Caribbean looks to provide investors with higher level BPO offering

Due to its relatively low cost, labour quality and geographical proximity to the key North American markets, the Caribbean has been an attractive location for outsourcing firms across the spectrum. Contact call centres are the predominant form of business process outsourcing (BPO) found in the region, stretching from Suriname and Guyana on the north-east coast of South America, through the Lower Antilles and Belize, up to the Bahamas off the US coast.

“Shared service centres [SSCs], knowledge process outsourcing [KPO] and IT outsourcing are really more focused on Latin America, with Costa Rica as the premium location,” says King White, founder and president at Site Selection Group, a firm that assists BPO companies in finding new locations.

Higher value

Despite a focus on call centres and more basic forms of BPO, the Caribbean region is considered to hold great potential for professional forms of BPO higher up the value chain, due to the region’s burgeoning graduate talent pool and natural affinity for niche services.

“I think that in IT outsourcing, KPO and creative services, there are real opportunities for local SMEs in this region,” says Krista Lucenti, trade and integration senior specialist at the Inter-American Development Bank.

Examples of successful higher value outsourcing in the region include financial services outsourcing, such as Scotiabank in Trinidad and Tobago and KPMG’s SSC in Jamaica; creative industry outsourcing, such as animation services in Barbados, Jamaica and Saint Lucia; and legal process outsourcing in countries such as the Bahamas
and Barbados.

Client driven

BPO firms typically generate revenue through clients paying them for the outsourced services they render, which requires flexibility in order to cater, adapt and respond to clients’ needs regarding facilities, costs and quality.

The proximity of the Caribbean to both North American and South American markets enables clients to easily travel to assess the facilities and interact with services companies. Moreover, English language proficiency and the cultural affinity of the Caribbean to North America enables Caribbean call centre agents to understand North American customers’ requirements easily.

The region is also cost effective, with labour costs on average 60% less than North America and overall cost of operations significantly lower, according to Randy Clapp, chief revenue officer at customer relationship management firm Advantage Communications.

“My overall experience in the Caribbean has been great,” says Yoni Epstein, founder and CEO of homegrown Jamaica-based BPO solutions firm Itelbpo.

Many companies report the customer service and productivity of their agents in the Caribbean is unmatched. CEO and founder of call centre provider KM² Solutions David Kreiss says: “Saint Lucians are just terrific workers, and we found the productivity in an hour was significantly greater than anywhere else, including the US.” 

Local challenges

Given the risk of hurricanes within the region, clients expect and look for buildings to be of sound structure, while also meeting their corporate image and standards, particularly larger companies. “Clients will not go to cinder block buildings as it doesn’t represent their brand. You have to match brand image with the type of centres on offer,” says Mr Kreiss.

Some countries are facing this issue head-on. “The main domestic challenge is the provision of suitable, modern operating contact centre facilities,” says Roderick Cherry, CEO at Invest Saint Lucia. “Invest Saint Lucia is actively doing its part to quell this issue by retrofitting factory shell spaces owned by the organisation to suit investors’ specific needs.”

Many BPO firms have resolved this issue with real estate through partnerships with either local investment promotion agencies or real estate developers, as well as well-purposed industrial parks and free economic zones found across the region, such as those offered by Invest Barbados and Curinde in Curaçao.

“ICD Group are major real estate developers on the island, so real estate is never an issue for us. In fact in Portmore, Jamaica, we have a 600-seat facility being built to meet demand,” says Mr Clapp at Advanced Communications, which has partnered with ICD Group.

Labour market 

Despite a lack of labour market scalability, operating in smaller Caribbean countries can have significant advantages, as there is often less competition among firms for agents and the talent pool, meaning wages remain stable.

However, attrition is a real issue in the BPO sector, especially in competitive markets, where agents can easily move from one company to the next to improve their wage growth. Many BPO firms have set up in smaller cities and towns across the region where attrition rates are lower due to a lack of job opportunities. Work-at-home agents, or call centre agents who work remotely, could also provide a solution to this problem, but are not yet widespread across the region.

For the Caribbean to be able to attract more BPO providers, some companies have stressed that labour laws need to be updated in terms of both flexibility and wages to reflect the BPO industry, which suffers from attrition, cyclical fluctuations and changing client demands.

Market entry costs can be substantial, due to the need to ship in the equipment required to set up call centre operations. Seat leasing, where third-party companies build the facilities and lease the desks to BPO firms, provides an opportunity to avoid such huge capital investment.

Some operators in the BPO sector believe incentives such as tax breaks are not enough to guarantee BPO firms invest and stay in the Caribbean. “[Caribbean governments] need to develop some more tangible economic incentive tools than tax holidays,” says Site Selection Group’s Mr White.

A saturation risk?

While attracting BPO investments in the short run provides essential job opportunities in a region with high unemployment, there is a long-term risk that attracting too many BPO operators will lead to labour market saturation, thus pushing up wages and the overall costs of operation, and reducing the investment attractiveness of the region to basic BPO firms.

Despite this risk, many hope that the Caribbean will emulate Costa Rica. Once a hub for call centres, the Central American country experienced an exodus of BPO firms following wage increases, and has instead moved up the value chain to become a leader in SSCs and higher value BPO.

Indeed, a focus on cost competitiveness will not guarantee BPO firm investment, as firms increasingly look for opportunities to offer innovation-driven higher value services.

“Most locations are still looking at positioning themselves as cost competitive, while investors are now looking at locations more from their ability to drive innovation within their service offerings,” says Rejo Sam, global services strategy consultant and associate director at consultancy firm Avasant.