Q: I think the first question we fajardo taxi taxishould look at is: is it right to talk of “Latin American shared services” at all? Latin America is a very big region geographically and in terms of population; it’s got a smaller linguistic diversity than, for example, Europe, but there are still very big differences between, say, Brazil and Costa Rica. To what extent is it actually possible for organizations – captive or BPO – to take a truly regional approach in Latin America? Is it impossible to avoid having significant resources in individual countries?
Ricardo Neves: This is a region different from other regions in the world. If you talk about intra-region services, you’re talking about two major languages which are, in some ways, close to each other; you have also a closeness of overall culture; and usually what you see with multinational or regional operations here is that the larger countries like Brazil, Argentina, Mexico, Chile correspond to a significant size of the operations. Usually if you look at most of the global or multinational companies in the region, they have 50% or even 75% of their operations carried out in two or three countries at most – and then 10, 12 other countries where they do have operations but which make up only 25% or less of their business.
This gives a challenge when setting up a regional center, because there is a scale for the larger countries which is not present in the smaller ones – and what I’ve seen here is a mix between totally centrally run shared services and a lesser local presence in smaller countries to make sure the right scale is achieved and the right support is done at the regional level. There are companies based in Brazil that I’ve seen who have regional shared services – like the brewer AmBev, now connected with InBev and AnhauserBusch, which has a very large regional shared services based in Sao Paulo serving not just operations in the region, but also the firm’s operations in Canada for the Labatt operations. Unilever has also set up an HR shared services – and has just sold its finance shared services to Capgemini in the region.
In sum, from those large operations that I’ve seen, as i said I’ve seen a mix of some centralised services and some small countries with local services combined.
Esteban Carril: We’re serving Argentina, Chile, Peru, Mexico, Colombia, Venezuela, and Brazil. My team is divided into three functional areas, in two countries. One team is working in Sao Paulo, Brazil; the other two functional teams are working here in Argentina. We run accounts payable, accounts receivable, credit and collections, billing, cash applications, payroll, commissions and bonuses. It’s actually not divided linguistically: we found we already had some good skills in Brazil to develop the credit and collections department there, so we decided to leave the existing group providing services there in Brazil, to provide services for the rest of the Latin American countries. We wanted to have three functional groups, but we wanted to try to keep the same skilled people working and we didn’t want to have to move them from one country to another.
Laura Bao Castro: We’re part of a global strategy. We have currently two pretty large financial shared services centers in Intel. One is located in Malaysia and the other one is located here in Costa Rica; the markets that are supported from Costa Rica are Canada, the us, Costa Rica, and Mexico, Colombia, Venezuela, Chile, Argentina and Brazil.
Q: Laura and Esteban, you both come from big global organizations with significant worldwide presence. Do you think it’s still the biggest companies who are setting up shared services in Latin America or are the smaller, or maybe mid-market, organizations also getting involved?
Laura Bao Castro: I think the mid-market is coming up. I was able to go to [a Latin AMerican shared services event in] Chile last year, and also participated in [a] conference in Mexico City, and I was very surprised by the number of Latin American multinationals that have already moved into this journey, or are in the process of doing so – especially in Mexico where I think a lot of companies are looking into it, even having shared services within Mexico itself. The concept is right there; they know they can reduce costs and produce more quality with shared services, and even within Mexico itself companies are developing shared service centers.
Mauro Mezzano: Actually we’ve been seeing this shift since two or three years ago. At the start of the decade many multinationals began establishing shared services in the region, but when i went to conferences in Miami and Orlando there weren’t many Latin American-owned companies present. Then in 2004, 2005, bigger local companies and groups started with the concept. Now smaller and smaller companies are doing it; some of them don’t really implement what we would call shared services but they do centralize and they do take a few concepts from shared service centers, and perhaps redesign a process. The influence of shared services is spreading out through many more companies than before.
Ricardo Neves: I’ve seen an increase in interest: among mid-market companies it’s less regional. What I’ve seen is among large companies, they’ve done a lot of rationalization in each of their countries of operation, and a lot of discussion about regional shared services. What I’ve seen in the mid-market, specifically in Brazil, are still questions on “in-country” shared services if you know what i mean. It’s more making sure that they leverage their local operations, and then as a second step – especially with some of the systems work done – it’s something of a done deal to set up something regional: when you have a regional systems platform, for example.
Q: Let’s shift focus slightly and take a look at the outsourcing market in Latin America. Over the past couple of years we’ve seen the entry into the region of some of the big global players – in particular some of the big Indian providers. What impact has that had on the market – and on firms that are running shared services?
Esteban Carril: In my experience in leading a shared service centre I have been trying to find different ways to do things, and finding vendors who can provide services in a more efficient and economical way than us doing it ourselves. When it comes to the outsourcing sector, I find that in Latin America things are still in development. When it comes to outsourcing it’s important to see how well-organized companies are, and how well they provide services in multiple countries – and I see the challenge for many of the big firms is that they are still working as independent companies in each country, and not really regionally organized in order to provide services to multi-country shared service centers.
I think that’s one of the key points that I’ve been finding. Another key point is that some companies are regionalized but unfortunately they might not have presence in all markets, so that becomes a problem in terms of finding a single regional outsourcing solution to meet our needs.
Laura Bao Castro: About five years ago companies providing outsource service arrived to Costa Rica. Since then, these companies have grown, for example HP has now close to 8, 000 employees. While I can’t be specific about their services or regions they serve, these companies look for people speaking Spanish, English, Portuguese, French, Italian – even Chinese. We do not work specifically with an outsource vendor at this moment – but periodically we reassess our current strategy.
Ricardo Neves: One of the features that I’ve noticed, one of the movements in the outsourcing space in Latin America, is that there’s been a lot of currency fluctuation between the dollar and the real, and the dollar and other currencies, and I’ve seen some discussions on contract review – especially for service providers – from both sides: if the clients want to take advantage of that, or even discuss relocation of some work; or if the providers are saying that an increasing cost is related to currency fluctuation putting added pressure on their margins. Definitely currency fluctuations have been one of the biggest topics of discussion in the region.
Q: OK, let’s move on and address the big issue of the moment and, perhaps, of many moments to come: the financial crisis and global economic downturn, and their impact upon shared services and the sourcing sector in the region. Ricardo, what do you see as having been the main changes in the space since the beginning of the main phase of the crisis in October?
Ricardo Neves: What I’ve seen is basically a larger interest in discussing measures to reduce costs. Some of the plans that were lined up to be rolled out in the future have now become more interesting for discussion now; specifically, if they can help reduce costs. The mood, the willingness to do something now has increased. Organizations today want to do something bolder than they were willing to do even six months ago. We used to hear things from the business like “don’t disrupt my growth”, “don’t rock the boat”; now executives are coming and saying “hey, where can we make this boat more nimble? How can we rock the boat but at the same time make us leaner and more prepared? ”
I’ve seen this happening in a couple of ways. One is, clients coming to us looking for an overall assessment of cost reduction – which usually includes the theme of shared services. Secondly, we’re also having a lot of discussions on reviewing outsourcing contracts – or even making those contracts broader, in order to ensure they are capturing all the value they could based on the relationship. So overall what I’m seeing is an increased willingness to take bold measures to ensure cost reduction.