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Why Central America is an appealing outsourcing destination

Posted March 16, 2017
Central America team members walking downstairs

When companies and consumers hear the words “contact center outsourcing,” geographically, two places often come to mind: India and the Philippines. But with “nearshoring” becoming a more popular option for North American companies, outsourcing to Central America has been on the rise.

The cluster of seven continental countries — Honduras, Guatemala, Nicaragua, Costa Rica, Panama, Belize and El Salvador, as well as the Caribbean nations — have become some of the fastest-growing destinations for contact center outsourcing.

Business consulting firm Frost & Sullivan anticipates that by 2020, the region will experience an 8.4 percent compound annual growth rate and have an estimated worth of $5.07 billion. And with the United States comprising more than 90 percent of the contact enter service demands, much of that growth is being fueled by North American-based companies.

Why has Central America become such an appealing outsourcing destination, and what should companies expect when outsourcing there?

Cost-cutting and cultural proximity

For many years, companies have turned to India and the Philippines for outsourcing as a lower cost solution. In recent years, however, Central America has become a competitive alternative. “Central America has been improving lately with the price-to-value ratio and cost,” says Juan Manuel González, an enterprise-communications industry manager for Latin America at Frost & Sullivan. “The pricing that these companies can offer is usually between 25 to 40 percent below domestic U.S. rates.”

While cost is often an entry point for outsourcing consideration, it’s not necessarily the deciding factor. Sure enough, to look at Central America solely for cost-cutting purposes is to overlook the other virtues that are driving its success.

One of which is Central America’s close proximity to their biggest customer: the United States. The location can be very appealing to companies, especially those wanting a more hands-on outsourcing partnership. A business trip to the region doesn’t require a 15-hour flight, or the accompanying jet lag. “You can even go and see a call center and return home in the same day,” says González.

Cultural affinity is another benefit to Central America’s location. Residents of the region often enjoy the same television shows, share a similar passion for baseball and often have family in the United States. “There is a deep affinity with the U.S. culture that you will not find in probably any other countries in the world,” says González, and that compatibility can greatly affect both relationships with their clients and the delivery of customer service.

Potential challenges and opportunities

All that being said, cultural affinity doesn’t necessarily mean English fluency — a requirement for any contact center looking to provide support to American customers. Compared to competition in India or the Philippines, González says that English proficiency levels in Central America aren’t always as high.

However, the contact center boom in Central America — and the job opportunities it promises — has led to a rise in English schools. In places like Guatemala, universities have even started making English language classes a prerequisite for graduation. What’s more, with a 17.6 percent Hispanic population in the United States, working with a contact center in Central America can be an added bonus for companies looking to outsource multilingual support.

Local governments are even helping the industry in the interest of encouraging the economic growth that outsourcing can bring to a country. “Governments are investing time and money to bring companies to their countries and help them with subsidies,” says González. “[And] governments are training the agents before the call center companies hire them for the launch of new opportunities.”

While government investment in the outsourcing industry is appealing to many companies, the perception of crime in Central America can serve as a deterrent. Scott Figler, a senior consultant at Jones Lang LaSalle, a commercial real estate company, cautions however, that the media can often paint an exaggerated picture of what’s really happening in the region. “I would advise anyone looking to make a capital investment in these countries to do their homework, and not buy in so much to the caricature that the U.S. media often makes Latin America into,” Figler says. “Yes, some places are more dangerous than others, but so are many American cities. It doesn’t mean something is not worth doing.”

It’s about the people

Focusing too much on crime will also deprive companies from what may be one of the greatest benefits of outsourcing to Central America: its people. One of the major draws of the area is not just how young and educated the workforce is, but their enthusiasm.

Workers often take great pride in their jobs, and eagerly treat them as career growth opportunities. That passion is great for the relationship between company and outsourcing partner, but also between agent and the customer, often resulting in a higher-quality of service, employee engagement and retention. “You start to see a decrease in the cost of training because you’re not losing people, so you don’t need to start from the scratch every time an agent goes,” says González.

With its close proximity to the U.S., tremendous growth opportunities and passionate workforce, Central America is an appealing destination for any company looking to outsource their customer support.

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