Cheap labor and a Spanish-speaking population are making Argentina and other Latin American countries rising stars among companies looking to save money by sending jobs overseas.
South America is an ideal base for services targeting the Latino population in the U.S., said Probir Ghosh, president of Denver-based Virtual Source Networking, a consulting company that helps companies outsource.
“Many countries like Colombia, Venezuela … still depend mainly on language-related work. A good amount of business that goes to South America would have a direct or indirect connection to language,” Ghosh said.
Douglas County-based outsourcing provider TeleTech Holdings, which has worked for Latin American companies in Argentina, Brazil and elsewhere for at least a decade, has seen demand from U.S. companies for services in those countries rise, said KC Higgins, a Teletech spokeswoman.
American companies, which rushed to India – a 600-pound gorilla among offshoring destinations – over the past 10 years, are looking elsewhere as wages have risen in that country, said Peter Ryan, senior analyst at market research company Datamonitor.
India and China still lead the pack as locations for offshore jobs, but other countries are emerging as alternatives. Health care and financial services are among a host of industries that are sending jobs to such far-flung locations as Brazil, Romania, Colombia, Ireland, Israel, Hungary, South Africa and Egypt.
U.S. unions cite job losses
The trend has roused the ire of the American labor movement. The Communications Workers of America, which has targeted the technology sector for organizing, estimates that American companies have sent offshore more than 500,000 jobs since 2000.
Argentina has been aggressive in seeking trade agreements that have enhanced its ability to win work from American companies, said Marcus Courtney, president of WashTech CWA, the Communications Workers of America’s organizing arm for tech workers.
Industry “wants to develop a global supply chain of labor; they are equating offshoring to an assembly line. More and more workers are competing for fewer and fewer jobs, and this drives down wages,” Courtney said.
The collapse of the peso in 2002 sent Argentine wages plummeting below the level paid in India and helped to attract U.S. business to the South American country.
TeleTech’s Latin American revenue rose from $91.7 million in 2004 to $171.7 million in 2006. Much of the new work is in Argentina, Higgins said.
“In 1997, 100 percent of the work we did in Argentina was for Argentine companies, and that is no longer the case. We started with one site; now we have three, and we continue to expand,” Higgins said.
Global expansion plans
TeleTech also is expanding into other emerging nations. The company recently opened its first Costa Rican “delivery center,” where workers provide both front- and back-office functions, and expects to begin operating another in South Africa soon.
TeleTech has seen steady growth in India but nowhere near the expansion of its Latin American market.
It isn’t only the call center and other customer-care jobs that TeleTech offers that are luring companies overseas. Modern infrastructure and a plentiful supply of cheap, skilled Internet technology professionals have resulted in U.S. firms sending information technology jobs offshore.
A recent study by The Brookings Institution found that demand for cheaper labor poses a threat to the information technology job base in places like Boulder, Denver and Colorado Springs.
The report predicted that Boulder, with its highly concentrated technology sector, would lose between 3.1 percent and 4 percent of its information technology jobs by 2015. Denver and Colorado Springs, which also have large numbers of tech jobs, could lose from 2.6 percent to 3 percent of those jobs, the study said.
Another point of view
The flow of information technology jobs to other shores isn’t bad news for America, Mary Lacity, co-author of “Global Information Technology Outsourcing: In Search of Business Advantage,” said of the job flight.
With baby boomers on the cusp of retirement and fewer students pursuing computer science and related subjects, there could be a shortage of American workers capable of doing the kinds of jobs that are going overseas, she said.
And more jobs will be created than lost as American industry concentrates on higher-value work.
But many companies that consider offshoring a way to cut costs do so without having a workable plan, said outsourcing consultant Ghosh. In some cases, they run into serious quality issues that can undermine the health of the company, he said.
“A lot of companies will outsource because they think that is the new wave. That doesn’t really work; you need a strategy.”
Ghosh sometimes tells companies that have outsourced only to find it isn’t saving them money to stop and take a closer look at their business. “They have to understand the company’s core strategy. If it is something they want to outsource, then we recommend which areas to look at.”
An overseas operation isn’t always the best strategy, he said.
Denver-based Qwest Communications International maintains all of its English-speaking call centers within its 14-state service region.
The telecom has a small number of Spanish-speaking customer-service representatives in Mexico and a repair service center for Spanish-speaking customers in Panama, said Qwest spokesman Vince Hancock. And many customer-service and other functions can be performed by people who work at home.
TeleTech has hired more than 700 people to fill the positions in 22 states since the end of 2006 and expects to have more than 1,000 by the end of this year, Higgins said.
“They get good people, stability and good service,” Ghosh said of companies that use at-home labor.
Staff writer Tom McGhee can be reached at (303)954-1671 or tmcghee@denverpost.com.
