Nearshore Americas

With Remote Work and Empty Facilities, Providers Struggle with ‘Double Costs’

Early debates about work-from-home (WFH) arrangements tended to assume companies would save money on rental costs through their implementation. But in practice, many firms – including Nearshore IT and BPO providers – have incurred extra costs through running office infrastructure alongside WFH programs.

With the coronavirus vaccine rollouts just beginning in the region, most companies in the Nearshore are still facing the “double cost” of the pandemic. In fact, insiders and analysts say that predicament is a major driver of tech innovation – with companies seeking to virtualize their operations to reduce expenses.

King White, the CEO of Site Selection Group

King White, the CEO of Site Selection Group, an independent location advisory firm, told Nearshore Americas that many providers were currently facing two layers of cost. Even with employees working from their home and the traditional workspace empty, executives are forced to spend.

“You’re going to have [to pay for] the maintenance of the exterior and interior of the facility,” White said.  “You can’t just turn off the air conditioning unit because your ceiling grids will buckle and some of your equipment could go bad because of the humidity levels… The backup generator is also going to need to be tested and maintained on a monthly basis regardless.”

Providers are forced to spend on internal business telephone systems, data centers and fiber optics within facilities that are empty or in partial use.

Such costs come on top of the expenses of implementing WFH programs at scale. Providers in the Nearshore region have already invested in improving connectivity, particularly for BPO operators working remotely. “Companies are subsidizing that in some situations,” White said, adding that some providers had installed hotspots in the homes of their workers. “When you have a thousand hotspots at $20 or $30 a month, that adds up pretty quickly,” he said. “It is definitely more expensive than having a T1 cable running through an office building.”

Workers are also footing the bill for water and electricity costs that were previously provided by their employer. For those facing reduced salaries or supporting unemployed family members, such costs can be particularly burdensome.

“We are not really hearing that customers are getting price breaks over WFH versus captive employees,” King White said.

The Double Cost Dilemma

White projects that 70 to 80 percent of BPO activity in the Nearshore will continue to rely on brick-and-mortar facilities once the pandemic is under control. Around 20 to 30 percent of operations will depend on WFH arrangements, he estimated. However, there are notable exceptions, with companies such as Comcast aiming for a remote-work policy across its workforce.

Despite early speculation around costs savings related to WFH programs, White believes the difference in practice is minimal.

“We are not really hearing that customers are getting price breaks over WFH versus captive employees,” he said. “What we are hearing from our clients is there are not really any savings.”

WFH programs may bring other tangible benefits in terms of employee satisfaction and environmental impact. However, the “double cost” dilemma will remain for companies running dual or hybrid operations.

Frank Prempeh II, CEO of Corpshore Solutions

“Our costs increased overall due to the pandemic,” said  a BPO provider with operations in the Dominican Republic and Colombia. “We had to buy more office supplies and personal protective equipment. Utility costs were probably the same, but we had fewer people working in the office.”

The Pandemic’s Lasting Legacy

The double cost issue may remain a challenge for most Nearshore providers in the coming years. However, technological solutions can help to mitigate the problem. Through the introduction of cloud-based models, companies such as Teleperformance and Sykes have moved their internal processes and communication to a single platform that functions independently of location. Such next generation solutions remove the need for internal office telephone networks and other communication systems that require investment and maintenance.

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Corpshore Solutions is also developing a unified cloud-based platform of its own. Prempeh said the unexpected costs of 2020 had been a major driver towards tech innovation.

“We are creating a monolithic platform that our employees can log into and work in almost the same manner as if they were working from one of our physical contact centers,” Prempeh said. “It’s a backup in case we ever had to move many of them back home again on a large scale.”

Prempeh said Corpshore currently hoped to bring most staff back to their contact centers. However, the company was planning for a range of possible scenarios.

“We’re doing our due diligence to develop our internal structures,” Prempeh said. “If there’s a mutation with the virus and it reoccurs again on a larger scale or something more lethal comes along, than people are locked in and we’re a lot more prepared.”

By making those preparations, Corpshore is also fostering an increased culture of agility, Prempeh said. If the company reaches maximum occupancy in its current contact centers, they can still onboard and employ people. Due to their virtual platform, Prempeh said, “[Corpshore] doesn’t have to keep developing new real estate to accommodate more people.”

Stephen Woodman

Stephen Woodman is an independent journalist based in the Mexican city of Guadalajara. He has six years’ experience covering business and culture in Latin America. Stephen has been published in numerous international media outlets, including The Financial Times, BBC News and Reuters. To share story ideas, drop him a note here

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