cost comparisson for bpo and contact center operations in central america

Saturday, January 23, 2010

Contact Center, BPO and ITO Hub in Central America


“…if the people are not trained and are not receiving the right kind of training, then we have to go elsewhere — either elsewhere in the United States or elsewhere in the world — because at the end of the day, we have to find the people.”

Business Lexington's interview with Tom Blodgett,ACS


Honduras Business Case


Honduras - San Pedro Sula - Altia Business Park

Location Assestment Framework

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1. Scale and Quality

Labor Pool Skills Availability Graduate OutputCultural affinity

Skills and Scalability


http://en.wikipedia.org/wiki/List_of_schools_in_Honduras

Statistics:Guatemala, 26 bilingual schoolsEl Salvador, 56 bilingual schoolsNicaragua, 5 bilingual schoolsCosta Rica, 35 bilingual schoolsHonduras, 410 bilingual schools

Several associations:• Asociacion de Escuelas Bilingues de Honduras• AASCA - • Asociacion Noroccidental de Escuelas Privadas Bilingues • Part of SACS (Southern Association of Colleges and Schools)

English skills…bilingual schools are the source…




Important Data

•Largest English speaking and IT population in Central America (410 bilingual schools), almost 100% more than the rest of Central American countries combined (Approximately 70,000-85,000 people in the country). Each year this number grows by 7,000 high school graduates, and more than 15,000 college graduates per year just in San Pedro Sula

•Safe & Cost-Competitive Near Shore Location: Honduras offers the most cost competitive solution in the near shore area in a safe, stable environment

•Positive Business Environment: Solid legal framework for investment ensure the safety and continuity of business relations.


What can we expect from Honduras?•Honduras will become the new hot spot for BPO and contact centers due to several factors:

– Labor shortage in neighbor countries: Gua, ES, Ni and CR are all struggling to supply and sustain growth in this industry

– World financial crisis will keep on putting pressure for companies for outsourcing services, and Latin America/Central America is a perfect nearshore location

– Competitive labor costs will create an increasing interest in opening an operation in Honduras

– U.S. Hispanic market will keep on boosting bilingual services

– Honduras will be the only country in Central America that will be able to supply the necessary labor pool, which will provide sustainability to the indsutry


•Cultural affinity – more than 100 years with presence of U.S. companies succesfully operating in Honduran territory

•More than 25 yrs of democracy – catalogued by the World Economic Forum as a country with good future perspectives

•Multinational carriers presence (Milicom – Navega, Multidata, Digicel (Irish),Telecorp, Cablecolor, Telcel (Mexican – Claro)

•Honduras has the human capital and the passion for service culture: opportunity for lower cost operations due to attractive labor rates

Important Data


2. Cost

Cost of Operations Cost of Training Cost of Real Estate& Energy

Cost of Bandwidth Cost of Living

Savings


Decision Matrix comparing Offshore Locations

CRITERIA

PHILLIPINES INDIA CANADA IRELAND PANAMA BRAZIL HONDURAS

AVERAGE AGENT SALARY PER YEAR

(US $) 4,000-6,000 3,500-5,000 25,000-40,000 25,000-40,000 6,500-8,500 7,500-10,000 4,000-6,000

REAL ESTATE COST (RENT PER SQUARE

METER) 26.00 18.00 35.00 38.00 26-28 40.00 18.00REAL ESTATE COST (RENT PER SQUARE

FT/YR) 29.00 20.07 39.03 42.38 31.23 44.61 20.07REAL ESTATE COST

(BUYOUT PER SQUARE METER) 3,000 2,000 3,800 4,000 3000-3500 4,000-4,500 1,800

TELECOMMUNICATION (E1) 1,000 - 1,400 1,100 - 1,500 650 - 800 1,300 - 1,700 1,200 - 1,500 1,000 - 1,500 900 - 1,200


Decision Matrix comparing Offshore Locations

CRITERIA

HONDURAS MEXICO COSTA RICA CHILE

AVERAGE AGENT SALARY PER YEAR (US $)

4,000-6,000 10,000-12,000 8,000-10,000 10,000-12,000

REAL ESTATE COST (RENT PER SQUARE

METER) 18.00 35.00 26.00 30.00REAL ESTATE COST

(RENT PER SQUARE FT/YR) 20.07 39.03 29.00 33.46

REAL ESTATE COST (BUYOUT PER SQUARE

METER) 1,800 3,800 2,700-3,500 3,000-3,500

TELECOMMUNICATION (E1) 900 - 1,200 1,200 - 1,700 2,000-3,100 1,200 - 1,500


But we need to compare operating costs in Offshore locations...

• In our financial and feasibility models we must include:

• Direct salaries

• Management costs

• Support staff salaries

• Training

• Real estate

• Technology and communication


Cost Comparisson between Central American countries

Honduras Costa Rica Nicaragua El Salvador Guatemala

Human Resource

Labor pool availability 85,000 15,000 4,000 Less than 5,000 Less than 5,000

Human Resource

Bilingual schools 410 35 5 55 26

Human Resource

Average agent salary (bilingual) $448.00 $650.00 $575.28 $550.00 $540.00

Human ResourceComments

Honduras has the potential to

become the next BPO and contact center

hub due to labor availability

Labor shortages have caused high rotation

and wage/cost increases

Labor shortage due to a small

amount of bilingual schools

has deaccelerated

the establishment of contact centers

and BPOs

Labor pool has forced the

government to start an English training program, but will

struggle in the next five years

Guatemala has problems

supplying bilingual labor force due to a shortage caused mainly on the low

amount of bilingual schools

per capita

Telecommunication and service providers

Number of service providers 31 1 9 13 19Telecommunication and service providers

Average Internet Cost per Mega $200.00 $526.00 $490.00 $465.00 $525.00Telecommunication

and service providers

E1 $1,089.00 $2,960.00 $3,500.00 $2,400.00 $2,100.00

Telecommunication and service providers DS3 (Clear channel) $22,000.00 $26,080.00 $30,000.00 Not available Not available


Honduras Costa Rica Nicaragua El Salvador Guatemala

Real estate

Cost per square feet per year $20.07 $27.88 $17.84 $21.00 $14.00

Real estate Comments

Altia Business Park can offer turn key projects, including everything needed

to start an operation in the shortest time, reducing curve of experience costs

This is one of the highest costs in Central America

Limited office space availability

Low offer on office space

that can comply with

contact center and BPO

requirements, high costs

Guatemala has a large office space offer, but presents high traffic problems

Energy costs

Energy cost per Kw-Hr 0.15-.17 0.09-0.13 0.16-0.21 0.16-0.20 0.16-0.19

Energy costsRedundant systems

YesProblems with

national grid and energy supply

Cost comparisson between Central American countries


Honduras

New entrants Under development Developed

Stages of Development of Contact Center and BPO in Central America

Location Maturity

Nicaragua

El Salvador

% of Savings Potential in Operating Costs

Guatemala

Labor Pool Availability

Costa Rica

Panama

Honduras

Nicaragua

El Salvador GuatemalaPanama

Costa Rica


Important Data

•Altia Business Park will become the most modern technology and business park in the region:

• Energy redundant – Energy efficient: we have designed the park as energy self sufficient, but also interconnected to the national grid. We have designed all the buildings aimed to obtain the LEED certification. This will be translated to a cost competitive advantage on the power bill (20-30% lower than standard consumption)

• Connectivity redundancy – high quality, cost effective telecommunication

• World class environment – we can deliver turn key office space based on your requirements and needs

• World class security

• Fully 24/7/365 operational capability


Important Data•Honduras is connected to the NAP of the Americas through 3 submarine cables, which provide reliable communications infrastructure

•Honduras has one of the largest fiber optics network in the region. Lowest telecommunication cost in the whole region•Sustained economic growth of more than 5.5% during the last 7 years; it is expected to have a 3% growth during 2010

•Honduran recently elected government has established the service sector as a national priority


3. Business Catalyst

Government BenefitsIncentives

Competitive Landscape Untapped LaborPool

CurrentlyEmployed

Business Environment


San Pedro Sula Business Case


•70% of business visitors to Honduras arrive through San Pedro Sula’s airport

•San Pedro Sula is the motor of the Honduran economy, generating more than 60% of the national GDP

•San Pedro Sula has become a vibrant economic and industrial city (1.1 M people) with 6 main universities (total population of 50,000 students) and 52 bilingual schools in the urban area and 161 in Cortes, and a total of 410 in Honduras

•San Pedro Sula has daily/direct flights to New York, Atlanta, Houston, Miami and connected to Los Angeles, San Francisco, Mexico, Central and South America

Important Data


4. Infrastructure

Operational Environment

Connectivity Bandwidth availabiltiy Transportation


Internet costs (VoIP)

Source: Julio Herrera, Navega Commercial Manager,March 2009 (Prices in US$)

This price has gone down to US$200.00, information provided by Mario Alvarenga/Navega, January 2010


Important Data

•Altia Business Park is based as a free zone, which means you are exempt of any local or national tax.

•Competitive real estate cost •We have in place a network of strategic partners and alliances to help you reduce your curve of experience costs and your time to have running an operation

•Any BPO or contact center will have at their service a multidisciplinary team aimed to help you have a successful operation: human resource, engineering, logistics, etc


Altia Business Park - Strategic Geographic Location (public transportation routes)

25 minutes, moderate traffic


We are on the 11th floor (14 floors)

Connectivity and power infrastructure installation

First tenants will be moving their

offices and operations

Interior of Lobby design finished

Infrastructure

70% advance on civil works

100% advance

Building

Building Timeline

May ’09 Aug ’09 Oct ’09 Dec ’09 March ’09


Our strategic network


Commercial Risk Political Risk Natural Risk Social Risk

5. Risk Profile


Important Data

• Honduras has recently designed a Nation Plan for the next 30 yrs. This was elaborated by leaders, academics, businessmen, social institutions and represents the vision of a better Honduras

• On November ’09, we elected a new government and President Lobo has established as his priority to execute the Nation Plan

• Altia Business Park spearheads the new and modern Honduras, focussed on developing a service industry based on our competitive advantages


6. Quality of Life

Social Infrastructure likeEducation institutions,

hospitals

Non work culture Availability of Recreation/Leisure facilities


Quality of Life


“Altia Business Park, located in San Pedro Sula near two of its premier technology universities, is the first designated Free Zone facility offering all the tax and customs duty benefits, tailored for IT and BPO firms. Its prime location in the main commercial and industrial city of Honduras with a captive population of over 1 million is a critical element for attracting and retaining quality human resources and managers.”


Conclusions Honduras is a count ry w i th the r igh t infrastructure and the human capital, perfect for a near shore operation; a vibrant city with the business environment aimed for successful ventures; a world class business and technology park with all the required energy, telecommunication, security and modern office space, all of them together providing a real competitive cost advantage.


cost comparisson for bpo and contact center operations in central america

Documents

bilingual schools honduras

real estate cost rent

real estate cost buyout

bilingual services honduras

cost comparisson

bilingual schools nicaragua

real estate technology

real estate costbuyout