perspectives on delivery center locations for bpo – latin

Location OptimizationFebruary 2008 – Preview Deck

Topic: Perspectives on Delivery Center Locations for BPO – Latin America

Copyright © 2008, Everest Global, Inc.ERI-2008-2-PD-0177

2Copyright © 2008, Everest Global, Inc.

ERI-2008-2-PD-0177

Everest and Location Optimization overview

Research report overview

Table of contents


ERI-2008-2-PD-0177

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ERI-2008-2-PD-0177

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ERI-2008-2-PD-0177

We currently track over 125 cities globally across multiple functions

Source: Everest Research Institute (2008)

Experience includes serving global majors across industry verticals – energy, pharmaceuticals, banking and financial services, technology, and outsourcing suppliers

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completed


ERI-2008-2-PD-0177

Our ability to deliver insight on locations is based on extensive and continuing market research…

Team of eight analysts

focused on Location

Optimization

Proprietary & Confidential. © 2006 Everest Partners, L.P.1

125+ cities currently host offshore delivery centers

1 Based on analysis of delivery center locations for 42 suppliersNote: Map not to scale

Source: Everest Research Institute

8

27

8 105

169 9

3 3 1

10

2 1 2 2 0

12

North America Latin America W. Europe E. Europe Middle East & Africa Asia

>5 suppliers2-5 suppliers1 supplier

Number of cities with supplier presence1

Supplier location databaseCity databaseCity profile: Bangalore - Call centre

Salary costs (US$ p.a.)

Base salary-call center agent 3,043Gross salary-call center agent 3,408Base salary-call center supervisor 5,180Gross salary-call center supervisor 5,802Base salary-call center manager 21,725Gross salary-call center manager 24,332Base salary-call center COO 73,021Gross salary-call center COO 81,783

Education

Number of university graduates pa 71,335Number of high-school graduates pa -

Captive location databaseNo. Company name

Parent industry vertical (primary)

Time since inception

IT (ADM and Infra) BPO KPO CC

Engineering, R&D

Comments on services offered

FTE estimates (date variable)

1 3Com Telecom and hi-tech <3 yrs Software development

100

2 ABB Manufacturing 3-5 yrs Software development &

500

3 ABN Amro BFSI 3-5 yrs Banking transaction

2000

4 Adobe Telecom and hi-tech >5 yrs R&D 600

5 Agilent technologies Telecom and hi-tech <3 yrs Application and SOC Chip design,

1000

6 Airwide solutions Telecom and hi-tech <3 yrs 100

7 Akzo Nobel Car Finishes

Others 3-5 yrs Develop products and color NA

8 Allianz Cornhill BFSI 3-5 yrs IT application development and 500

9 Alsthom Manufacturing <3 yrs Engineering and design services, 1,000

10 Amazon Telecom and hi-tech <3 yrs Software Development,

NA

11 AMD Telecom and hi-tech <3 yrs Design 120

12 American Express BFSI >5 yrs F&A back-office HR processing,

3,000

13 AOL Telecom and hi-tech 3-5 yrs Contact center , software

1,650


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…and a wide network of relationships

Brazil

Costa Rica

EL Salvador

Northern Ireland

Malaysia

Jamaica

Philippines

Poland

Romania

South AfricaUruguay

India ChinaCzech Republic

Denmark

FinlandSweden

Scotland Estonia

Slovakia

Thailand

Singapore

Argentina

Mexico

Russia

Turkey

Chile


ERI-2008-2-PD-0177

Everest engages with clients in multiple ways to assist with location-selection decisions

Increasing specificity/sophistication

City profiles

ObjectiveCity overview for specific functions

Illustrative deliverablesDemographics Functional skillsCostsMarket landscapeLabor

Location prioritization

ObjectiveRelative attractiveness and prioritization of cities across functions

Illustrative deliverablesComparison of cities on costs, labor pool, language/functional skills, market activity, and risks Short-list most attractive options and highlight cost-risk trade-offs in making location choices

Location strategy

ObjectiveDevelopment/review of company-specific delivery center strategy and/or location selection

Illustrative deliverablesEvaluate best-fit location based upon alignment with company strategy and business plansEvaluate alternate delivery modelsDue diligence

This report is a standard location prioritization analysis that has not been customized to a specific organization’s objectives or needs


ERI-2008-2-PD-0177

Everest and Location Optimization overview

Research report overview

Table of contents


ERI-2008-2-PD-0177

Table of contents (page 1 of 2)

Section I: Executive summary 7

Section II: Latin America market overview 12Size and growth of the Latin American market 13Examples of supplier and captive presence 14Location/city options for delivery centers 15Key factors driving complexity in decision-making 16

Section III: Drivers and approach to location selection 17Everest risk-reward framework 18Approach/methodology used for location prioritization 22

Section IV: Relative attractiveness of Latin American cities for BPO 24How to read this document 25Assessment on environment- and infrastructure-related factors 28

Environment-related factors: stability, security, risk of natural hazards 29Infrastructure-related factors: connectivity, infrastructure support 34

Labor pool analysis 40Tertiary educated labor pool 43Level of language skills 45

Topic Page no.

Report contains over 90 pages of detailed analysis and information


ERI-2008-2-PD-0177

Table of contents (page 2 of 2)

Section IV: Relative attractiveness of Latin American cities for BPO (continued)Cost-risk analysis 51

Total operating costs per FTE 53Risk analysis: environment risk, time-to-market risk, labor-availability risk 54Trade-off analysis: cost-risk trade-offs in selection of cities for BPO 57

Summary of assessment and prioritization of cities 58

Section V: Additional considerations for location selection 59

Section VI: City snapshots of prioritized cities 64

Appendix 79Overview of Everest Location Optimization capabilities 80Details of assessment of cities across environment-and infrastructure-related factors 86Details of availability of language skills by country/city 97Other reports in this series 103

Topic Page no.

Report contains over 90 pages of detailed analysis and information


ERI-2008-2-PD-0177

Background and objective of the research

Background

Objective

The economic growth of Latin America has attracted a number of outsourcing suppliers to the region to serve the growing domestic demandIn addition to this, suppliers are also using the region to serve U.S. customers, especially in light of the growing Hispanic population in the United StatesLower costs, physical proximity, and cultural affinity are other factors driving the growth of outsourcing market in the regionAs a result, the location landscape in Latin America is rapidly expanding to new countries/cities. Leading global suppliers/captives have set up delivery centers in numerous cities in the region However, these locations have different leverage points across multiple factors relevant for location selection (e.g., costs, labor pool, functional, language skills). The presence of multiple city options with significantly different characteristics drives complexity in location-selection decisions in Latin AmericaThis research provides perspectives on the relative attractiveness of Latin American locations for Business Process Outsourcing (BPO)

Provide perspectives on the relative attractiveness of Latin American locations for a BPO centerPrioritize 8-15 locations from multiple city options based on their relative attractivenessThe focus of this report is on prioritizing a set of potential location options. However, the report is not aimed at selecting the best-fit location for a company-specific situation. In order to further make location choices, additional company-specific requirements and factors need to be evaluated


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Scope of the research – cities covered

Brasilia

Campinas

Curitiba

Porto Alegre

Rio de Janeiro

Salvador

Sao Paulo

UberlândiaVitória

Belo Horizonte

Buenos AiresRosario

San Miguel de Tucumán

Mendoza

Puebla

Monterrey

TolucaMexico City

QuerétaroGuadalajara

Santiago

Leon

Cordoba

Aguascalientes

San José

ChihuahuaJuárez

Culiacán

Mexicali

Panama City

Parana

Saltillo

Santa Fe

Tijuana

Mexico

ArgentinaChile

Brazil

Panama

Costa Rica

Recife

Countries considered are Mexico, Costa Rica, Panama, Brazil, Chile, and Argentina; 35 cities across these countries are covered in this research


ERI-2008-2-PD-0177

Analysis Data presented/analyzed

Summary of key analyses and data presented in the research

Analysis Data presented/analyzed

Latin American market overview

BPO overviewSupplier and captive landscapeLocation options for delivery center

Labor pool Tertiary educated labor pool Assessment of language skills

Includes Spanish, Portuguese, and English

Costs Total operating costs per FTE based on Everest’s proprietary cost model capturing 40+ data elements. Examples:

Salaries & benefitsManagementAdministrationOverheadReal estate TrainingAttritionTelecomEquipmentUtilities

Risks Labor availabilitySize of labor poolLanguage skillsCompetition for talent

StabilityPolitical, economic stabilitySecurity

Connectivity Infrastructure supportEvolution of ancillary servicesRegulatory environment

Trade-offs Assessment of cost-risk trade-offs Classification of city clusters

City snapshots City facts (e.g., population)Business environmentOutsourcing activitySupplier and captive presence


ERI-2008-2-PD-0177

Everest’s location selection methodology/approach

1

Activities

Filtering2 3 4 5 6

Overall objectives and requirements

Risk

Cos

t

Labor pool analysis

Cost-risk analysis

Customized analysis

Due diligence

De-prioritize cities that do not meet basic minimum requirements a) Environment-

related factors – stability, security, risk of natural hazard

b) Infrastructure- related factors – connectivity, infrastructure support

De-prioritize cities that do not have minimum labor pool to meet requirements using a two-step processa) Overall tertiary

educated labor pool

b) Language skills

Cost analysisRisk analysisCost-risk trade-offs

Evaluate alternate delivery models

Fit with business plans and existing delivery footprint

Due diligence on prioritized cities to validate findings and identify potential company-specific incentives


ERI-2008-2-PD-0177

The report has more than 80 pages of data, insights on relative attractiveness of Latin American locations for BPO

Language skills across countries in Latin AmericaShare of total population

Supplier/captive centers across Latin America

Annual tertiary education pool 2006; ‘000s

Cost-risk comparison for prioritized cities for BPO delivery center

First-principle filtering – stability, security risk ratings

Total annual operating cost per FTE for BPO delivery center2006; US$ ‘000s per FTE

Sao Paulo (IBM, Accenture,etc.)

Santiago(Shell, IBM, TCS etc.)

Monterrey (IBM, CSC, etc.)Mexico City (EDS, Capgemini, etc.)

Argentina

Chile

Brazil

Mexico

Rio de Janeiro (Teleperformance, KPMG)

Curitiba (Accenture, HSBC, etc.)

Buenos Aires (EDS, IBM, TCS, etc.)

Costa RicaSan José (IMB, P& etc.)

Panama City (Sitel, Dell etc.)

Panama

Peru (Atento, Siemens)

Guatemala (ACS, Capgemini, etc.)El Salvador(Dell, Atento, etc,)

Sao Paulo (IBM, Accenture,etc.)

Santiago(Shell, IBM, TCS etc.)

Monterrey (IBM, CSC, etc.)Mexico City (EDS, Capgemini, etc.)

Argentina

Chile

Brazil

Mexico

Rio de Janeiro (Teleperformance, KPMG)

Curitiba (Accenture, HSBC, etc.)

Buenos Aires (EDS, IBM, TCS, etc.)

Costa RicaSan José (IMB, P& etc.)

Panama City (Sitel, Dell etc.)

Panama

Peru (Atento, Siemens)

Guatemala (ACS, Capgemini, etc.)El Salvador(Dell, Atento, etc,)

Stability1City Security2

Salvador

Sao Paulo

Uberlândia

Vitória

Belo Horizonte

Brasilia

Campinas

Curitiba

Porto Alegre

Rio de Janeiro

Recife

Stability1City Security2

SalvadorSalvador

Sao PauloSao Paulo

UberlândiaUberlândia

VitóriaVitória

Belo HorizonteBelo Horizonte

BrasiliaBrasilia

CampinasCampinas

CuritibaCuritiba

Porto AlegrePorto Alegre

Rio de JaneiroRio de Janeiro

RecifeRecife

Low riskMedium riskHigh risk

Low riskMedium riskHigh risk

English Spanish Portuguese

Panama

Argentina

Brazil

Chile

Costa Rica

Mexico

Low availabilityHigh availability

English Spanish Portuguese

PanamaPanama

ArgentinaArgentina

BrazilBrazil

ChileChile

Costa RicaCosta Rica

MexicoMexico

Low availabilityHigh availabilityLow availabilityHigh availability

Buenos Aires

Sao Paulo

Mexico City

Santiago

Rio de Janeiro

Belo Horizonte

Brasilia

Curitiba

Puebla

Salvador

Cordoba

Monterrey

Recife

Rosario

Porto Alegre

Cor

doba

Bue

nos

Aire

s

Cur

itiba

Por

to A

legr

e

Bra

silia

Bel

o H

oriz

onte

Cam

pina

s

Rio

de

Jane

rio

Pue

bla

San

tiago

Sao

Pau

lo

Mex

ico

City

San

Jos

e

Mon

terr

ey

Cor

doba

Bue

nos

Aire

s

Cur

itiba

Por

to A

legr

e

Bra

silia

Bel

o H

oriz

onte

Cam

pina

s

Rio

de

Jane

rio

Pue

bla

San

tiago

Sao

Pau

lo

Mex

ico

City

San

Jos

e

Mon

terr

ey

Monterrey

Puebla SantiagoSan JoseSao Paulo

Buenos Aires

Mexico City

Curitiba Campinas

Cordoba

Rio de Janeiro

Belo Horizonte

Porto AlegreBrasilia

Monterrey


Buenos Aires

Mexico City

Curitiba Campinas

Cordoba

Rio de Janeiro

Belo Horizonte


Mature locations

Emerging locations

Cost

High

Low

RiskHigh Low

Monterrey


Buenos Aires

Mexico City

Curitiba Campinas

Cordoba

Rio de Janeiro

Belo Horizonte


Monterrey


Buenos Aires

Mexico City

Curitiba Campinas

Cordoba

Rio de Janeiro

Belo Horizonte


Mature locations

Emerging locations

Cost

High

Low

RiskHigh Low


ERI-2008-2-PD-0177

Everest Research Institute reports in this series

Geography coveredType of report Number of cities

coveredBPO ITOCentral & Eastern Europe 25

Asia (China, India, Philippines, Singapore, Malaysia, etc.) 40

India 23

Latin America (Argentina, Brazil, Mexico, Costa Rica, etc.) 35

Eight different reports covering BPO or ITO for four geographies are available


ERI-2008-2-PD-0177

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perspectives on delivery center locations for bpo – latin

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