Nearshore Americas

Canada's Resurgent Nearshore Opportunities

With the Canadian dollar currently valued at US$0.77 (on date of publishing)—a significant drop since hitting par back in 2012-2013—outsourcers north of the border are sitting on an impressive value proposition based on labor arbitrage, cultural affinity, and geographic proximity. But to maintain a long-term and sustainable base, Canadian providers must do more: they need to compete with innovative technologies and business models.
“I see three technology areas where Canadian providers are investing,” says Tom Loberto, CEO of Montreal, PQ-headquartered Atelka Enterprise Inc. “First, telecommuting and work-from-home agents. Second, leveraging social media to serve customers across multiple channels. And third, setting up listening posts on platforms like Facebook and Twitter.”

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Telecommuting Models
In Canada, the infrastructure is in place to leverage telecommuting, and to tie agents into analytic software—a growing requirement in the industry. This model builds on the fact that Canada can deliver first-world connectivity to educated populations in economically disadvantaged areas.
“There are two distinct types of telecommuting,” says Loberto. “There is hub-and-spoke, where you work from home, but are perhaps only 50 kilometers from a contact center. And there’s a model where you aren’t tied to any center—you could be anywhere in Canada. Ultimately, the second is where you want to get to, as it has a wider catchment.”
Loberto says that his company is past the evaluation stage—it is now building up its operating model to be truly virtual, as opposed to hub and spoke. But this second model can be a steep climb, and most Canadian providers have yet to fully leverage its advantages.
“The technology is there, but there are challenges,” says Loberto. “There is no contact center where people can go and get trained. As well, the bigger obstacle is that you need a virtual model for filling and managing positions.”
The Goldilocks Scenario
With a fully functioning telecommuting model, a Canadian nearshore provider can operate in a goldilocks scenario, wherein it can utilize all the most sophisticated technologies for analytics and social media, while also benefitting from favorable labor costs and exchange rates.
“In Canada, telecommuting is a huge opportunity,” says Peter Ryan, a Canadian executive who works for NY-headquartered Conduit Global. “It begins with basic transactional activities, and from there you can build higher-value services. That’s what happens once confidence in the business model increases—it’s what we’ve seen in the US.”
And that’s the rub. The US currency is strong, but there are plenty of rural areas south of the border with lower wages and excellent connectivity. As with many other technological trends, the US is also ahead at adopting higher-value services via telecommuting agents.
“The Canadian advantage is real, but the US can leverage a similar model,” says Mark Schrutt, Research Vice President, IDC Canada. “If you go to a Tier 2 city like Cleveland, you can see savings of 10-15%, and then if you go to Mobile, Alabama, you might see another 10%.”
Impact of Other Industries
In Canada, the opportunity to build more advanced capabilities with a telecommuting workforce is growing because of a unique economic reality. With lower energy prices, many workers are leaving the oilfields in Alberta and returning to the Maritime Provinces of New Brunswick and Nova Scotia, which have well-established outsourcing capabilities.
“These regions are trying hard, and are doing a good job at retraining, as well as providing financial incentives to companies that base operations there,” says Schrutt from IDC. “Nova Scotia in particular is trying to bring back people. And, given the time zone, they like to tell US customers they can start their day an hour earlier.”
Still, the Canadian dollar can be fickle, and long-term viability requires the combination of an effective labor strategy with dynamic technologies. The work-at-home business model is less developed in Canada than in the US, which means that Canadian providers have to step up to the plate—particularly given the renewed interest.
Multi-channel Approach
“There are a lot of discussions about coming to Canada, and we are starting to see some traction with remote technology servicing delivered as higher value BPO,” says Ryan from Conduit Global. “Companies are looking to re-establish with more non-voice transactions— more social media, more web chat—with higher-end front office BPO.”
Where these initiatives can hit a wall, however, is when compliance issues come into play, or for those workers needing advanced certifications. However, for industries with high transaction volume requirements, the new reality in Canada, combined with the right technology, might be just the ticket.
“I am definitely seeing interest in the telecom and retail space, where there is high volume transaction activity,” says Loberto from Atelka. “In these areas, incoming transactions can be segmented, with analytics to determine which customers should be dealt with via dedicated voice.”
The Canadian Advantage
Canada can draw on a young immigrant population that is tech savvy and that can handle multi-lingual support. Given the currency play and geographical proximity, the country is now getting competitive with Costa Rica and parts of South America. But to build a long-term industry, Canadian providers will have to work hard to provide added value from a distributed workforce.
“One way to mitigate against capacity and currency issues is for vendors to get to work building those telecommuting capabilities,” says Ryan. “It’s important, because US customers will start to get uncomfortable if the dollar rises to the US$0.83 cent range.”
The problem is that this is not happening to the extent that it should. Schrutt says IDC research indicates that, for the most part, vendors in Canada’s IT industry are not prioritizing telecommuting. Scalability of qualified labor remains a persistent issue, which puts a cap on growth.
“Can a big outsourcing company like CGI expand beyond BPO and accounting, where Canada has plenty of people, and where the rates are attractive? Maybe not,” says Schrutt. “Canada has pockets of tech savvy workers, but they get drained pretty quickly when the work comes in.”
It then becomes a business decision on the part of the vendor whether to invest in a training culture focused on the latest technology platforms, and building a reliable value proposition that can withstand economic volatility. At the end of the day, Canada has a lot to offer, but without an innovative approach in areas such as telecommuting, it’s just a currency surge away from lost opportunity.
Interesting in Sourcing and Services in Canada? Join us for a brand new conference “Sourcing Decisions 2017” in Toronto coming in March, 2017: LEARN MORE and REGISTER

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Tim Wilson

Tim has been a contributing analyst to Nearshore Americas since 2012. He is a former Research Analyst with IDC in Toronto and has over 20 years’ experience as a technology and business journalist, including extensive reporting from Latin America. A graduate of McGill University in Montreal, he has received numerous accolades for his writing, including a CBC Literary and a National Magazine award. He divides his time between Canada and Mexico. When not chasing down stories, he is busy writing the Detective Sánchez series of crime novels.

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