| It might not yet have the same profile as South Asia | | | | need to do is support the investment through the cost |
| or Eastern Europe, but Latin America is becoming an | | | | reduction itself. |
| increasingly popular destination for organizations looking | | | | Q: Moving over to the practitioners: Laura and Esteban, |
| to establish shared service centers, either serving | | | | how have you been responding to the crisis? Has it |
| domestic markets or as part of regional or even global | | | | had a big impact on your business and are you looking |
| shared services strategies. Furthermore, along with this | | | | at operations in a different way? |
| growth in the captive sector Latin America has | | | | Laura Bao Castro: Intel Corporation has been, over the |
| become the focus of growing interest on the part of | | | | past 2.5 years, on a restructuring and efficiency |
| major outsourcing providers whose entry into the | | | | program that has resulted in run-rate savings of |
| market has had knock-on consequences across the | | | | greater than three billion dollars, CapEx avoidance in |
| board. Throw into this already-volatile mix the current | | | | excess of one billion dollars, and a reduction of twenty |
| economic instability and it's easy to see why the | | | | thousand employees from our peak in 2006. We as |
| region's activity is making waves across and beyond | | | | part of the Corporation are taking actions to contribute |
| the shared services and outsourcing space in 2009. | | | | in this process. We are doing a big effort to reduce |
| We convened a panel representing practitioners, | | | | discretionary spending and one example is travel. We |
| providers and advisors to take a look at the current | | | | are also increasing the number of meetings over the |
| level of maturity of the Latin American market and to | | | | phone and are focusing on productivity and efficiencies |
| examine how - and if - the economic malaise affecting | | | | so we can do more with the same. |
| much of the rest of the global economy is impacting | | | | Esteban Carril: Laura mentions the travel and |
| upon operations in the region. | | | | entertainment reduction, and this is clearly an area |
| Attending were: | | | | where we have tried to pay close attention - but as a |
| Laura Bao Castro | | | | matter of fact I think that there is no doubt that the |
| CR FSSC Controller | | | | economic crisis will bring new opportunities for shared |
| Intel Corporation | | | | services here in Latin America. I think this might now be |
| Esteban Carril | | | | a great time to demonstrate that Latin America is a |
| Director, Latin America Finance Operations | | | | reliable region, especially for global shared services. As |
| EMC Corporation | | | | we speak my company is looking for new |
| Mauro Mezzano | | | | opportunities in emerging markets. Right now we are |
| Partner | | | | looking for a shared service center for sales |
| Vantaz Group Consulting | | | | operations here in Latin America; this might be a great |
| Ricardo Neves | | | | opportunity for consolidation and cost efficiency. |
| PwC Global Sourcing Leader for South America | | | | Like Laura we have accelerated process |
| PricewaterhouseCoopers | | | | improvements and efficiencies, and tightened our |
| Q: I think the first question we should look at is: is it right | | | | controls over expenses; we are also now |
| to talk of "Latin American shared services" at all? Latin | | | | implementing new tools to give us better visibility of |
| America is a very big region geographically and in | | | | customer usage patterns and people's performance, in |
| terms of population; it's got a smaller linguistic diversity | | | | order to drive customers to more efficient services. |
| than, for example, Europe, but there are still very big | | | | Those services that may be high-cost and are not |
| differences between, say, Brazil and Costa Rica. To | | | | being used by our customers are the ones that we |
| what extent is it actually possible for organizations - | | | | would like to either outsource or discontinue. We have |
| captive or BPO - to take a truly regional approach in | | | | also identified other opportunities to expand our scope |
| Latin America? Is it impossible to avoid having | | | | of services by leveraging our shared services to |
| significant resources in individual countries? | | | | serve new internal customers, and redirecting our |
| Ricardo Neves: This is a region different from other | | | | services to areas where they can add more value... |
| regions in the world. If you talk about intra-region | | | | [Regarding discretionary spending] As Laura |
| services, you're talking about two major languages | | | | mentioned, we have to do more with the same; in my |
| which are, in some ways, close to each other; you | | | | case I'm trying to engage people from my shared |
| have also a closeness of overall culture; and usually | | | | services to lead some of these projects. On other |
| what you see with multinational or regional operations | | | | cases we will prioritize those projects where we see |
| here is that the larger countries like Brazil, Argentina, | | | | there is a clear benefit in costs in the short term. |
| Mexico, Chile correspond to a significant size of the | | | | Mauro Mezzano: What I would say is, working in |
| operations. Usually if you look at most of the global or | | | | shared services implementations in 2000, 2001, |
| multinational companies in the region, they have 50% or | | | | everybody was looking towards cost reductions. Then |
| even 75% of their operations carried out in two or | | | | moving through 2005, 2006, 2007 and last year - up to |
| three countries at most - and then 10, 12 other | | | | October, of course! - I had, as a consultant, many |
| countries where they do have operations but which | | | | customers who were very focused on growing, so |
| make up only 25% or less of their business. | | | | they were very interested in preparing for big growth |
| This gives a challenge when setting up a regional | | | | rates. Now, after October last year, once again I'm |
| center, because there is a scale for the larger | | | | getting many calls from people looking for cost |
| countries which is not present in the smaller ones - and | | | | reductions, and being very proactive in implementing |
| what I've seen here is a mix between totally centrally | | | | projects with quick results. I think it's come back to that, |
| run shared services and a lesser local presence in | | | | and I think as Esteban was saying, in our region some |
| smaller countries to make sure the right scale is | | | | countries become even more interesting for |
| achieved and the right support is done at the regional | | | | multinationals to do medium-to-long-term cost |
| level. There are companies based in Brazil that I've | | | | reductions because the labor costs are under what |
| seen who have regional shared services - like the | | | | they can see in other regions. |
| brewer AmBev, now connected with InBev and | | | | Something which is different from the 2000 period, in |
| AnhauserBusch, which has a very large regional | | | | 2008, 2009, 2010, I think the offshoring/BPO providers |
| shared services based in Sao Paulo serving not just | | | | are really appearing here in Latin America, and this |
| operations in the region, but also the firm's operations in | | | | could be a very interesting moment to potentiate that |
| Canada for the Labatt operations. Unilever has also | | | | outsourcing and offshoring business. |
| set up an HR shared services - and has just sold its | | | | Q: Have you been seeing clients are coming to you |
| finance shared services to Capgemini in the region. | | | | with the need to do more with the same amount of |
| In sum, from those large operations that I've seen, as I | | | | money, or reduced budgets? |
| said I've seen a mix of some centralised services and | | | | Mauro Mezzano: I've been seeing both. Some of the |
| some small countries with local services combined. | | | | clients that were working here during 2008 in shared |
| Esteban Carril: We're serving Argentina, Chile, Peru, | | | | services have come to me and said "Sorry, I cannot |
| Mexico, Colombia, Venezuela, and Brazil. My team is | | | | come anymore with this budget because my |
| divided into three functional areas, in two countries. | | | | company is in a crisis"; but at the same time I've been |
| One team is working in Sao Paulo, Brazil; the other two | | | | having new calls from customers who weren't working |
| functional teams are working here in Argentina. We | | | | with us previously, but who really want to work with us |
| run accounts payable, accounts receivable, credit and | | | | because they've got a new approach to shared |
| collections, billing, cash applications, payroll, commissions | | | | services. The market is still very open and diverse, but |
| and bonuses. It's actually not divided linguistically: we | | | | I think it's going to narrow down into cost reductions |
| found we already had some good skills in Brazil to | | | | during March and onwards. |
| develop the credit and collections department there, so | | | | Q: Obviously globally over the last few years one very |
| we decided to leave the existing group providing | | | | big question has been how to attract and retain talent. |
| services there in Brazil, to provide services for the rest | | | | Recently however as the economy has worsened |
| of the Latin American countries. We wanted to have | | | | there has been the feeling in other parts of the world |
| three functional groups, but we wanted to try to keep | | | | that talent acquisition and retention isn't going to be |
| the same skilled people working and we didn't want to | | | | such an issue over the foreseeable future, because |
| have to move them from one country to another. | | | | people aren't going to be willing to move out of secure |
| Laura Bao Castro: We're part of a global strategy. We | | | | jobs. Is this mirrored in what's happening in Latin |
| have currently two pretty large financial shared | | | | America right now? |
| services centers in Intel. One is located in Malaysia and | | | | Laura Bao Castro: You know, Costa Rica is behaving |
| the other one is located here in Costa Rica; the | | | | very differently from other markets, specifically in the |
| markets that are supported from Costa Rica are | | | | service industry. This year is no different; and the |
| Canada, the US, Costa Rica, and Mexico, Colombia, | | | | projection is 3,500 new jobs, so we actually have a |
| Venezuela, Chile, Argentina and Brazil. | | | | pretty hot market. Talent retention is critical for our |
| Q: Laura and Esteban, you both come from big global | | | | success. |
| organizations with significant worldwide presence. Do | | | | In terms of our sourcing strategy, we work very |
| you think it's still the biggest companies who are setting | | | | closely with the technical schools - particularly the |
| up shared services in Latin America or are the smaller, | | | | accounting technical schools - and the public university |
| or maybe mid-market, organizations also getting | | | | that provides accounting professionals. We provide |
| involved? | | | | internship programs for technical school graduates and |
| Laura Bao Castro: I think the mid-market is coming up. I | | | | a student program for university students: we bring |
| was able to go to [a Latin AMerican shared services | | | | those people while they're still studying to work |
| event in] Chile last year, and also participated in [a] | | | | part-time for us - some of them in an internship mode, |
| conference in Mexico City, and I was very surprised | | | | some as what we call "student workers" - and by the |
| by the number of Latin American multinationals that | | | | time they graduate, and if we feel that they have |
| have already moved into this journey, or are in the | | | | delivered to our expectations - we offer them full-time |
| process of doing so - especially in Mexico where I | | | | jobs. That has been a very successful strategy that |
| think a lot of companies are looking into it, even having | | | | we implemented about six years ago, and we have a |
| shared services within Mexico itself. The concept is | | | | conversion rate of 95%. |
| right there; they know they can reduce costs and | | | | In addition we provide English classes to those |
| produce more quality with shared services, and even | | | | employees to ensure that by the time they get |
| within Mexico itself companies are developing shared | | | | converted they have reached the level of English that |
| service centers. | | | | we require to do our jobs, because we offer services |
| Mauro Mezzano: Actually we've been seeing this shift | | | | to the North American market and a lot of our jobs will |
| since two or three years ago. At the start of the | | | | require a certain level of English capability. So that's a |
| decade many multinationals began establishing shared | | | | sourcing strategy that I think has proven to be very |
| services in the region, but when I went to conferences | | | | successful for us, and it gives a continuous pipeline of |
| in Miami and Orlando there weren't many Latin | | | | new employees coming in. |
| American-owned companies present. Then in 2004, | | | | In the area of talent retention, Intel is a company that |
| 2005, bigger local companies and groups started with | | | | believes in flexibility and we do provide a lot of flexibility |
| the concept. Now smaller and smaller companies are | | | | to our employees. I don't know if you're familiar with |
| doing it; some of them don't really implement what we | | | | the term "Generation Y" for people born after 1980; |
| would call shared services but they do centralize and | | | | 80% of the population that I manage are Generation Y, |
| they do take a few concepts from shared service | | | | young people with very different mentalities - they |
| centers, and perhaps redesign a process. The | | | | have a different chip in their minds from mine, for |
| influence of shared services is spreading out through | | | | example - and they value flexibility very much, so we |
| many more companies than before. | | | | have programs like what we call "telecommuting" |
| Ricardo Neves: I've seen an increase in interest: among | | | | where they're able to work from home up to two |
| mid-market companies it's less regional. What I've seen | | | | days a week. They have different start and ending |
| is among large companies, they've done a lot of | | | | times - some of these employee are going to school |
| rationalization in each of their countries of operation, | | | | so they need flexibility to continue their studies - we |
| and a lot of discussion about regional shared services. | | | | have found through the surveys and questionnaires |
| What I've seen in the mid-market, specifically in Brazil, | | | | that flexibility is one of the main reasons why they |
| are still questions on "in-country" shared services if you | | | | choose to stay with us. We provide portable |
| know what I mean. It's more making sure that they | | | | computers to all our employees which they can take |
| leverage their local operations, and then as a second | | | | home - and this generation are technology-growers, of |
| step - especially with some of the systems work done | | | | course, so they love that. |
| - it's something of a done deal to set up something | | | | These two things have really been proven to help us |
| regional: when you have a regional systems platform, | | | | retain employees - in addition to the career |
| for example. | | | | development of course. One of the beauties of shared |
| Q: Let's shift focus slightly and take a look at the | | | | services is that you manage different functions, you |
| outsourcing market in Latin America. Over the past | | | | manage different groups, and if someone wants to |
| couple of years we've seen the entry into the region | | | | start a career they will have the opportunity to move |
| of some of the big global players - in particular some | | | | into these different groups and become a rounded |
| of the big Indian providers. What impact has that had | | | | professional. |
| on the market - and on firms that are running shared | | | | Q: Esteban, how are you finding the employment |
| services? | | | | market - and has there been a shift in your acquisition |
| Esteban Carril: In my experience in leading a shared | | | | and retention strategies as a result of the economic |
| service centre I have been trying to find different | | | | crisis? |
| ways to do things, and finding vendors who can | | | | Esteban Carril: In our case - and I would say that this |
| provide services in a more efficient and economical | | | | applies for every other shared services in Latin |
| way than us doing it ourselves. When it comes to the | | | | America - turnover rate is one of the most challenging |
| outsourcing sector, I find that in Latin America things | | | | areas for shared services. We have been doing |
| are still in development. When it comes to outsourcing | | | | several things to retain our talent. We have been cross |
| it's important to see how well-organized companies | | | | training - so, for example, when an employee comes |
| are, and how well they provide services in multiple | | | | to work in one department we offer them some |
| countries - and I see the challenge for many of the big | | | | exposure to other areas of operations, to other |
| firms is that they are still working as independent | | | | processes, so they can learn other activities and |
| companies in each country, and not really regionally | | | | processes which as Laura pointed out adds more |
| organized in order to provide services to multi-country | | | | value to their own career. |
| shared service centers. | | | | This year we are also offering a new service inside |
| I think that's one of the key points that I've been finding. | | | | shared services which is that we loan employees to |
| Another key point is that some companies are | | | | other areas, so for example if a business area needs |
| regionalized but unfortunately they might not have | | | | an extra person because someone goes on maternity |
| presence in all markets, so that becomes a problem in | | | | leave, or even leaves the company, we provide them |
| terms of finding a single regional outsourcing solution to | | | | with people as a service. If our people are trained in |
| meet our needs. | | | | other systems and other processes we can add value |
| Laura Bao Castro: About five years ago companies | | | | by moving those people to other areas where they |
| providing outsource service arrived to Costa Rica. | | | | can spend two or three months. We're offering that |
| Since then, these companies have grown , for | | | | as another service from our shared service centre. |
| example HP has now close to 8,000 employees. While | | | | Another area is flexible time. The nature of our |
| I can't be specific about their services or regions they | | | | business is, 70% of our business takes place within the |
| serve, these companies look for people speaking | | | | last three weeks of the quarter so we really need to |
| Spanish, English, Portuguese, French, Italian - even | | | | be flexible with our people. We let them do some |
| Chinese. We do not work specifically with an | | | | telecommuting, we offer flexible time, because - as |
| outsource vendor at this moment - but periodically we | | | | Laura pointed out - you should give them some kind of |
| reassess our current strategy. | | | | freedom inside the company. We provide English and |
| Ricardo Neves: One of the features that I've noticed, | | | | Portuguese classes as well. |
| one of the movements in the outsourcing space in | | | | The key here is that we've signed some agreements |
| Latin America, is that there's been a lot of currency | | | | with universities through which we bring new people on |
| fluctuation between the dollar and the real, and the | | | | board; we usually train them in those areas which are |
| dollar and other currencies, and I've seen some | | | | more transactional, so they gain experience - and then |
| discussions on contract review - especially for service | | | | we move them around, not only inside shared services |
| providers - from both sides: if the clients want to take | | | | but also outside, offering them now career |
| advantage of that, or even discuss relocation of some | | | | opportunities in the business, in different countries, in our |
| work; or if the providers are saying that an increasing | | | | local finance team. So we offer them several routes |
| cost is related to currency fluctuation putting added | | | | to success inside our company. |
| pressure on their margins. Definitely currency | | | | Q: Are you thinking that turnover is still going to be an |
| fluctuations have been one of the biggest topics of | | | | issue for you in a worsening economy and a |
| discussion in the region. | | | | consequently tightening job market? |
| Q: OK, let's move on and address the big issue of the | | | | Esteban Carril: I think right now, there are several |
| moment and, perhaps, of many moments to come: the | | | | companies that are letting people go, and I think the |
| financial crisis and global economic downturn, and their | | | | labor market will be better for us. However, inflation is |
| impact upon shared services and the sourcing sector | | | | still a problem - particularly in Argentina - so when it |
| in the region. Ricardo, what do you see as having been | | | | comes to retention we would expect to be reactive in |
| the main changes in the space since the beginning of | | | | terms of salary adjustments, to ensure competitive |
| the main phase of the crisis in October? | | | | salaries. So in general terms I think the market's going |
| Ricardo Neves: What I've seen is basically a larger | | | | to be quieter; however, we should always keep an |
| interest in discussing measures to reduce costs. Some | | | | eye on the need for salary adjustments - especially |
| of the plans that were lined up to be rolled out in the | | | | with the inflation fluctuations we may see in coming |
| future have now become more interesting for | | | | years. |
| discussion now; specifically, if they can help reduce | | | | Q: Ricardo, what's your take on the job market and |
| costs. The mood, the willingness to do something now | | | | the pressures on talent management at the moment? |
| has increased. Organizations today want to do | | | | Have things changed as a result of October's events? |
| something bolder than they were willing to do even six | | | | Ricardo Neves: Some of the clients I support have |
| months ago. We used to hear things from the | | | | said the pressure on them has increased to deliver a |
| business like "don't disrupt my growth", "don't rock the | | | | good service at a lower cost, and the best way to do |
| boat"; now executives are coming and saying "hey, | | | | that is with good people. So I think the search for good |
| where can we make this boat more nimble? How can | | | | people, and the importance of retaining them, and |
| we rock the boat but at the same time make us | | | | working the talent market, is still a big challenge as we |
| leaner and more prepared?" | | | | go into crisis mode. Even though when you think about |
| I've seen this happening in a couple of ways. One is, | | | | it there might be a little more availability of resources |
| clients coming to us looking for an overall assessment | | | | on the market, when you look at the example we've |
| of cost reduction - which usually includes the theme of | | | | heard of Costa Rica - or even Brazil, where |
| shared services. Secondly, we're also having a lot of | | | | companies are going more into the interior of the |
| discussions on reviewing outsourcing contracts - or | | | | country and looking at other cities inside Brazil to be |
| even making those contracts broader, in order to | | | | able to retain a good flow of people coming out of |
| ensure they are capturing all the value they could | | | | universities, and have been growing very fast |
| based on the relationship. So overall what I'm seeing is | | | | throughout the country - shared services and new |
| an increased willingness to take bold measures to | | | | organizations coming in are going after talent very fast, |
| ensure cost reduction. | | | | wherever it is; so I don't believe it will be an easier time |
| Q: Do firms still have money to spend on big | | | | managing talent for shared services during the crisis |
| implementations, or is it about making changes as | | | | we have now. |
| cheap as possible? | | | | Q: And have you noticed - or are you forecasting - a |
| Ricardo Neves: I think a lot of it is, as you say, to make | | | | drop in attrition rates over the next few months? |
| things as cheap as possible, as fast as possible. But | | | | Ricardo Neves: Not at this point; considering what I've |
| I've seen some room to say "if I need to spend that to | | | | both from clients and from providers with whom I've |
| get that back, then let me hear what you have to say". | | | | been working closely I have not seen any significant |
| Again, I think firms are more willing to do things than | | | | change in those rates at this point, in Brazil particularly. |
| they were before - but no-one's saying they've got a | | | | Q: And will the increased operation of big BPO |
| big pile of money to reduce their costs. What they | | | | providers have an impact here? |