Esteban Carril: I think now there are several companies making people go, and I think the market will work best for us. However, inflation is still a problem – especially in Argentina – so when it comes to retention expect to be reactive in terms of salary adjustments, to ensure competitive salaries. Thus, overall, I think the market will be more silent, however, we must always keep an eye on the need for wage increases – especially with the fluctuations of inflation, we can see in the coming years.
Sson: Ricardo, what is your opinion about the job market and the pressures on management talent at the moment? Things have changed as a result of events October?
Ricardo Neves: Some of the clients who have said that support the increased pressure on them to provide good service at a lower cost, and the best way to do this is with good people. So I think the quest for great people as well as the importance of maintaining them, and work the talent market, it is still a great we will challenge for the crisis mode. Even when you think about it there may be a little more resources available in the market when you look at the example we've heard Costa Rica – or even Brazil, where companies are going further into the country and looking at other cities in Brazil in order to maintain a good flow of people coming out of universities, and has been growing very fast across the country – shared services and new organizations coming talent are going after very rapid, wherever it is, so I do not think it will be easier once talent management for shared services during the crisis we have today.
Sson: And have you noticed – or you're predicting – the drop in attrition rates over the coming months?
Ricardo Neves: Not at this point, considering I have both customers and suppliers with whom I have worked closely have not seen any significant change in these rates at this time in Brazil, mainly.
Sson: What if the operation of the increase of BPO providers have a major impact here?
Ricardo Neves: I think so. I have not seen a slowdown somehow to the growth of shared service centers, or from suppliers or companies going after her. So even if there is increased supply I do not think that the demand will decrease, actually, I think the demand will increase for both existing shared services and new companies entering the market. I do not anticipate an easier time on turnover rates and retention of talent.
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About the Author
Jamie Liddell has worked in journalism since he was a 17-year-old cub reporter for The Tico Times, Costa Rica’s highly regarded English-language weekly newspaper. Holding an MA in English from Clare College, Cambridge University, Jamie came to SSON from the world of overseas property publishing where he worked on the industry’s best-selling publications for the UK and Ireland, and gave seminars at consumer and b2b exhibitions and conferences internationally.
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