Developing New Business in the Construction Industry
VSI_WhitePaper_Email
1. Beyond the Hype...
Make a Fully Informed Outsourcing Decision
PAGE 1
When Nearshore May
Make More Sense
PAGE 2
Case Study: Optimizing
Business Relations through
Innovative Solutions
PAGE 3
Customer Success Story:
Mortgage Default Services Provider
PAGE 4
Nearshore Outsourcing
in Colombia:The
Strategic Advantage
PAGE 5
Why Bogota and
Barranquilla?
PAGE 6
Setting up Nearshore
Operations in Colombia
2. Introduction
In an increasingly global and technology-
driven marketplace, the outsourcing of
support services and back-office func-
tions to offshore companies has become
an accepted part of doing business in the
U.S.The practice of outsourcing has been
around for 50 years, started by Ross Perot
creating EDS in 1961,but with the advent of
the new millennium bringing with it back-
to-back recessions, being cost competitive
and operating efficiently became crucial to
corporate survival and more companies
emerged globally to meet the need. Many
companies developed a strategy of focusing
on core business and critical processes and
identifying areas that could be outsourced.
Often, these were functions necessary to
run the business, such as accounting, hu-
man resources,
data processing,
etc., but were
not specifically
related to the
company’s core
competencies
or how they
differentiated
themselves. This
trend continues
today as U.S.
businesses look
to India, China,
and, increasingly, Latin America to provide
the resources and infrastructure for infor-
mation technology and business process
outsourcing.
Over the last two decades, India has been
the clear leader in offshore outsourcing
services.The country offers a large, diverse,
well-educated, English-speaking, low-cost
workforce that has successfully met the
back-office needs of many well-known
organizations, including GE, British Air-
ways, Hewlett-Packard, IBM, American
Express, and Citibank,to name a few.More
and more, these companies and others are
outsourcing highly interactive functions
such as customer support, client contact
centers, application development, and soft-
ware engineering. However,language issues
(English speakers from the U.S. often have
a hard time understanding Indian-accented
Queen’s English), cultural misunderstand-
ings, proximity and time zone challenges,
as well as growing concern over data theft,
privacy, protectionism and quality in India,
China, Russia and other Asian countries
has leading companies increasingly seeking
other locations, particularly Latin America,
as a means to address the risks inherent in
the traditional offshore outsourcing model.
Latin America has emerged as a viable and
attractive alternative to “offshore” out-
sourcing. As a “nearshore” location for
U.S. companies, Latin America ranks third,
behind India and China, for IT outsourcing,
according to Capgemini’s 2010 Executive
Outsourcing Survey. Of the executives
responding to the survey, 56 percent of
them believe that doing business in Latin
America is becoming easier than doing
business in other parts of the world.This
is good news for companies like VSI, who
provides software development and busi-
ness process outsourcing from world-class
nearshore facilities in Barranquilla and
Bogota, Colombia.
Very often, the “soft skills” and cultural
compatibility abundant in places like
Colombia more than compensate for the
initial hard dollar savings from Asian-based
outsourcing.Citing its importance,Wendell
Jones,Chief Executive ofThe Society for In-
formation Management commented, “Suc-
cessful offshore outsourcing starts with an
understanding of the cultural context and
an appreciation for the people involved
in both companies. From the cultural and
people perspective, outsourcing manage-
ment involves blending the different cul-
tural values and norms, people, processes
and technologies into a cohesive team.”
When nearshore
may make more sense...
Dell was among the first technology
companies to outsource customer
service and support calls to India.
Within a couple of years, though,
Dell moved a portion of the call
center back to the U.S. because of
a growing number of complaints
about the quality of service. Call
center customers were frustrated
by the Indian-based Dell agents’
seemingly inability to effectively
communicate with them and their
hesitation to either depart from the
script or route the call to properly
resolve the customer’s problem or
question.
Challenges with outsourcing in India
are not just limited to quality issues
with call center and customer
support operations. Cogent Road,
a firm that provides web-based
software applications for the mort-
gage industry, backed away from a
software development project in
Calcutta that took twice as long as
anticipated because of the language
barrier and the 12-hour time dif-
ference between India and its San
Diego office.
Today, in addition to continuing
to use Indian and other offshore
companies, Dell has set up a near-
shore customer technical support
and consumer sales and care opera-
tion in El Salvador that serves both
U.S. and Latin American markets.
www.vsiteam.com1
3. 2
Challenge: The client, a centralized
provider of property valuation, closing and
escrow,and title insurance to the mortgage
industry, is responsible for working with
the lender, buyer, and seller to schedule
hundreds of closings across the nation on
a daily basis. The process required agents
to spend innumerable hours on the phone;
hours that could have been better spent
processing critical documentation needed
for the closing on the property.
Solution: VSI offered an attractive option
through its bilingual call center in Colombia.
TheVSI staff spoke excellent English, which
was critical to communicate complex in-
Case Study: Optimizing
Business Relations through
Innovative Solutions
VSI, a U.S. headquartered company, is the
outgrowth of a corporate strategy that
recognized the value of nearshoring in
Barranquilla and Bogotá, Colombia, to
provide call center, customer contact,
back-office and software services. Original-
ly established in 2005 as a captive service
provider to a Fortune 1,000 U.S. financial
technology and services company,VSI has
proven its ability to improve profits by
combining attractive labor costs, skilled
and motivated employees, proximity,
cultural compatibility, and a focus on con-
tinual process optimization.
The cultural shift from being a captive cost
center to a for-profit service provider
allowsVSI to develop partnerships with its
clients focused on improved efficiency and
business outcomes as opposed to the “lift
and replace” approach taken by many out-
sourcing providers.
formation to a number of different parties.
The center’s proximity and time zone (U.S.
Central Standard Time) enabled real-time
conversations, face-to-face visibility, easier
oversight and control of processes.
For the initial pilot project,VSI trained its
highly capable staff in two to four weeks,
faster than the anticipated six to eight
weeks of training. Beginning with a pilot,
using a sample of lower volume states,VSI
quickly proved itself, smoothly and rapidly
implementing key processes and demon-
strating high quality communications with
all involved parties.
Results: VSI exceeded the company’s
expectations, accomplishing the sched-
uling process approximately 50 percent
faster than the company’s internal staff
and lowering costs nearly 40 percent.One
year later, VSI has ramped up operations
and currently schedules mortgage closings
for the company across the U.S.The client
is so satisfied with the program that it is
currently expanding its relationship with
VSI to include more critical pieces of its
process, including reviewing documenta-
tion for compliance.
VSI based its operations in Colombia to
provide a convenient,accessible nearshore
solution for their customers’ complex, inter-
active and high-touch projects. According
to executives surveyed by Capgemini, this
putsVSI in an ideal position. Colombia and
the rest of Latin America offer a variety of
benefits including robust technology and
infrastructure; skilled, educated labor;
economic stability; compatible language
and cultural affinity; easy access due to
similar time zones and close proximity;and
various tax benefits and other government
incentives.
Customer Success Story
One of the largest title production companies in the U.S. turned toVSI to outsource its mortgage closing scheduling function
so that its staff could more effectively deal with core business functions and increase its productivity, which in turn helps its
customer to generate more revenue faster.
4. Customer Success Story
Challenge: When mortgages go into
default and parties are required to go to
court, significant real estate information
is required to support specific claims.The
company already excelled at gathering and
analyzing the data,but its staff was spending
a lot of time retrieving data from various
databases as well as physically inspecting
properties and then pulling that informa-
tion together to create an accurate picture
of the property in default. The company
was looking for ways it could more easily
aggregate both the public and non-public
data (for example, property appearance,
maintenance, and upkeep), streamline the
overall process, and differentiate its ser-
vices from the competition.
Solution: VSI’s nearshore location, me-
thodical and collaborative approach to
software development, and cost com-
petitiveness encouraged the company
to implement a test project outsourcing
development of an analytical software ap-
plication that aggregated the needed data.
Positive management response led to out-
sourcing the full application development
project toVSI.
In order to meet its own needs, the client
company established an aggressive time-
line of approximately six months. However,
midway through the development process,
afterVSI had delivered nearly 80 percent of
code, customer management modified its
priorities and askedVSI to rewrite a signifi-
cant portion the application that had been
developed internally.
VSI, regarding its relationship with the cus-
tomer as a partnership,went into high gear
and worked 24/7 to implement the new
requirements, while still meeting the origi-
nal deadline.“What was important to us,”
said Esteban Reyes,VSI’s Managing Partner,
“was the outcome of the project…that we
delivered a high-quality product that met
the customer’s needs.We have a core be-
lief that if we exceed expectations and de-
light our clients, the business will flourish.
So far it seems to be working well for our
customers, for VSI and for our employees
who feel rewarded and valued when we
give them the support and empowerment
do the impossible.”
Since then, the company’s relationship with
VSI has grown about two-hundred-fold,
and VSI continues to receive software ap-
plication development work that enhances
the customer’s way of doing business.
VSI recently assisted the largest provider of mortgage default services with development of a complex software application
to dynamically aggregate critical information needed to enhance the client’s process.
“It's no secret that the Hispanic population in the U.S. is the fastest growing segment
and expected to reach majority status in the next decade.With most industries slow
to adopt multilingual solutions for portals, self-help and advanced speech recognition
to drive transactional efficiencies, nearshore contact center solutions are an effective,
low-cost alternative for serving this critical customer segment.And with the quest for
sustainable customer relationships more important than ever, there is no better means
than live, productive interactions for driving long-term engagement.”
~ Bonnie Tichman
Outsourcing Management Consultant and
formerVP of Global Marketing, Convergys
3
5. 4
Colombia, a tropical and lush country that
boasts both beautiful beaches and scenic
mountains, has historically been stereo-
typed as a land of good coffee and illegal
drugs. Over the last decade, though, Co-
lombia has transformed itself into one of
the best locations to do business in Latin
America. Once perceived as unsafe, it now
ranks solidly with the progressive, indus-
trializing countries worldwide that have
well-diversified resources and productive
capacities. With a population of 45 mil-
lion, Colombia is the third largest coun-
try in Latin America, behind only Brazil
and Mexico. Colombia is a top market for
U.S. exports, and the home of significant
technological innovations including the ar-
tificial heart valve and LASIK eye surgery.
In recent years, beginning in Alvaro Uribe’s
presidential term and continuing under the
current president, Juan Manuel Santos, se-
curity has improved and crime rates have
fallen dramatically to be in line with many
industrialized countries.At the same time,
the perception of Colombia as a viable
business location has risen—the country
is fast becoming a major success story in
both the sphere of Latin American out-
sourcing, and on the larger global stage.
The technology research firm,Gartner,Inc.,
ranks Colombia as one of the top locations
for offshore services. The Colombian gov-
ernment wants foreign investment and, in
conjunction with the private sector,is mak-
ing significant strides to create an attrac-
tive environment for offshore companies.
Several programs promote public-private
partnerships, and government reforms and
initiatives are enabling the country to go
head-to-head with other countries look-
ing to service both Spanish- and English-
speaking information technology and busi-
ness process outsourcing markets.
So, what distinguishes the Latin American
and, more specifically, Colombian “near-
shore” outsourcing model from the more
standard Asian/Indian “offshore” model?
As many technology companies, including
VSI,Unisys,SAP,andTelefonica have discov-
ered, it has much more to do with the To-
tal Cost of Ownership than just the basic
labor costs. The proximity, infrastructure
language compatibility, and cultural affinity
of Colombia all play into creating a unique
collaborative and creative business envi-
ronment that is crucial to the success of
ITO and high-touch BPO and that is simply
not available on a similar scale in the Asian
marketplace. In fact, many large Asia-Pacif-
ic ITO and BPO outsourcing providers are
increasingly seeking to acquire“nearshore”
capabilities in order to plug the gaps in
their traditional “offshore” model.
Colombia, located near the equator, is in
the middle of five time zones and an easy
flight from major business centers such as
Miami, NewYork, Los Angeles andToronto.
Business can be conducted in real-time,
face-to-face, and during “regular” business
hours. By contrast, New Delhi, Beijing, and
Manila require 18- to 24-hour transconti-
nental flights from many U.S. locations and
require altering the business day to accom-
modate U.S. time zones.
Nearshore Outsourcing in Colombia: The Strategic Advantage
“For the last several years, Barranquilla has been making
significant investments in infrastructure, education and incen-
tives for companies to strengthen the BPO & ITO industries in
the city and the surrounding areas.As a result of these efforts,
outsourcing companies were responsible for creating 42% of
the new jobs in the region.The BPO companies in Barranquilla
increased their headcounts by 34% during the same period.
Such growth highlights both the commitment of the suppliers
and great satisfaction experienced by clients that are being
served from Barranquilla.With more than 3,200 jobs generated
by this industry recently, the BPO & ITO industries are one of
the key strategic sectors for growth and investment for the city.”
~ Tatyana Orozco
CEO ProBarranquilla
www.vsiteam.com
6. Barranquilla 1.1 m
Cartagena 0.9 m Cúcuta 0.6 m
Cali 2.2 m
Medellín 2.3 m
Bogotá 7.2 m
Ibagué 0.5 m
Bucaramanga 0.5 m
Colombia has the 2nd largest population in Latin America.
With a robust infrastructure
and continuing investment
around creating large, complex
data centers (e.g., Terremark
in Bogotá), Colombia is well
positioned to offer outsourc-
ing companies resilient, high-
availability technical solutions
that enable service delivery. In
addition, the omni-presence of
companies such as Hewlett-
Packard and Dell, as well as a
high rate of computer and In-
ternet users provides the re-
sources and intellectual capital
needed to outfit and staff ro-
bust ITO and BPO operations.
According to Internet World
Stats, at the end of 2009, nearly
50 percent of the Colombian
population regularly accessed
the Internet, versus 24 percent
of the population across Asia.
Also, the Colombian govern-
ment is highly proactive about
IP and data protection and has
laws in place to regulate per-
sonal data protection in com-
pliance with U.S. and European
Community standards.
Colombians speak a “neutral”,
easy-to-understand Spanish, and
English is the second most
spoken language in the country.
Working with the BPO industry,
the government has created
www.ispeak.com, a national
registry for certified speakers
of English to make it easier
for companies to recruit quali-
fied employees. Also, the city
of Bogotá, in partnership with
several companies, has created
a program to finance English-
language education for call
center employees. Given that
the U.S. is home to over 45
million Hispanics, the outsourc-
ing industry is finding that it is
imperative to offer bilingual
services if it is to remain com-
petitive and attractive to its
customers. Colombia is the
second largest Spanish speaking
country in the world, behind
only Mexico.
Language is only a small part
of the cultural affinity shared
between Latin and North
American people: similar histo-
ries, religious backgrounds and
educational expectations help
to establish a natural connec-
tion in an industry that often
requires high-touch and on-
the-spot resolution to technol-
ogy issues that goes beyond
the standard call center script.
An ethos that emphasizes em-
ployment stability, customer
service, and creative, innovative
approaches translates into an
extra level of productivity that
cannot be measured by cost
alone, but certainly impacts the
bottom line.
While focusing only on labor
arbitrage, dollar-for-dollar, the
outsourcing labor costs in
Asia/India are less than in Latin
America. But when things such
as travel, employee attrition,
customer retention, real-time
communications, and the abil-
ity to solve problems faster are
considered, the total cost of
doing business is lower in Latin
America.
Why Bogotá and Barranquilla?
Bogotá, the Colombian capital and largest economic
center in the country, boasts a population in excess of
seven million. The eligible workforce is young and well
educated with 115 higher education institutes gradu-
ating approximately 95,000 professional and technical
experts each year.The city also offers BPO and IT stu-
dents and employees intensive English-language training
through “Talk to the World” and access to training pro-
grams designed specifically to meet the needs of out-
sourcing companies. Bogotá’s competitive salaries, real
estate prices,and business services that,when combined
with its proximity to major U.S. cities (3 ½-hour flight
from Miami, 5-hour flight from New York), in-place and
proven infrastructure (five submarine cable systems
connect directly with its fiber optic network, and the
city ranks fourth in broadband penetration among 46
Latin American cities), overall high-quality of living, and
business-friendly environment, provide a clear cost-ben-
efit to nearshore outsourcing companies that choose to
locate there.
As the fourth largest Colombian city, the World Bank
views Barranquilla as one of the most business-friendly
Latin American cities. With a population of 1.3 million
people, Barranquilla offers the IT and BPO industry
many of the same benefits as Bogotá, including a grow-
ing bilingual Spanish-English workforce; comprehensive
telecommunications services with a high-redundancy,
low-latency infrastructure; and dynamic economic
growth.The city is committed to growing its outsourc-
ing business sectors, putting in place an investment and
growth plan to provide assistance to national and foreign
companies.The plan is jointly operated by the Office of
the Barranquilla District Mayor, Office of the Governor
of the Department of Atlanticó, the Chamber of Com-
merce, universities, compensation funds, and telecom-
munications operators. Positive moves such as these
play a significant role in increasing the value proposition
of nearshore outsourcing in Barranquilla.
www.vsiteam.com 5
7. 6
Setting up Nearshore Operations in Colombia
Choosing to outsource back-office busi-
ness functions can frequently free up criti-
cal corporate resources, reduce operating
costs, and allow a company to focus on its
core competencies. Outsourcing non-core
processes have become a standard part of
operating a business. These days, the only
questions are what to outsource, where to
locate the outsourcing function—locally,
offshore, or nearshore—and whether to
“build or buy” the outsourcing function.
In addition to the actual costs of doing
business, certain risks often impact the
decision of where to outsource, including
geopolitical concerns; proximity, cultural,
and language issues when the outsourced
function is high-touch and interactive; and
data rights, privacy, and intellectual proper-
ty challenges. For these very reasons, many
businesses are looking to Latin America,
in general, and Colombia specifically, as a
“nearshore” destination for their opera-
tions centers.
Whether to “build or buy” the nearshore
outsourcing function depends on how
much investment in money and time a
company is willing to make.A captive cen-
ter (build) is attractive because the com-
pany maintains full management control of
the function, implements its own quality
standards, and resources the facility with
an eye toward achieving the lowest opera-
tional cost.Companies such as Citi,Henkel,
Wyatt, Abbott, Hewlett Packard, and Dell
have successfully set up captive outsourc-
ing centers in Colombia that handle back-
office functions such as customer support,
sales and marketing, data processing and
analysis, etc.
On the other hand, in partnering with a
nearshore outsourcing provider (buy),
the company contracts the operations of
specific business functions or projects to
third-party service providers that are re-
sponsible for the process management,
staff and resources, the infrastructure and
software used, and, quite often, much of
the risk associated with the program be-
ing outsourced. Benefits include in-place,
established operations and experience in
the foreign environment. Many global com-
panies, including AT&T,Telefonica,Tracfone
and Greyhound outsource their software
development, document processing and
contact and call center support to Colom-
bia
The Colombian government, recogniz-
ing the potential of attracting outsourc-
ing partners to its various cities, has put
in place a number of attractive incentives
to encourage U.S. and other multinational
companies to set up operations there. For
example, they have established free trade
zones that can be created around single
companies based on investment and head-
count commitments,structured a favorable
tax environment that includes eliminating
the value-added tax on BPO exporters,and
implemented intellectual property protec-
tion and regulatory stability agreements.
In addition, the government continues to
make significant investments in transpor-
tation and communications, recently an-
nouncing a $28 billion public-private infra-
structure plan.
Establishing and maintaining a successful
nearshore IT/BPO operations center in
a Latin America country depends a great
deal on creating a work environment that
is client-focused, measures qualitative and
quantitative performance, communicates
effectively internally and externally, lever-
ages the talent and resourcefulness of the
workforce,and strives for quality in all areas.
The people of Colombia are known for
their can-do attitude and commitment to
“When considering Outsourcing, on-shore, offshore, or near
shore, to avoid certain disappointment later, one must do a
thorough, rigorous and objective analysis of the vendors, the
services to be outsourced and the business case supporting it,
as well as the geographic pros and cons.
Better to pay a little more now and ensure a smooth, effective
deal, than to rush to cost savings only to redo the deal later
because it failed to meet other expectations that were not prop-
erly assessed from the start.”
~Thom Mead
VP of Marketing,Alliances & Channel Management
Firstsource
