Nearshore Americas

LATAM-Based BPO Providers Are Hitting the Global Top Five

There are not many industries, except for commodities, where you can find two Latin American providers among the top five players worldwide. This statement is even more valid nowadays as last year seemed to be the worst for the regional economy since 2009.

Certain key factors affect almost all countries. First, there is the end of the cycle of high commodity prices (raw materials, such as soy, iron and copper, account for the majority of Latin American exports). Second, the oil price drop is damaging major economies like Brazil, Colombia, Venezuela and Ecuador, although it may benefit others such as Chile, Peru and Argentina (however, a net impact will be found in Argentina, as this country is also looking for new investors to develop its own non-conventional oil fields in Vaca Muerta – a task made more difficult when oil prices are falling). Finally, Latin American currencies are losing value against the U.S. dollar. The rapidly depreciating currencies indicate that markets across the region may start losing investor confidence (theoretically, this currency depreciation should be good news for export-oriented sectors, but, with lower world prices for commodities, many will not be able to take advantage of the favorable terms).A

The Big Two

That being said, the existence of Latin American companies that are prosperous within the services arena at a universal scale is good news. And the business process outsourcing (BPO) customer relationship management (CRM) space is one of those rare sectors where two Latin American firms have broken into the global elite: Atento and Grupo Contax.

Atento, the largest provider in Latin America and Spain, employs approximately 153,000 people. Meanwhile, Grupo Contax, the biggest outsourcer in Brazil, is almost as big as the former, with 110,000 employees even though it has operations in only four countries (Brazil, Argentina, Colombia and Peru).

Both companies recently reported their third quarter results which confirmed they will keep consolidating their leadership positions worldwide. While Atento’s quarterly revenues grew 5.9% on constant currency basis, achieving US$1.74 billion during the first nine months of 2014; Grupo Contax’s Net Operating Revenue (NOR) was down by 6% compared with 3Q13. However, if measured quarter over quarter, those revenues rose by 2%. The first nine month of the year for Grupo Contax showed revenues of 2.59 billion Brazilian reais (over one billion dollars).

Shrewd Market Moves

Atento continued to diversify its client base in the quarter, with non-Telefonica revenue accounting for 54% of total revenue, an increase of three percentage points over the same period last year. Atento has also reported the sale of its operations in the Czech Republic to Comdata SPA, which allows the company to continue strengthening its focus on its core markets (Latin America, as well as Spain and Morocco in the EMEA region).

Another smart move from this company was the recently approved acquisition of the Casa Bahia Contact Center in Brazil (Casa Bahia is one of the biggest consumer electronics stores from Brazil). On top of that, Atento and Via Varejo (the owner of Casa Bahia and other stores such as Ponto Frio) signed a five-year agreement for the provision of call center services for the entire organization.

Meanwhile, Grupo Contax’s third quarter was a milestone as it represented the end of a restructuring process started in 2013 aimed at bringing significant improvement in the financial performance of its Brazilian operations. If 2014 ends up not having been a bright year for the company, it will certainly have been because Grupo Contax is still in a transition period which will probably even see it migrate to a new logo or brand (although this is not yet confirmed). However, we expect the company to continue to focus on enlarging its Latin America footprint while expanding its services and increasing efficiencies in Brazil during 2015.

The American Dream

What both companies have in common – besides their high dependence on the telecom vertical segment and the fact that Brazil is their key revenue generator market – is that they both want to penetrate the U.S. market. At this moment, Atento has taken the lead, as it has a flagship presence (two delivery centers in San Antonio, Texas) and is pushing hard to win new logos to serve the U.S. market from its delivery centers in Central America.

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Grupo Contax does also provide services to the United States from its Colombian delivery centers (Allus), but the amount is very limited so far. However, the company has conducted some exploratory missions to the United States and Mexico during 2014, with the aim of further expanding opportunities in those markets, although nothing has been announced so far. This raises some interesting questions: Will Grupo Contax continue fostering its growth through nearshoring campaigns? Will Mexico become the next market for Grupo Contax because it would enable the firm to provide services to the United States while also tending to Mexico’s growing domestic market?

Either way, we can confirm that the U.S. market is certainly the next stop for the two rising Latin American BPO providers. So buyers in the United States should get used to Atento and Grupo Contax. You will be hearing from them sooner than later.

Juan Manuel Gonzalez

The author is Research Director of ICT at Frost & Sullivan.

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