Nearshore Americas

Watching Your Step: Politics, Disruption and Nearshore Investment

As unsavory as the topic might be, politics eventually comes up in any location analysis. Regardless of the political conflicts existing in almost all jurisdictions, the question that really matters in the end is: can government leaders work together despite their differences?

Nearshore and offshore investors are no strangers to this situation. Some of the top locations for the industry are known or were known at some time as “difficult” places for foreign businesses due to political, social or even environmental risks. Some have matured to the degree that risks are –for the most part– ignored by foreign investors. Others have yet to reach that level of industry maturity, making them more vulnerable to their own problems. 

“As leaders and potential investors, we need to be careful about where we invest,” commented Arturo Velasco, Nearshoring Director at European digital firm Inetum, during his participation at a Nexus 2024 on investment and global risk.

“If the industry is mature enough, we will survive,” Arturo added. “But if you’re going to a country which is still in the initial phases of investment attraction, where you don’t have that sort of support or openness from the government, it will be very hard. Because governments can really change that.”

From left to right: Kirk Laughlin (Managing Director and Chief Analyst, Nearshore Americas); Arturo Velasco (Nearshoring Director, Inetum); Rita N. Soni (Principal Analyst, Everest Group); Amal Hassan (Founder & CEO, Outsource Global)

For service vendors, jumping on the trend aligns them with the interest of some of the world’s largest companies, for whom social and environmental responsibility in business has become a must over the past five years. 

For many foreign investors, it all comes down to a matter of public policy. If the right policies are in place, if the “tone” is right, they might be much more willing to take a risk where others would pause.

“There is a positive that politics can have, but it all depends on the tone that is being set,” stated Rita Soni, Principal Analyst at Everest Group and another speaker at the panel. 

“I think about the changes happening in India, where one of the issues that keep getting highlighted is the growing inequality in the country,” Rita added. “That could potentially be a risk, because that’s the community that is getting lifted into the BPO and IT industries.”

“There is a positive that politics can have, but it all depends on the tone that is being set”—Rita Soni, Principal Analyst, Everest Group

Some of the nearshore’s top locations have managed to remain attractive to investors due to business friendly policies that have been cultivated for years and which remain even in the midst of radical political change. Mexico and Colombia saw sudden shifts to the left, recently. Though investors have expressed concern, foreign dollars keep coming in. Same goes for Argentina, where years of economic storms have yet to deter foreign investment. Beyond the Americas, the same phenomenon can be seen in India and the Philippines; in Central Asia and Eastern Europe.

Then there are the cases of transformation; countries which have –steadily or suddenly– changed the perception global investors had of them through shifts in public policy.

“Each country has gone through a different path of evolution from a nearshoring or services perspective. It’s what I call the ‘maturity level’,” commented Arturo Velasco. “Costa Rica, for example, has reached a particular level of maturity; been there, done that. Mexico is there too. Then you have El Salvador, Honduras, where you can see the changes. El Salvador, with its change of president, saw a radical transformation in months.”

“It has to do with the willingness of the government to invest in education, to push for several languages beyond the local one,” Arturo continued. “Then there are the benefits that governments set up to attract this sort of industry.”

 

The African metamorphoses

Some of the best examples of this shift in investors’ perceptions through public policy can be found in Africa.

The continent has a reputation as one of the most problematic places for business overall; due to political and social unrest, economic turmoil, environmental threats and insufficient infrastructure. 

And yet, a score of African countries have built their business bona fides over the past decade, emerging as true contenders in the global services landscape.

“There’s a lot of growth in the industry. South Africa is pretty much a mature market, as well as Morocco and Egypt. There are also emerging markets like Nigeria and Kenya,” pointed out Amal Hassan, Founder and CEO of Nigerian BPO firm Outsource Global. 

“What we’re seeing is a lot of disruption in Africa. What the continent is providing is unmatched scale and talent, plus best price,” she added.

Amal Hassan shares her entrepreneurial story with the Nexus audience

Nigeria has yet to position itself in the minds of global BPO investors, but companies like Outsource Global are slowly building a reputation outside the country’s borders.

Amal is one of Africa’s most recent success stories. As an entrepreneur, she has emerged as one of the architects of economic development in her native Nigeria and of business disruption in the whole African continent. Her company –Outsource Global– currently operates four offices in Nigeria, employs over 2,000 people and services mostly clients in the US, with a portfolio which expanded from CX, telemarketing and collection services to accounting, legal and even software development.  

In her view, Africa is the place to be for any BPO investors hunting for the next big thing in the industry. The continent has a population of nearly 1.3 billion, with around 60% of them under age 25. 

“What we’re seeing is a lot of disruption in Africa. What the continent is providing is unmatched scale and talent, plus best price”—Amal Hassan, Founder & CEO, Outsource Global

“This is where the industry should be, because of that scale,” Amal commented. “There’s this notion that quality is not there yet, but it has changed from where it started.”

Although Amal underscored Africa’s potential, she recognized that such potential could go to waste without proper government support. Fortunately, several governments in the region have gotten solidly behind their local BPO industries. Such is the case of South Africa, Egypt, Morocco and, of course, Nigeria.

With a publicly supported platform in place, most of the heavy-lifting will have to be done by companies, however. In Nigeria, Amal and other entrepreneurs are spearheading an initiative to upskill college graduates in the country in order to accelerate the school-industry pipeline. Much of the curriculum is being built around the needs of clients serviced by Outsource Global and other local BPO firms. 

“The way to ensure that it is sustainable is by ensuring that it is private-sector led. Bring in the  experience of the private sector, their culture,” Amal stated.

 

Beyond profits

For global services providers, it is increasingly obvious that there is business to be made in locations which have been passed over for being unfairly perceived as too difficult or even “backwards”.  

It all comes down to two things: 1) the opportunity of exploring relatively new destinations for foreign investment and 2) the idea is picking their clients’ interest too.

“We need to have responsibility towards the places we’re investing in. It’s about how you return to those places to make them sustainable.”—Arturo Velasco, Nearshoring Director, Inetum

“A company told me they are putting an SLA into their contract which states that, after a certain period of time, 20% of their FTEs will be impact workers. That’s huge,” Rita Soni shared with the Nexus audience.  

“Right now, we think there are between 420K and 450K impact workers globally. We believe that number is already a lot bigger, and that it will get even bigger when contracts like this one I mentioned go in,” she continued. “And even if the overall CX market gets smaller in terms of the volumes of people, we expect the number of impact workers to go up, because that’s the shift. They [companies] want to be socially responsible.” 

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For some entrepreneurs, taking the risk means more than a bet for profits. They’re attracted by the prospect of helping whole communities rise, develop and thrive.

“I realized BPO created a lot of jobs for Indians and thought: Why not Nigerians?,” said Amal Hassan. “My passion has been to create employment, and that’s more important than how much profit we will make.”

“We need to have responsibility towards the places we’re investing in,” added Arturo Velasco. “It’s about how you return to those places to make them sustainable.” 

Cesar Cantu

Cesar is the Managing Editor of Nearshore Americas. He's a journalist based in Mexico City, with experience covering foreign trade policy, agribusiness and the food industry in Mexico and Latin America.

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