Ann All spoke with Steve Rudderham, senior vice president and business leader for Genpact Latin America. Genpact combines process expertise, information technology and analytical capabilities with operational insight and experience in diverse industries to provide a wide range of services using its global delivery platform. It operates service delivery centers in India, China, Hungary, Mexico, Guatemala, the Philippines, the Netherlands, Romania, Spain and the United States.
All: Mexico is the country we hear most about regarding Latin American outsourcing, and Genpact has a presence there. Why the decision to add a facility in Guatemala?
Rudderham: If you look at Latin America as a whole, there has been a lot of talent that has been developed. College-educated people with a finance and accounting background, but also the English language as well. Certainly the Central American countries like Costa Rica, Nicaragua and Guatemala are all doing a lot of investment on how they actually generate more English-speaking people in order to attract BPOs. So all we are really doing is tapping into a bigger global talent pool than we had previously.
I think what we are starting to see in these Latin American countries is they are starting to see the power of the outsourcing industry, the road that it's going on. Businesses like IBM, Accenture, ACS and Genpact are willing to set up a site, and when they do set up a site, it's usually for at least 500 people if not more. So attracting four or five businesses like that into your city is very attractive for the local economy. We're starting to see a lot of Central American government agencies reaching out to us now and attracting us in. In addition to incentives like tax-free zones, they want to partner with firms and say, "How can we set up university courses that are specific for call center service?" That kind of thing.
All: Is Genpact anticipating growth in the Latin American region? Does it anticipate opening other facilities in the region in the near future?
Rudderham: We are anticipating some strong growth, particularly leveraging the Spanish speaking. When you look at the Hispanic market just for the U.S., for example, it's growing tremendously, and work within the Latin American market as well. As you head South, Brazil does not export a great deal. It's very much Brazil for a Brazil market. They generally consolidate their utilities, their government agencies into large call centers. So it's not so much cost arbitrage they look for there, it's just central efficiencies. What we are looking to do with Brazil is work with our global clients who want Portuguese speakers. It's difficult to do that elsewhere in Central America or out of our Eastern European hub. But that's why we are looking to set up an operation in Brazil as well.
All: Call centers appear to be the initial focus. Is there potential for growth in more sophisticated BPO services in the region?
Rudderham: We are obviously focused on collections and customer service at the moment. But we know that there's a rich talent pool in F&A coming out of Guatemalan universities as well. So we are looking to leverage that when possible.
Within Guatemala, the BPO presence is not great. There are about 5,000 people connected with BPO operations but about 50 providers, a lot of Spanish-only call centers as well. So it's a very fragmented market. If you look at Tier 2 cities in India, what we've managed to do there very successfully is be the first one in and leverage that to partner with the universities. We are looking to do something similar in Guatemala. Be the first in, partner with universities and show people that there is tremendous career growth there.
All: The advantages of being first into a market are obvious. But aren't there greater risks involved as well, with a large upfront investment required?
Rudderham: There's definitely a balance you have to work out to be first in the market. If you are very successful at doing it, your competitors can see doing the same, just look at paying your people a higher wage because you've paid for all the training upfront. So there has to be a focus right upfront on establishing your brand name and your company as a place where people can see a long-term career path. We have to say, "If you want a career in F&A, here's what Genpact can offer, and we can offer a global experience as well, if that's what people want."
All: Are there still concerns about stability and the political environment in Latin America?
Rudderham: It's getting a lot easier. I think what we have to be careful of within Central America is business continuity planning when you've potentially got hurricanes coming through. Guatemala was attractive to us because it's a higher altitude. Although it can get a lot of rain, it's rare for a hurricane to hit at full force. The city and the country have built the infrastructure to handle the rain. When you go into Latin America, you have to take into account not only the political environment but the natural environment and make sure you've got a strong business continuity plan. That's perhaps why we haven't seen more outsourcing in areas like Jamaica that take the full brunt of tropical storms.
All: Genpact acquired the Guatemalan facility from GE Money. Is this a sign that companies are increasingly looking to work with third-party providers rather than establishing captive facilities?
Rudderham: It depends both on the organization and the industry. You have certain industries that are very risk averse. But as the outsourcing market is maturing, organizations are getting more comfortable outsourcing their data. You see a lot of companies talking about virtual captives, where operations in the BPO are just an extension of their own operations. I think people are getting a lot more comfortable with that scenario, that you can have a team offshore that is managed the same way.