After making a splash in US, European and Japanese markets, Indian ITeS companies are now ready to enter Latin America. The past two years have been many of them set up shop in countries like Chile, Brazil, Argentina, Uruguay and Mexico. From TCS to Satyam, Evalueserve to 24 / 7, Indian companies have now opened development centers or acquired companies all across Latin America.
And whatâ€™s driving them is the fact that the continent is one of the fastest growing regions for contact centers. Experts say, expansion to Latin America is a logical step for Indian companies looking to globalize their operations.
IT outsourcing in the US to increase at 5.9 %. The American IT outsourcing market is expected to increase at a compound an annual growth rate of 5.9 per cent, from $13.3 billion in 2006 to $17.7 billion by 2011, a new report has summarized.
There will be continued shift within federal market away from a government-owned, government-operated model towards a contract-operated approach, the report said. This shift, it says, is fueled by the impending federal IT workforce shortage, war in Iraq, and federal contract spending slowdown.
Two main reasons are driving the growth. They are, it helps Indian ITeS companies to service the larger Spanish speaking population in the US and they find it easier to attract Spanish speaking talent in Latin America compared to India. Also, even though Latin America does not have the depth of talent like India it has sufficient expertise to complement the India story.
In fact, research done by Value Notes reveals the number of call centers agents working for outsourcers in Mexico will grow to 85,000 by 2010, and in Brazil it will increase to 12,000 in the same period.
To obtain the IT talent required and to minimize the costs of acquiring new technologies in relatively short time frames, spending in the areas of business process outsourcing and application services will contribute the greatest growth to the federal outsourcing market over the forecast period.
To obtain the IT talent required and to minimize the costs of acquiring new technologies in relatively short time frames, spending in the areas of business process outsourcing and application services will contribute the greatest growth to the federal outsourcing market over the forecast period, the report said.
Already Indian companies working there are scaling up operations. Evalueserveâ€™s Chilean delivery center which started with approximately 15 employees is expected to employ a few hundreds in the next two to three years. Subsequently they will add around 60 professionals every year. The company believes the country could represent 10% of global revenues by 2008, and also add business for the India and China operations. Nearness to US is major attraction for Indians. For the Chilean center helps in dealing with the workload for it is in the same time zone. Besides Chile is a part of the global delivery platform for some clients of ITes of Evalueserve, TCS, Satyam etc.
While costs (especially salary costs) in the region are higher compared to India, they are still lower than those in the US. Besides, bandwidth costs in Latin America are lower than in even India because of its proximity to the US. Although the market may not be as big as the US or Europe itâ€™s still big enough to keep Indian companies engaged.
Lower valuations of Latin American companies make the entry of Indian vendors relatively easier. Since the Latin American economies are â€˜yet to arriveâ€™ and eager to grab a slice of the outsourcing action, it creates good acquisition opportunities for the cash rich Indian vendors looking beyond India.