Latin America the Next Outsourcing Hotspot
One of the reasons cited as important for selecting Latin America for outsourcing include its proximity to the US, time zone alignment and accent neutrality
US executives rank Latin America as attractive outsourcing location based on low-cost, skilled labour, technology and infrastructure capabilities, and economic stability.
Consulting firm Capgemini has announced the results of the second annual Capgemini Executive Outsourcing Survey, which found that Latin America is the third most popular outsourcing destination, with 25 per cent of responding companies currently outsourcing to this region. While still perceived by many respondents to be an ‘emerging’ outsourcing destination, this survey revealed that Latin America is not far behind legacy outsourcing destination China, which is ranked second at 27 per cent, while India leads with 60 per cent of companies outsourcing to this country.
The survey, commissioned by Capgemini and conducted online by Harris Interactive, among 300 senior executives at Fortune 1000 companies also identified the top reasons for executives to select Latin America as part of their outsourcing strategy. More than two-thirds (69 per cent) of surveyed executives cited cost of labour as the top reason why their company might outsource to Latin America, while other attributes reported included technology and infrastructure capabilities (49 per cent), skilled labour (48 per cent), and economic stability (44 per cent). These attributes are aligned with the key reasons why companies choose to outsource in general, suggesting that outsourcing to Latin America will continue to expand.
Other reasons cited as important for selecting Latin America for outsourcing include its proximity to the US, time zone alignment and accent neutrality.
These attributes are all unique to this region when compared to other outsourcing locations such as China and India.
The Executive Outsourcing Survey findings also revealed that almost half (45 per cent) of executives who do not currently outsource to Latin America say their company would be interested in considering the region as a resource for outsourcing in the future.
In addition to uncovering Latin America as a leading outsourcing destination, the survey highlighted the region’s increasing value to the global economy.
An overwhelming majority of executives (89 per cent) believe that Latin America is an emerging market that will become increasingly important to US businesses, and that there are advantages to doing business in Latin America (83 per cent). Further, more than half (56 per cent) of executives believe doing business in Latin America is becoming easier than doing business in other parts of the world.
“As the economy rebounds, companies are looking to use outsourcing more strategically as a tool to increase efficiency, yield significant cost savings and drive growth – this includes considering locations beyond India,” said David Poole, vice president and head of Americas Business Process Outsourcing, Capgemini.
Other survey highlights include:
- The top five factors listed by executives in choosing an outsourcing destination are labour costs (79 per cent), technology & infrastructure capabilities (62 per cent), skilled labour (61 per cent), language proficiency (49 per cent) and economic stability (44 per cent). Less important factors listed by executives in choosing an outsourcing location are tax benefits (26 per cent) and proximity to the U.S. (3 per cent).
- Forty-one per cent of executives outsourcing to Latin America cited language proficiency as a key reason.
- Forty per cent of executives cited the average education of the Latin American workforce as a key factor in their decision to outsource in Latin America.
