Nearshore Americas

CEO Interview: Softtek’s Trevino Speaks Openly About Leadership, Acquisitions and the Region’s ‘Sweet Spot’

Blanca Treviño is President and CEO of Softtek, an IT and BPO solutions provider headquartered in Monterrey, Mexico. With over 6000 associates in 30 global offices from Brazil to China, Softtek is the largest private IT services provider in Latin America. Since she took over as CEO in 2000, Treviño has increased company revenue by 400%, and agressively expanded operations worldwid

Nearshore Americas sat down with Treviño last week to discuss the changing face of Latin American outsourcing, Softtek’s new direction in 2010, and her personal philosophy on work, corporate leadership and being a female CEO in a male-dominated playing field.

Q: What do you see for the nearshore industry in 2010? Can Latin American outsourcing compete with the so-called ‘India Inc.’ brand, and what role is Softtek playing in that vision?

A: Things have changed since ’97 when Softtek launched the Near Shore initiative. It was difficult then because offshore services dominated the market, and nearshoring was perceived as the new competition. Instead, today we have established ourselves as another component of global sourcing, along with the offshore industry.

From my perspective, it makes more sense for us in the LATAM market to position ourselves this way. It’s difficult to face India, if you’re trying to compete with India. We’re seeing more and more that nearshoring is important in what companies today are looking for – global sourcing alternatives, rather than just offshore services. So in that sense, can we compete with Indian vendors? We’ve been competing with them for 13 years. And we win whenever we convince clients how important it is to have the nearshore component in their overall outsourcing strategy. For example, in a business where there isn’t much interaction with the client, we won’t be more productive by being closer or in the same time zone. But in a business requiring constant communication between the team and the user, that’s where Latin American nearshoring finds its ‘sweet spot’. We can even be cost-competitive for our clients if we leverage this advantage.

Blanca Trevino:
Softtek pioneered the concept of nearshoring. We started offering those services way before any other company, and as a result we have matured. The Latin American domestic market is not as demanding as the US one, and not many LATAM providers have made that transition or reached that maturity level. They will get there, but it will take a few years. Softtek is one of the few that operate on a global level, and today if you ask any of our clients who also work with Indian vendors, they will tell you that our processes are as good, and sometimes better than them, who have been in the market for 25 years. So the role we play is still as pioneers, showing other LATAM companies how to position themselves in the US market, and offer that ‘sweet spot’ proposition to US firms.

Q: What is it like running an international outsourcing business out of Mexico? What are the strengths and weaknesses you see in the Mexican outsourcing eocnomy?

A: I believe that Mexico is the country best suited for nearshore services. If you think of the geo-political advantages – time zone and proximity to the US are both critical – you can leverage those benefits to put an attractive value proposition on the table. It’s not just about convenience for clients; it’s about using that proximity to work much more productively for them. You don’t get that with Brazil or Argentina for example. Even though we have GDCs (Global Delivery Centers) in both those countries, they are more focused on serving the domestic markets than the US.

NAFTA is another advantage for us in Mexico. The TN (Trade NAFTA) visas allow easy movement of workers across the border, and that’s not available in other Latin American countries. Under NAFTA, there are also certain industries in the US that cannot work with countries that have a nuclear agenda, such as India, and so their business often comes to us. Intellectual property laws are also a big plus.

Trevino: “In our facilities we have English classes for workers, and everybody takes at least three hours per week if their English is not good enough.”

In terms of challenges, one is demographics. Mexico is not like India where you can set up a business in Bangalore and find all the talent you need right there. To access a large enough talent pool in Mexico, we have four development centers in different regions; in fact our largest GDC is in Aguascalientes, which is a very small city. Apart from Mexico City, the country doesn’t have cities that can support large scale operations like ours by themselves, so it makes sense to have more than one center. It also keeps costs down. In Monterrey for example, we face significant challenges in finding talent. Since many businesses have set up here, we are competing for skilled workers, and that makes it more expensive.

In Mexico, the government thinks about many other industries before thinking of IT. That is changing, but not at the speed we would like.

Another challenge is the government understanding of what should be done for Mexico to become an important nearshore player. In India, everything is organized and aligned with that interest, and the government is very ‘alive’ in terms of providing incentives for companies, especially in IT. In Mexico, the government thinks about many other industries before thinking of IT. That is changing, but not at the speed we would like. English capability is another factor that shrinks the talent pool. In our facilities we have English classes for workers, and everybody takes at least three hours per week if their English is not good enough. So it’s definitely a problem, but we can work with it.

Q: Talking about Softtek in particular, can you give us an idea of who your main customers are? Are they growing strongly, or are they seeing increased pricing pressure in the nearshore market?

A: Our focus has always been the corporate market, the mature and demanding multinationals. Today our clients include 17 of the global Fortune 50, some of whom we are just starting with, and some who we have been working with for ten years or more. Because of non-disclosure agreements, I can only give out a few names like GE, Virgin Mobile, Novell and Metlife Mexico. GE in particular has been key in our development. In addition to those, we recently added important clients in the retail, beverage, health and financial services industries.

Are our clients growing? Yes, in some of them we have seen significant growth. As soon as they realize that the nearshoring model does make sense, they start growing quite rapidly. Softtek itself has grown in the number of clients we have, but one of the things we are proud of is not client numbers, but how long we have worked for some of them. About 60% of our revenue comes from clients for which we have worked more than 6 years, and at least 30% comes from clients we have had for 10 years. That shows how we have been able to evolve and grow with our clients on a global scale. Yes, in 2009 we did experience the pricing pressures that happen during a recession, but instead of simply handing out price reductions, we worked with clients to arrive at cheaper answers such as moving work to China, or changing the way we deliver services. In Latin America the profit margins are not always as high as in India, so we need to come up with creative solutions to combat pricing pressure.

For many years we have grown at a compounded rate of about 30%. Our growth was less than that in 2009, but still significant, and I think we can return to that rate because of the market we support. 2010 for us is the year to ‘reap’, or collect on our long-term relationships in terms of exploring new opportunities with our clients. We are not necessarily looking to grow our client base this year; rather we want to grow within our existing client base. We have a healthy revenue mix from an industry and regional perspective, and we’re not dependent on any one business in particular.

Q: In July 2009 you opened your second Chinese delivery center in Wuxi, China. As Softtek continues to expand its operations, which countries or regions are you considering?

A: We see this year as a year of consolidation. If you look at the markets with the most growth potential, we’re already there – the US, China, Brazil. So from a target market perspective, we’re not being aggressive in looking to expand into other countries. We’re already in Europe, Asia, and the Americas, and these are the markets where I think we should be. We have nine GDCs globally, and we don’t have to expand into new countries to serve our clients better.

Yes, we do expect to expand much more in the US, and it will always represent the most attractive market for us. Mexico and Brazil have lesser, but important growth potential. China is an early bid, mainly to have the offshore component that we need, but also for the emerging Chinese domestic market. Softtek’s expansion for now will be in our existing markets mainly in the US; we’re not looking for new countries.

Q: There has been a lot of speculation around the fact that Softtek is a prime target for acquisition. In past interviews, you haven’t ruled that out as a possibility. Will Softtek be acquired in the next 6 months? Or does Softtek itself have acquisition targets?

A: No. It’s true that we are continuously approached by different companies. We’re a very attractive target firstly for our nearshore ability, and secondly for our dominance in the Latin American market. But I can say that within the next 6 months it’s absolutely not on the table. I can’t rule out the possibility in the future, and we’re always looking for ways to leverage our capability, but we have turned down many offers in recent years. We don’t need to sell Softtek for financial reasons or because we can’t compete, and that lets us really consider whether these offers make sense for us.

Softtek also doesn’t have any acquisition targets at present. Once again, we’re always exploring opportunities such as two years ago when we acquired IT United in China. But nothing concrete for now.

Q: On a more personal note, being a female CEO in such an important role, in a largely male-dominated industry, how does that impact the way you run the business?

A: I have to be honest, it really hasn’t been too difficult for me. There are very few female CEOs in Latin America, and I think it’s because they haven’t been as privileged as I have in the support I received from my family, and my partners in Softtek. I can’t give you stories of how hard it’s been for me to get where I am today, because I have been very fortunate to have these people. Even though Latin American outsourcing is very male-dominated, I have never felt that I don’t get respect because I am a woman.

That’s not to say it has been easy. Being a CEO and a mother of two daughters is not easy. But it’s always important to balance your priorities, and it helps that I enjoy both those roles so much. Many women believe that the only way to be successful is if they don’t have a family. But for me balance in my life, between work and family, is so important. Men and women have different skills and can complement each other, especially in this business. And when you understand that balance, it becomes a part of how you lead a company like Softtek – not always with a focus on competition, but on team-building and using different skills. I think that has been a large part of our development as a company.

Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

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