BUSINESS PLAN FOR A CALL CENTER IN URUGUAY

Universidad Católica del Uruguay

School of Business

Grade Report
to obtain a
Licentiate of Business Administration Degree

BUSINESS PLAN FOR A CALL CENTER IN URUGUAY

Fernando Reich Espinosa

Tutor: Fernando Castro Pombo, MBA

Montevideo, July 2010

Acknowledgements

To my mother María J. Espinosa, Fernando Pombo MBA (my tutor), Ing.
Washington Salaberry MBA (Head of Technology Planning and Analysis
en Zonamerica), Dr. Francisco Ravecca MBA (Executive Director Aguada Park), my
cousin Econ. Fernando Reich Rada MBA (Relationship Manager at Citigroup) and
my friend Sebastian Rodriguez Straumann.

Copyright ® 2010 - All rights reserved

CONTENTS

Page

INDEX 1

EXECUTIVE SUMMARY 2

INTRODUCTION 5
Introduction
Object of the study
Work goals

CHAPTER 1: CHARACTERISTICS OF THE SERVICE
16

CHAPTER 2: COMMERCIAL ASPECTS 26

CHAPTER 3: TECHNICAL ASPECTS 80

CHAPTER 4: ECONOMIC ASPECTS 98

CHAPTER 5: LEGAL ASPECTS 136

CHAPTER 6: ORGANIZATIONAL ASPECTS 152

CHAPTER 7: BUSINESS STRATEGY 156

CHAPTER 8: IMPLEMENTATION OF BUSINESS PROCESS 159

CHAPTER 9: SCHEDULE 161

CHAPTER 10: BUSINESS ASSESSMENT AND CONCLUSION 162

SUPPLEMENTS 165
Glossary
Bibliography

Keywords: Foreign Investment, Outsourcing, BPO, Business Plan, Telecom,
Uruguay.

Copyright ® 2010 - All rights reserved 2

Executive Summary

The comparative advantages that some jurisdictions have in relation to
others for the generation of products and services partly explains the choice of
certain locations with a view to increase profitability in different productive sectors.

On the other hand, technological progress has enabled the remote
operation of production centers. This is the case of a large number of services,
such as Call Centers, which are the subject of this paper.

The development of a call center in Uruguay aims at offering services to
companies that need to increase their revenue through personal contact, by
improving the knowledge that the company has of its customers, resulting in a
higher efficiency and lower operating costs.

For these purposes, increased sales will not only be obtained by increasing
the target market, but also by expanding the current customer data base,
improving the marketing information system and by business process outsourcing
(BPO [1] ) so that the services are supplied by a company offering scale
economies in order to minimize costs and associated risks.

An exception among most companies, Call Center companies have highly
skilled labor force where labor costs are the most important issue.

Therefore, the provision of HR, with adequate qualifications and costs, (as
recently demonstrated in relation to the ICT business sector [2] in our country) is
the reason why Uruguay offers a very good solution for this industry, as well as for
other Latin American countries with similar characteristics.

As a result of the existence of a large unsatisfied worldwide demand for this
type of services, the need to meet this business proposal is far from being
exhausted.

This application is composed by the most profitable companies worldwide,
such as the companies included in the Global 2000 (the ranking made by Forbes
magazine) and, as the demand for call center activities exceeds the supply, less
profitable customers would not reasonably be considered.

In particular, the services offered by an enterprise of this type are:
Telemarketing, Customer Service (consultations, negotiations and Post-Sale
services), Surveys (opinion poll), Loyalty (customer retention) and Business
Process Outsourcing.

The purpose of this work is to study whether a commercial venture of this
nature located in Uruguay, offers optimal conditions for the export of such services.


To achieve this, we proposed the following objectives:

1) Submit an internal tool that allows managers to guide firms specializing
in Outsourcing Call Centers when making investment decisions in Uruguay (with a
special emphasis on the Spanish market).

2) Outline the main business strategies for this type of business.

3) Provide an idea of the technological scenario applicable to overseas
customers (as in the case of Spanish companies), and of its costs.

Research carried out:

For this work, an investigation was carried out with regard to the
competition. This included call centers present in Uruguay, Spain and the largest in
Argentina and in the world.

Opinions and interviews were obtained from qualified experts who
contributed with valuable information, views and experiences on this sector. For
confidentiality reasons their names are not specified in this work.

As a result of investigations that included business analyses, we
attempted to outline the characteristics of the competition and its future projection.
Thus, we were able to confirm the following:

• In Uruguay the most profitable markets for this industry are the Spanish and
the U.S. markets. Should Greece, Portugal, Italy and Ireland drag the EU
towards a steep devaluation of the Euro, or should the economic crisis in Spain
tended to increase, our main target market would then be the U.S. market
(although this is not a critical issue for our business).

• In order to enter the American market, it is vital to negotiate with U.S. and
Indian companies and Contact Centers. Indian companies in this industry are
those that have a greater presence in the American market.

• The current world situation has led to very low interest rates on loans, thus
enabling the financing of new ventures that look for stable markets in which to
invest in order to escape the European crisis. This is the case of Uruguay.

• A possible threat is the resurge of anti-spam laws in the EU and U.S.
telephone system (which does not seem likely in the medium term because
telemarketing is a dynamic factor of the economy).


• Uruguay's greatest strength to attract this type of companies is that we
have the most qualified workforce in the continent, with the lowest operating
costs.

• It exists in Uruguay financing with low interest (2.5% annually) and if we
make invoices abroad, tax exemptions are 100%.

• Tholons, a consultant of Indian origin based in the United States, reported
this year that, according to the report of Top 50 Emerging Global Outsourcing
Cities) Uruguay offers the most open business environment of the region with
regard to outsourcing.

In conclusion: it was determined that this project offers an excellent
risk/benefit ratio, along with a convenient financing by financial agents
operating in Uruguay. Therefore this business has the necessary financial
feasibility to ensure success.

From the point of view of the identified risk, a possible
disadvantage detected when analyzing this project is a weaker quotation of
the Euro in relation to Uruguayan peso. This risk in the exchange rate may
be minimized with some tools, such as an insurance policy.

Assuming an initial investment estimated of € 1,277,909, with a four
years’ evaluation period and a discount rate of 15% to shareholders, (who
will only provide the initial deposit by means of an international guarantee)
and will finance the future growth of the working capital), the above
mentioned initial investment would generate a NPV of € 2,353,333 and an
IRR of 99%, thus demonstrating the conveniency and feasibility of this
project.


INTRODUCTION

Introduction

The object of this report is to carry out a Business Plan for the installation
and start up of a call center in Uruguay. During the last five years, the author has
worked in call center activities at two international companies from the moment
they started their operations in Uruguay.

This has given him the opportunity of getting acquainted with the business
activities of two outsourcing companies [3] competing with each other and with
radically opposed HR management, throughout the various stages of their life
cycle.

Object of the study

Outsourcing Companies (Outsourcing ) specialized in Call Centers that are
1)

willing to establish themselvesin Uruguay.

These companies often operate from abroad (offshore [4] ) and not
situatedin the country where the provide the service.

The majority of large area call centers in the world (i.e. those employing
over 200 people) are outsourced.

We shall limit our study [5] to Spanish speaking customers because this is
the fastest growing segment in Latin America.

PURPOSE

1) To present an internal tool that acts as a guide for managers of the
specialized firms in Outsourcing Call Centers and assist them in making
investment decisions in Uruguay (with special emphasis in the Spanish market).

2) To outline the main business strategies for this business.

3) To provide an idea of the technological scenario applicable to overseas
customers (as is the case of Spanish companies), and of its costs.

The study is oriented to the following markets:

Geo: mainly the U.S. Hispanic market and Spain, because companies in these
countries pay better.


Although we are strongly determined by the native language of our human
resources, we should not exclude other potential markets to be developed (see
2.6.3.1.)

Customer Segmentation

Explanation: In this activity the customer is not usually the person to whom
the service is intended but rather the company that hires the services of a Call
Center.

• multinationals located in Latin America: in many cases they require
regional services covering several countries focusing the operations on a single
reception center or on outbound calls (so that a profitable volume of business is
obtained).

• highly profitable activities no matter their location due to high
specialization, such as banking, insurance, legal advice (Legal Process
Outsourcing [6] ) etc.

• our own suppliers: in order to work, we must always employ
telecommunications providers (links), HR agencies, infrastructure companies,
technology and financial services. These companies can reduce costs by
negotiating with them a counterpart in Call Center services.

Example: If to work with Banco Santander of Spain we must hire links from
Movistar Uruguay, we can try to negotiate with Movistar Uruguay a counterpart in
Call Center services in order to reduce the costs of those links that are being
engaged.

• The sales or telemarketing campaigns are usually the most profitable
ones, because the Call Center charges a fee for sales [7] (in the case of banks
these are called Front Office campaigns [8] ).

• Outgoing or outbound calls are usually the ones that pay the highest
rates (not excluding incoming or inbound calls). In the case of outgoing calls, it is
more difficult to carry out the sale (the greater the difficulty, the higher the
commission on the sale).

• We must have a target of the most profitable customers worldwide,
such as companies in the Global 2000 [9] (the ranking made by Forbes Magazine)
and, as the demand for call center activities exceeds the supply, targeting less
profitable customers does not seem reasonable (as explained in the Analysis of
Content Supply see 2.6.2).


The most profitable industries are listed below (Table 1):

Source: Ranking prepared by Forbes Magazine.

Reasonably, one may ask: do all these industries require the services of Ca ll
Centers? The answer is affirmative, because this activity is designed to meet the
need of communication from:

• the customer with the companies, as well as of the
companies with their customers (both ways). No business can exist without
communication between customer and company (feedback [10] ).


• the internal customer [11] (a concept defined by Karl Albrecht
in his book "Internal Customer") also needs to be satisfied in order that the
company may operate ("If you want things to work out, first thing to do is to work
inside," Karl Albrecht ). The more profitable a firm, the greater the risk that the
communication between its branches, departments, suppliers, partners, etc. is not
the most appropriate one.

• Although they depend on unstable factors transactions "from
business to consumer” (business-to-consumer [12] or B2C), also have a higher
market volume. They are often used to describe the transactions between the
company and the final consumer.

• "Business to business" transactions (business to business
[13] or B2B), although of a smaller volume, are often more profitable because they
are more specialized (such as back office [14] of legitimate businesses and bank
accounts). They are often used to describe the transactions between a
manufacturer and the distributor of a product and also for the relationship between
the distributor and the retailer.

B2C and B2B Source: Kotler, Philip Marketing - 6th ed (with Gary Armstrong),
Prentice Hall.

In order that the reader may view the type of customers we are aimin to, we are
listing below the 10 most profitable companies (Table 2: The most profitable
companies) since these companies carry out their services in Spanish for Hispanic
markets.

Source: Ranking prepared by Forbes magazine.

Benefits derived from Call Centers Services

For the customer:


• It reduces the risk of making strategic planning mistakes by focusing all
the attention on core business [15] (engaged in the task of obtaining higher
returns)

• It offers a better service or an increase in sales including the possibility
of cross-selling, by delegating the CRM [16] (Customer Relationship
Management by Thomas M. Siebel) management and 1X1 Marketing (one-
to-one marketing, the model of individualized or customized by Martha
Rogers and Don Peppers) to a third party specialized in that order.

• A greater capacity for growth (by outsourcing may support an occasional
growth).

• It lowers service costs by:

a) achieving scale economies of outsourcing companies.

b) eliminating fixed costs (when a company hires a specific
campaign, it only has to consider the variable cost of the campaign, without
resorting permanent resources).

c) replacement of physical branches by phone calls.

• Increases the predictability of service costs by eliminating variations
(during the term of the contract signed with the outsourcing company).

• Reduces the overall business risk; some risk is shared with the
outsourcing company and a part of it disappears, depending on the client's
ability to:

a) penalize the Call Center (through "trigger" clauses [17] ) or

b) terminate the lease for services.

For the social point of view:

• It decreases unemployment
(it is the business with more intensive labor that exists)

• It offers job opportunities to segments of the population that other jobs
do not offer (young people seeking for their first jobs and people over 35
years old).

• It offers training for employees in customer services (in many cases in
sales, computing, etc.)


• It is a source of employment for emerging economies (Third World
countries with economic and legal stability).

• Due to the type of business, it offers an ideal opportunity for people with
a medium/low background to move quickly in the organization by resorting
only to personal effort.

Brief History Overview

The history of this activity began with the invention of the telephone in
1877. In less than a century the first Call Center appeared, implemented by Ford.
In 1990 with the advent of Internet, the world changes eliminating distances,
providing Call Center services from across the world.

Table 3: Historical background of the Call Center

Events Year Comments
Invention that made it possible:
The Telephone. 1877 New form of communication
Telemarketing [18] 1881 Invented by a German pastry-cook
Telefónica is born in Spain 1924 Telephone Operator (Movistar)
The Great Depression 1930 Companies try to increase their sales
First major telemarketing campaign
First Call Center (Ford) 1962 which reached 20 million customers
Companies try to cut out costs and
save rentals (by outsourcing) and to
optimize the working time of their
Oil Crisis 1973 employees (TMO)
Mobile Telephony in Spain 1976 Mobile phone in vehicles
First personal mobile phone in
the world 1983 Motorola
Vodafone is born 1985 Telephone Operator
France Telecom is born / First Telephone Operator (Orange) / Europe
ocean link 1988 and America connected by a cable
Internet is born / Mobile Phone
Boom in Spain. Uruguay
inaugurated its first Free Zone First with Movistar and then with Airtel
named Zonamérica as a (post. Vodafone) and Amena (post.
Business & Technology Park 1990 Orange).
The cost of long distance calls is
Voice over IP 1996 avoided.


The Euro becomes the official currency
of the European Union.
The State communication companies in
The Euro in Europe. The first Uruguay (UTE and ANTEL) write
initiatives of Call Centers in specifications for future bids for Call
Uruguay 1999 Center services.
Uruguayan private enterprises
begin to assemble their Call Rafap, Bip Bip, Equital, Acodike and
Centers. 2000 Riogas.
SABRE lands in Uruguay. 2004
RCI and Avanza land in
Uruguay. 2005
Atento lands in Uruguay. 2006
Extel crm lands in Uruguay. 2008
Aguada Park is innaugurated in
Uruguay as a platform for global
services under a Free Trade Main AAA complex for Call Centers in
Zone regulations 2010). Uruguay.
Source: author’s production

The above historical picture clearly shows:

The environment, the need and the purpose for this business
• The tool: the means to communicate, telecommunications, with a
technological progress that has been evolving throughout history, thus
renewing the life cycle of this business.

• The need: this activity is designed to meet the communication needs
of the client with companies, as well as that of companies with their
customers.

• The goal is the sale of products or services, which drives the wheel
that turns the business life cycle, and the need for phone calls is even
necessary as a service (leaving aside the concept of the exchange
relative to the sale.)

At the end of the 90’s, telephone operators in Spain employed over 10,000
people [19] .

Labor costs

Current trends and these of the next few years indicate that increasingly call
center services will be provided from Latin American countries due to cheaper
labor costs involved, (the average wage is about one-fifth of current wages paid in
Spain) [20] . Labor costs in Spain are even higher than the EU average [21] .


The annual salary of an operator in Spain is € 12,249.5 Gross [22]
The annual salary of an operator in Uruguay is approximately € 2,641.7
Gross [23] to $ 27 / € [24] .

Remark: We must take into account the existing knowledge crisis which is
worldwide: the mean salary in the market is higher than the legal one and this is
more remarkable whether a bilingual, commercial or more specific knowledge is
required.

Figure 1: Wage Comparison
14000
12000
10000
8000
Uruguay
6000
Es paña
4000
2000
0
Salario anual en €

This situation makes Latin America especially attractive for Spanish
companies.

Degree of offshoring by Spain in Latin America

In 2005 disinvestment [25] of "Real estate and business services" [26] by
Spain amounted to 30.3% compared to its total gross investment [27] .

Depending on the gross investment data in Spain [28] we can see that the
"gross investment abroad", is almost twice as "gross disinvestment."

Figure 2: Gross investment Figure 3: Disinvestment versus gross investment
Inversión bruta Deslocalización < Desinversión <
Inversión bruta en el exterior

Inversión 80,0% 61%
14.433; bruta en el 60,0%
exterior 30,3%
39% 40,0%
22.975; Inversión 20,0%
61% bruta en 0,0%
España Desinversión Inversión bruta en
el exterior



Figure 4: Call Stations by Spanish companies
Puestos de Call de empresas
españolas

60.000
40.930
40.000 Source: author’s production
20.179
20.000

0
Latam España
On the other hand only 33% of
the posts offered by Spanish companies
are abroad. For this reason, the industry's turnover in Spain is higher than that of
their overseas branches, as can see from the chart below:

Figure 5: Size of platforms [29]

Source: ACE [30] -facemd
(http://www.ace.fecemd.org/resources/image/Resumen_Estudio-2009.pdf)

In conclusion: The branches in Spain have a higher turnover, as a result of
their being much larger companies (more digits), while foreign branches have a
higher margin because of lower labor costs.

All this would indicate that:

A) Offshoring (which is less than disinvestment) still offers much room for growth.

B) Although the price paid by customers is higher for services provided from Spain,
savings in labor cost more than justify establishing the platforms abroad.


In the next few years, offshoring will grow to the extent that:

1) The profitability of the business will exceed the profitability of the alternatives of
equal opportunity cost where the remaining investors are now currently investing
(profitability is estimated constant in the medium term and a lower opportunity cost
in the short term by increased risk in other activities).

2) The total investment abroad will increase, either as a result of the growth of
economy or due to new funding sources (aimed at increasing foreign investment in
order to protect capitals from the world crisis and to lower costs in the short term).

3) Labor costs in Europe and Latin America are maintained at levels similar to the
present ones (estimated as constant in the long run).

4) The trade union movement or the European regulations will not lock this type of
business (estimated as constant over the medium term).

CHAPTER 1: SERVICE FEATURES

1.1 Basic Service (Communication with the customer)

1.1.1 Needs and instruments
Sale
Post-sale (warranty)
Improving customer care (consultations, negotiations, etc.).
Poll (poll)
Loyalty (customer retention) and
Low cost and business risk

1.1.2 Services
Telemarketing
Customer Service
Information System
Marketing and
BPO (in special Legal Process Outsourcing, Medical Process Outsourcing y
Accountant Process Outsourcing).

1.2 Expanded Service

In order to improve trade proposals, two strategies can be defined
depending on the inclusion of:

1.2.1 Substitute Services [31]


To include the provision of Call Center substitute services to:

a) Make it more competitive by lowering costs or

b) Just because the customer requests these services.

The only real substitute to Telemarketing, are spam or door to door
salesmen (techniques which have increasingly less legitimacy).

1.2.2 Additional and Peripheral Services[32]

To include the provision of Call Center complementary services for the
purpose of:

a) Adding the value to business proposals and thereby making them more
competitive or

b) Simply because the client requests such services.

These services may be complementary or substitute, depending on the end
user’s profile of the end user and customer needs.

The grouping of modern communication services (graphics, radio, television,
e-mailing, online advertising, chat, Twitter, video, self-management via the Internet,
systems, interactive voice response IVR, webservicing [33] ) is often called Contact
Centers (Extended Service).

1.3 Plan Target Customer (Target customer)

The Business Plan will develop:

1.3.1 Internal Function

1. Act as a guide to firms that are already established in Uruguay, and who want to
venture into the Spanish market.

2. The Free Trade Zones in Uruguay are particularly interested in attracting call
centers to their facilities (Aguada Park [34] , Zonamérica [35] and Free Zone World
Trade Center [36] ).

3. Attracting new investment to the country.

4. The Call Center companies of:

a) Spain (the largest Hispanic market)

b) United States (with an Hispanic population of more than 40 million)

c) India (97% [37] of the Call Center Customers in India are American,
which generates its Call Centers to have branches in Latin America to meet
the needs of its clients in USA. Obviously the number of Hispanic speakers
in India is very limited and this country does not share time zone with the
United States and Europe (the time difference is between 7.5 and 8.5
hours).

1.3.2 External Function:

1.3.2.1. Customers: Provide advice to companies requiring the services
of Call Centers through the possibility of offering bids for serving them from
Uruguay.

1.3.2.2. Potential related businesses

Most providers of this project require the use of call center services for its
operations. Therefore, negotiating a return in services (such as customers and
suppliers in the same company), allows for lower operating costs and risk
diversification.

The following are the four strategic sectors where we could make alliances:

1.3.2.2.1 Financial Sector

In the next chart one may see the major banks of Spanish origin (and, therefore,
several potential targets such as finance companies and customers for the service
offered).


Figure 6: Spanish Banks

Bancos Españoles

2%
3%
BANCAJA
3%
14%
4% Banco Sabadell
8%
Banesto

Banco Popular

La Caixa
21%
BBVA

45% Banco Santander Central
Hispano (BSCH)
Otros

Source: (http://www.buscabancos.com/lista.htm and http://www.mejoresbancos.es and
http://www.cajasybancos.com).

The two most commonly used financial services are:

Factoring Service [38] : Our business may require this facility to finance the initial
investment and / or reduce credit risk in general.

Rate of exchange insurance: This helps to reduce the risk of a sharp decline of
the Euro in relation to the Uruguayan Peso.

The bank and insurance companies most commonly used used by Spanish
companies in Uruguay are: Santander [39] , BBVA [40] and MAPFRE [41] .

Major financial institutions in Spain:


1.3.2.2.2 HR companies linked to the selection of employment and / or
outsourcing Sector

As this business is fully intensive in the use of labor, it is essential to have a
business partner [42] in order to provide:

• Personnel suitable profiles for the post required.

• The number of workers required by the stipulated date.

• Competitive costs in relation to other competitors in the market.

Recruiting may be direct or through the business partner (employment agency). In
the latter case they will charge a rate based on:

a) The gross salary

b) The complement of the illness insurance quota for each worker.
.
Figure 7: Employment Agencies in the world

Adecco 19,5
Manpower 12,8
Vedior* 7,5
Randstad* 5,7
Kelly 4,5
Spherion 2,1
Volt (Advice) 1,7

0,0 5,0 10,0 15,0 20,0 25,0
Billones de U$S

* In Euro
Source: Adecco Uruguay (http://www.adecco.com.uy/aboutAdecco/about02.asp).

1.3.2.2.3 Telecommunication companies Sector

The choice of the telecommunication company that will provide us with the
necessary links to our business, is often a strategic choice because:


• Mobile phone companies are the main consumers of the call centers
service in the world and one of the most profitable segments; in most cases,
they also offer the service of international links.

• On the other hand, these international links have a high cost, "this
limitation" is actually an advantage, because it can be transformed into an
interesting barter of services between the telecommunication company and
the enterprise.

As seen in the figure below, Telefónica captures nearly the total of the Spanish
telephone market.

Figure 8: Phone expense by operators

Source: AEMTfacemd (www.marketingdirecto.com/estudios/telemarketing_Feb05.pdf).

1.3.2.2.4 Companies providing infrastructure and services Sector

Some companies offer solutions to install a Call Center (turnkey style), at a great
cost through economies of scale. However, one should be careful because often
these companies are also competitors.


As the total investment to install a large-area call center is very considerable3, this
option allows us to get better prices, credit, leasing [43] or to pay a part of the
project costs with call center services (in the same way as it could be done with the
telecommunication company).
However, this alternative reduces our ability to negotiate because we would
depend on one supplier.

Recommended companies: Isbel [44] , Telefax [45] , Logicalis and Arnaldo C.
Castro [47] .

As shown below, Avaya brands (Call masters or VoIP phones [48] ), HP (desktops
and servers) and Cisco (VoIP phones and electronic network) are the most
commonly used companies.

Figure 9: Vendors ICT
Among the companies that offer services, we may also include companies
specializing in the development of Business Intelligence Software(or BI-Business
Intelligence) and legal bureaus.

1.4 The four phases of the life-cycle of a platform

The life-cycle of this product may be divided into four stages; Introduction,
Growth, Maturity and Decline.

We assume that the company already has a customer, since usually one
does not build large platforms until one has a customer (the volume of investment
is such that it is not profitable to assemble an infrastructure for an eventual case).


In short, until these companies have a customer (after having won a tender
and signed a contract) they should not invest (except, of course, in marketing and
advertising).

1.4.1 Introduction: slow growth in billing, due to the fact that the company:

• may have having difficulties in recruiting all the staff they need
(insufficient occupation).

• may need to develop a Know-how [49] of its own, because it is never
possible to import 100% (insufficient training and experience).

• they need to improve the infrastructure and technology that makes the
service possible (i.e. so as to avoid the risk of not meeting established
deadlines and commitments with suppliers and lack of experience or
expertise).

At this stage, costs can be higher if the company has not achieved a
sufficient scale economy and even more, if the client penalizes the firm (bonus
malus) for failing to meet certain parameters of the SLA (Service Level Agreement
[50] ). In other cases, we must deal with the client by means of a few months’
special bonus of the SLA, and at the time of starting up [51] the platform.

Table 6: Indicators of quality monitoring

Source: AEMTfacemd http://www.marketingdirecto.com/estudios/Mercado_feb07.pdf).


As shown on Table 6, the monitoring indicators requested by the client often
measure the quality of the service; however, monitoring indicators followed
internally by the company are often those that affect the profitability of the
business. For this reason, it is very important for the customer to relate billing with
the quality of service provided by the Call Center (otherwise there will be a conflict
of interests between the client and the Call Center company).

1.4.2 Growth:

The market share has been strengthened and consequently, the market
growth rate has reached the optimum point. Therefore the company must seize
the opportunities offered by the market, trying to grow as fast as possible.

At this stage the product is positioned in the market. Billing results in a
surplus and capital recovery is in full process.

1.4.2.1 In an attempt to prolong this phase one should aim at:

• Improving the quality of the service by increasing sales or those
parameters defined by the customer (if using a variable billing system based
on objectives).

• Defending from service competition (i.e. the best defense is a good
attack).

In the free market the customer always chooses the best (ideally, this
implies comparing similar platforms [52] but with better indicators).

1.4.2.1.1 In order that two platforms are comparable:

a) They must be in the same life-cycle,

b) they must provide the same service,

c) they should have a similar size and

d) be located in Latin America or Uruguay.

• Find clients in local and regional market, without ruling out the center’s
own suppliers.

• Agree with the customer an improved payment for services on the basis
of expanded services that were not included in the original contract.


• Conduct a selective communication with up and cross selling [53] (cross-
selling) with consumers, based on their conviction to purchase (due to
telemarketing campaigns).

This implies the training of suitable salesmen for said selective communication
and ensuring a low turnover of such staff.

• Establishing lower salaries for the new staff, since rotation is usually very
high in this business. Thus, there is the possibility of diminishing wages to
counteract the effects of wage increases (due to CPI, wage boards or labor
regulations), provided there is enough scope for this (in the introductory phase
it is usual to pay a salary slightly higher than the legal minimum, in order to
expedite the recruitment process). This will generate several wage categories,
depending on the employee's seniority.

1.4.3 Maturity:

The growth rate decreases, sales stabilize, efforts are made to find new
customers and improve the parameters of existing services (through motivational
plans and training).

1.4.4 Decline:

Services become unprofitable due to increased labor costs or due to
competing countries that offer lower labor costs and more skilled labor. The
institution will have to eliminate services or ask for State allowances.

In conclusion:

The life-cycle of a platform has nothing to do with the life cycle of the call center
business in general.

For example, a multinational call center company in the growing phase may
have some branches in decline as a result of the normal business process.

CHAPTER 2: COMMERCIAL ASPECTS

2.1 Proving that the market exists


While reality shows that this market does exist, it is also important to
demonstrate it.

There are many references to articles dealing with the global growth of this
business (which seems to be the latest fashion with regard to business); however,
these may be summarized with the following logic equation:

The need to increase profitability (there are other needs but they are
secondary), plus the difference in labor costs in third countries inevitably triggers
the offshoring phenomenon.

This equation was born with capitalism and will die with it because, as Adam
Smith said, "offshoring is almost as old as international trade itself " [54] and
because, since the industrial revolution, companies profit from this business in an
effort to increase profitability.

While this reality is legal in both countries (the country that receives the
service and the one that produces it) and profitable for the entrepreneur, the call
service business will most probably survive any crisis.

2.2 Description of the World Market for Contact Centers

The call center market in 2008 amounted to U.S. $ 10 billion [55] and now it
is currently estimated that the market size for 2012 would be approximately U.S. $
21 billion.

The annual growth rate according to McKinsey consultants is 37.5%.
However, Gartner Group estimates a growth of only 20 to 25% p.a. (a most
conservative estimate indicates that the growth of the sector will in no case be less
than 20% annually).

2.2.1 Primary segments (due to its high yield): Mobile Telephone Services,
Finance companies and Banks.

2.2.2 Secondary segments:

• 0800
• Tourism and transportation (travel agencies / hotels / airports /
terminals / cruises / car rental)
• Insurance
• Deliveries and Distribution
• Health (Pharmacies / hospitals / labs)
• Telcos (Antel, Telmex)
• Media (TV, radio, etc).
• Universities
• Public Services and Public Administration (gas, electricity, water)


As shown on the table below, the Telecommunications industry and banking
and financial services group most of the turnover of this industry. Note that this
situation is a decision of call center companies (telcos and banking sectors being
the most profitable ones).

Table 7: Turnover by sector

(http://www.ace.fecemd.org/resources/image/Resumen_Estudio-2009.pdf).

2.2.3 Geographical Aspects

A very illustrative picture of this activity is that there are 40.000 Call Centers
in the world [57] , of which 30.000 are in the U.S.; this gives us an idea of what
stage of the life-cycle this industry is in, an aspect that will be developed later.

Brazil ranks second in the world market for Call Centers [58] (positions).
Brazil, despite the fact that the only market for its native language is Portugal, has
established itself as the industry’s major supplier for the American market and its
huge domestic market, which far from being exhausted, allowed Brazil to grow
within its own borders.

The 43% of alla the Call Centers in the world are based in the U.S. even
though it is not a host country for this type of business.

The above is showing three facts:


1) The Call Center American market is not located offshore or, if so, only a small
part of it is located abroad and has a huge market.

2) The global market for call centers is going through a process of growth.

3) The native language is not necessarily a limiting factor for this business provided
there is a concentration of bilingual population and an efficient and cheap
transportation system.

Out of 417 from 6790 millions of people the Spanish language is spoken by
only 6.1% of the world population [59] a fact that delimits the size of this market.

In turn, Spain's population accounts for only 0.7% of the total world
population.

However, these figures are only theoretical, since it should be borne in
mind that not all of the world's population represents the market; (in fact the one
with the purchasing power is the customer).

2.3 Description of the Spanish Market for Call Centers

Market size in 2008 is 1.533 million Euros with a growth rate of 9.1% last
year, well below the global estimate of annual growth of 20 to 37.5% (depending
on the consultant) .

It is estimated that the factor that has slowed growth in the sector in Spain
is the harsh economic crisis that this country has experienced since early 2008.

From the chart below we may also see that this sector has never gone into
recession, although it has had periods of slower growth.

Figure 9: Spanish market

During the period 2008-2009 the market turnover was of 1.533 million Euros (slight
recession due to lack of financing of the work capital).

This project has a market share of 0,2% of the Spanish Call Centers market.

(http://www.ace.fecemd.org/resources/image/Resumen_Estudio-2009.pdf ).

Table 8: Our main market

Below are the main potential customers for this industry in the Spanish
market.

Source: Forbes Magazine

2.4 Why choose Uruguay?

The answer to this question has been provided by the consultant Tholons,
(chosen by U.S. based companies as the most highly respected one). Tholons
states: "Uruguay offers the safest destination for outsourcing in Latin America."

Source: Tholons [61] , Report on Outsourcing in Uruguay, June 2009.


2.4.1 Education and Labor costs:

• The perfect equation: Uruguay offers the more skilled workforce in
Latin America, together with the lowest operating costs; as described by the
following chart, the main minimum wages in Latin America.

Figure 11: Minimum wages in Euros

Salarios mínimos en euros

300 € 230 € 257 €
218 € 220 €
250 €
200 € 148 €
150 €
100 €
50 €
0€
Salario mínimo de Salario mínimo de Convenio de Salario mínimo de Salario mínimo de
Uruguay Paraguay telemarketing de Chile Argentina
Uruguay


Remark: It would be ideal to see the evolution of the salary in the last five years in
order to evaluate in which countries it is raising and in which it is falling down (this
analysis could not be done due to lack of data).

Below is a table comparing salary rates between Uruguay and Latin America, and
between Uruguay and the rest of the world.

Table 9: Uruguay, a stable, reliable, safe and democratic country


Source: Aguada Park. http://www.aguadapark.com/

The graph below compares the educational systems of several countries:

Figure 12: Educational System


• Language: The Uruguayan Castilian accent is naturally neutral, our
population has a strong tendency to adapt the accent to the places they


interact with; the Uruguayan accent is the most neutral one in Latin
America, since the vast majority of Uruguayans has a Spanish ascent.
• "Service orientation" of the Uruguayan citizen: This is a major
competitive advantage with respect to neighboring countries and is a critical
issue for companies who want customers to be served by the most
courteous and pleasant people. The reasons for this "service orientation" is
the Uruguayan idiosyncrasy itself.

• Literacy: Uruguay has one of the highest literacy rates in the world
and the highest literacy rate across the continent (97%).

2.4.2 Legislation and Courts:

• Regulatory stability: a stable, serious and responsible country, with
clear long-standing rules with regard to law observance, irrespective of the
ruling party.

Figure 13: Public reliance on politicians

Through an agreement between the Uruguayan government and the Overseas
Private Investment Corporation (OPIC) of USA Uruguay also offers political risk


insurance for investors. The insurance covers all risks other than credit and claims
are subject to international arbitration.


• Independence of the Judicial Power: This ensures the legal protection
of private and industrial property.

• Promotion of investment: There are investment promotional schemes
and free trade areas to direct offshore investments which are tax free.

• Equal treatment for domestic and foreign investors: There are no
restrictions on the transfer of profits with free entry and repatriation of capital
and dividends. In addition there is as a favorable treatment for imports of
production equipment (these are activities for which State authorization is
not required) .There is also a free choice of citizenship when recruiting staff.

Figure 14: Restrictions on Capital Flow

As shown in the chart below, among several countries, Uruguay is the one with
less restrictions on capital flow.



• Flexibility in the corporate structure: Foreign investors can operate in
the country by setting up a Uruguayan corporation; they can also operate by
constituting a limited liability company or other type of personal companies
constituted by members who are natural citizens or foreign legal citizens. It
is also possible to operate in the country through a foreign company by
installing a branch of same.

• Compliance with regulations: Data protection laws, laws of displaced
workers compatible with those of Spain, as well as excellent diplomatic
relations with that country.

• Government Commitment: Explicit tax exemption, aimed at promoting
the activity of offshore call centers [62] .

2.4.3 Strategic Location:

Uruguay is located in a strategic geographical region of the world as a result of a
growing market, the trade agreement of MERCOSUR (see Figure 15).


Figure 15: Location of Uruguay

Source: CPA Ferrere - Gabriel Oddone - Punta del Este in April 2008.

Figure 16: Montevideo is the administrative capital of the Mercosur

The influence zone comprises 251 million people. Uruguay is located in the heart
of the largest consumer and production area in South America (potential market).


2.4.4 Economy:

• Political and economic stability: Uruguay has obtained the
"investment grade" (low-risk for investments), as established by recognized
companies such as American Duff and Phelps and British IBCA. This
distinction indicates that Uruguay is identified as a risk-free country for
investments.

The following chart shows the business climate in Latin America, with Uruguay as
the best located country:


Figure 17: Good business climate in Latin America

Source: CPA Ferrere - Gabriel Oddone - Punta del Este in April 2008.

• International tax excemptions: The Uruguayan State does not charge
Income Tax in other countries worlwide. There is an agreement with Spain
to avoid double taxation (taxes can be deducted from the initial investment
and from all the monthly costs).

• Situated close to great economies: The geographical proximity to
economies such as Brazil and Argentina, makes it the ideal country for
testing new products and services. Many multinationals prefer to try new
products and services in Uruguay before introducing them to larger markets.

• Funding: Both branches and local companies can be financed through
local banks, with loans from abroad or from their head offices or
shareholders.

• Privileged geographical location: Uruguay is free from natural
disasters such as earthquakes, tornadoes and tsunamis.

• Free exchange: There is a free exchange market, no limitations exist
on the purchase or sale of foreign currency. Investments may be made in
any currency.

Corruption is one of the factors affecting the economy and business. In Figure 18
we see that Uruguay and Chile are the countries with the lowest degree of
corruption in the continent.


Figure 18: Degree of corruption and labor unrest, the lowest in MERCOSUR


2.4.5 Infrastructure:

• Major road, port and energy infrastructure throughout the country with
first-class roads. No blackouts. Everything works in an orderly manner.
See Figure 19 below: “Quality of general infrastructure”.

Figure 19: Quality of General Infrastructure


• Excellent telecommunication infrastructure, with the best quality in all
MERCOSUR. Uruguay is the only one country in America with 100%
digital coverage.

Figure 20: Telephone Infrastructure



Figure 21: Cost on account of terrorism in Business

Amongst the countries considered in the chart below, Uruguay is the country with
the lowest cost on account of terrorism.


2.5 Where to locate a call center in Uruguay?

2.5.1 Factors to be considered:

2.5.1.1 Telecommunications:
In Uruguay, 100% of all provincial capitals and larger urban centers have optic
fiber.

2.5.1.2 Wages, labor union conflictivity and absenteeism:
While labor union conflictivity in Uruguay is minimal, wage levels and absenteeism
are also low (as work is rather scarce, people tend to be carefulabout their jobs).

2.5.1.3 Subsidy:
The authorities in the interior of the country are much more likely to grant benefits
to new investors than the central government. In fact, the departments of
Canelones and Salto have created Technology Poles for this purpose.

2.5.1.4 Buildings:


Buildings should cover an area of at least 800 m2 . Preferably, the walls should be
transparent and the buildings should offer offices for rental (for this activity, it is not
usual to buy real estate).

2.5.2 Access:

In Montevideo, there is a demand for this type of buildings in the downtown area.
The rental value of office space ranges from U$S 6.27 to 36.57 per m² (depending
on the location, the condition of the office and whether it offers additional facilities).

g

Aguada Park Photo

Example: The Aguada Park complex offers 800m of type AAA facilities,
2

especially designed for Call Centers within a Free Trade Zone (exempt from all
taxes in Uruguay, including import charges) and not subject to a monopoly of
services.

The average cost of these offices is U$S 23 per m² (requiring a guarantee of
5 months rental).


However, in the interior of the country rental costs are much lower (never
exceeding U$S 7 per m ) but there is a serious locative difficulty, since it is hard to
2)

find a building infrastructure of 800mts (the ideal area for such an enterprise).
2

Alternative solution: In the countryside, in case there is no building
according to satisfy our needs, a good option would be a leasing agreement for
the quick construction of prefabricated modules (in 60 days) by the country's
largest construction company (Campiglia [63] ).

The monthly cost of leasing these facilities is equivalent to paying high
rental in Montevideo, provided an investment guarantee agreement and a lease for
a minimum of two years are signed.

2.5.3 Premise Location:

The high staff turnover in this type of business and the large volume of workers
required excludes all available locations.

Therefore the following will be required:

2.5.3.1 Security and metropolitan lighting
It is very important to ensure that there is good street lighting and police
surveillance from the terminal or bus stops close to the platform (remember that
the first shift may start at 4 or 5 a.m. Uruguayan time).

2.5.3.2 Transport:
It is vital to have public transport available in the early hours of the morning in
order to allow workers to attend work.

If safety, lighting and transport are insufficient, a negotiation may be carried out
with the Public Administration authorities before discarding a good location.

2.5.3.3 Locative capacity for potential future growth:
It should be borne in mind that the business can continue to demand more space,
so a location that allows for future expansion should be chosen

2.5.4 Location in Uruguay

Generally, when choosing a city or town, the customer determines the
minimum amount of inhabitants desired (usually at least 100,000 inhabitants)
without other large area cll center operating in the same location.

In Uruguay, the only cities that have a population restriction are Montevideo,
Canelones and Salto.

2.5.4.1 The department of Montevideo (capital of the country)


2.5.4.1.1 Population: With approx. 1.5 million inhabitants [64] , Montevideo
is in a position to provide human resources for 12 active Call Centers for large
areas (There are now five major [65] and several small ones).

2.5.4.1.2 Socio-cultural Level: Medium-high trade profiles.

2.5.4.1.3 Ideal location: The riverside area which extends from the
downtown area ("Ciudad Vieja") and the neighborhood of Carrasco (e.g. the Free
Zone of Aguada Park and World Trade Center Free Zone).

2.5.4.1.4 HR Profile: Students (computer training not required)

2.5.4.2 The department of Canelones, comprises a group of cities that are very
close to one another (approx. 10 to 20 km) and offering good transport links.

2.5.4.2.1 Population: Approximately half a million inhabitants. [66] . This
department would provide human resources for 4 active large areas Call Centers
(virgin land, until no Call Center exists in this area).

2.5.4.2.2 Socio-cultural Level: People belong to the middle class (lower
than that of Montevideo).

2.5.4.2.3 Prime location: The cities of Las Piedras and Canelones ( the
latter is the capital of the department) are the two most thickly populated cities and
the more remotely located from Montevideo (making them ideal for these type of
developments, since it is not likely that residents would prefer to travel to
Montevideo for working purposes).

2.5.4.2.4 HR Profile: Young people who have completed their high-school
education and middle-aged people who are used to work (although they may
require computer training).

2.5.4.3 The department of Salto

2.5.4.3.1 Population: Approx. 150,000 people [67]. This department is
capable of providing human resources for one large areas Call Center ( this is
virgin land, until now, there are no Call Centers).

2.5.4.3.2 Socio-cultural Level: Similar to that of Montevideo (medium-high)
with universities and schools of recognized standing.

2.5.4.3.3 Ideal location: The city of Salto (capital of the department)
concentrates about 100% of the department’s population.

2.5.4.3.4 HR Profile: As this department is situated close to Brazilian border,
the operator profile is ideal for a Portuguese-speaking client (with 100 operators) or
an Hispanic client (with 500 operators) .

The following table shows the location of the different Uruguayan departments:

Table 10: Uruguayan Departments (Country’s Capital: Montevideo)

2.6 Jurisdiction

How does the international market work?

From the point of view of the World Market Overview, geographical aspects
and the life-cycle stage of the business,the following can be said about demand
and supply:

2.6.1 Demand
The international demand for Call Centers services exceeds the supply by far.

The figure below examines the structure of the demand for services and shows
that 54% of Spanish customers in the Call Center industry correspond to
customers whose turnover increased to 45,000 million Euros p.a.


Figure 22: Structure of the demand for services (in thousands of Euros)


2.6.2 Supply
As the demand by far exceeds the supply, Telemarketing corporations can choose
which are the most suitable customers.

We are facing a market largely dominated by supply rather than by demand.

As a result of all this, companies limit their business operations to those
offering a very high yield and a number of interesting positions that allow scale
economies, thus optimizing costs (the funds for investment and the capacity
opportunities to take credits are finite) while business are abundant).

How does the national market works?

Most of the services supplied do not have the quality or size required for
international purposes (this is an issue that shall be analysed in detail under
Chapter 4 Economic Aspects). In addition, the quality of services is strongly
determined by the staff’s proficiency in the language (only a small percentage of
the population would qualify as a “native English speaker”).

The demand for Call Centers by domestic companies is usually not a
profitable venture for large Telemarketing companies. This leaves the field open
for domestic enterprises.

Market Analysis 2.6.3:

2.6.3.1 Identification of segments:
Below is a detail of the different market segments for this project.

2.6.3.1.1.Mercosur


Brazil offers a huge potential market for Uruguay because:

• In Uruguay a percentage of the local population speaks Portuguese (it
is estimated that at least 5% of the population is of Brazilian origin and
lives permanently in Uruguay [68]). The 2007 Students’ Census at the
University of the Republic indicated that 28.5% of students can read
Portuguese, while 17.6% are able to speak it.

• Together with Uruguay, Brazil is part of the MERCOSUR.

• It is more profitable for the Brazilian Call Center market to use their
own resources to contact U.S. customers than to do so for their own
domestic market.

Argentina, and Paraguay

• They have higher labor costs than those of Uruguay, as well as a
greater labor unrest, a lower score in the Offshore Location Attractiveness
Index (AT Kerarney) and a higher local cost.

• In Argentina, the minimum wage is € 257 [69] (17% over the Uruguayan
telemarketing agreement and 44% over the minimum wage for Uruguay).

• According to the Global Competitiveness Index, Argentina is at the
competitive development stage 2 (position 85). Uruguay is better situated;
i.e. at stage "2-3" (position 65).

Source: World Economic Forum (2010) The Global Competitiveness Report 2009-2010.

• In the case of Paraguay, this country is at the competitive development
stage "1-2" (position 124). Uruguay is at stage "2-3" (position 65).



• On the other hand, the minimum wage in Paraguay amount to € 218 [70]
(1% below the Uruguayan telemarketing agreement and 23% over the
minimum wage in Uruguay).

International 2.6.3.1.2
Chile


• According to the Global Competitiveness Index, Chile is at the
competitive development stage 2-3 (Uruguay is situated at the same stage).

• Chile has higher labor costs than Uruguay and the minimum wage is €
230 [71] (5% above the Uruguayan telemarketing agreement and 29%
above the minimum wage in Uruguay).

• Chile is a country prone to natural disasters (volcanoes, tidal waves,
tsunamis [72] and earthquakes). It has 500 [73] geologically active
volcanoes and about 60 with eruptive with an historical record of eruptions.
It is the country with the largest number of earthquakes in the world (call
centers should be located, as far as possible, in an area free from natural
disasters, as they are often used as a backup for third countries essential
services).

Peru



• According to the Global Competitiveness Index, Peru is at the
competitive development stage 2 (position 78). Uruguay is better situated,
i.e. at stage "2-3" (position 65).

• The human development index (HDI) [74] shows that Peru is situated at
position 78 (out of 177 countries) a score well below Uruguay’s position: 46.

• As regards the Index of Perceived Corruption published by
Transparency International [75] Peru is situated at position 75, while
Uruguay ranks 25 (the lowest in the MERCOSUR).

• Peru is a country prone to natural disasters (especially earthquakes
[76]) as it is located in an area subject to frequent seismic activity
corresponding to the strip of friction of the relative movement of two tectonic
plates (the Nazca plate and the Southamerican plate). With respect to the
recommended sites for Call Centers, the comment made for Chile applies to
Peru.

Figure 23: Earthquakes in Peru during the last 30
years


Source: http://www.wolframalpha.com/input/?i=Earthquake+Per% C3% BA

Spain (our target market, which is discussed under paragraph 2.3 of this chapter.)

Portugal

• As mentioned above, in Uruguay there is a percentage of the population
that speaks Portuguese.

U.S.A.

• Uruguay is located in the same time zone as the United States and
Canada; therefore Uruguay is the ideal country to serve the U.S. Hispanic
market, demanding services in Spanish (The United States have an
Hispanic population of more than 40 million people).

• In Uruguay, the English language is widely spoken by young people.
Some estimates indicate that approximately 25% of the population speaks
the English language, but not at "native English speaker” level. Last year
(2009), 3% of the population passed a Cambridge ESOL examination [77].
In the 2007 Census carried out by the State University of the Republic - the
largest university in the country – it was reported that 70.5% of the students
are capable to read English (out of a total of 81.774 students) and that
50.7% are capable of speaking this language. However, the socio-
economic profile of the students who have passed this examination is not in
line with that of a Call Center operator. Anyway, English speaking Call
Centers are feasible at somewhat higher labor costs.


Table 11: Global Competitiveness Index 2009-2010 [78]

Brazil is not a direct competitor for Uruguay because it is not a Spanish speaking
country and unfortunately Chile is likely to go down in the ranking due to the
earthquake that affected the country this year.

Source: Forbes Magazine

2.6.3.2 From where to get labor costs?

It is essential to count with statistics by country. For this purpose, data
should be sought from the following sources:

Laborsta Database 2.6.3.2.1 [79] developed by the ILO.

In Laborsta, it is possible to find the average labor cost per country for the
textile industry, although this cost has nothing to do with the Call Center industry
and is probably outdated. Anyway, it offers a rough idea of historical labor costs in
the countries under analysis.

In said Web page, labor cost is expressed in time units (ie hourly, monthly or
yearly cases, as calculated by each country at the corresponding currencies). To
change the available data to a single currency, these data must be changed to
Euros.

2.6.3.2.2 Database TRAVAIL [80] of the ILO

TRAVAIL shows the working conditions and labor legislation for each
country, as well as the minimum wage.

2.6.3.2.3 Bureau of Labor Statistics of the U.S.

(Federal Employment Statistics [81] ) shows the wages in almost all countries, in its
currency of origin.

2.6.3.2.4 Organization for Cooperation and Economic Development (OCED
[82] )

This offers a complete database of all member countries; however it does
not have specific information about the call center industry and the official sites
offering labor statistics for the countries we are analyzing.

2.6.3.2.5 In Uruguay it is possible to resort to the National Statistics Institute
(INE [83] ) and the Ministry of Labor and Social Security (MTSS [84] ).

It should be borne in mind that we are investigating the total labor cost and not the
salary. The labor cost will be calculated according to the salary specified by the
telemarketing agreement in each country (in case it exists).

In Uruguay, the wage established by the telemarketing agreement is € 220
(without reductions) per month (24% above the minimum wage).

Uruguay's minimum wage is € 178 (1/1/09) [85] per month.

2.6.3.3 Competitors

2.6.3.3.1 Competition at international level: there is not a serious problem
in the case of larger call centers, as there is enough for everyone of them.

However, in the case of multinationals who employ more than one
Telemarketing company, we should point out that very often they have to compete
against one another in order to increase productivity. In such cases, a competitive
environment is graphically displayed. Only when the market segment is too
valuable, one may see competition in the Telemarketing international market.

2.6.3.3.2 Domestic Call Centers: For the above mentioned reasons they
compete with each other and are affected by the large activities of the huge
international market companies.

2.6.4 Research

The sample includes:
• The eight members of the local House of Telecommunications and other
Call Centers present in Uruguay.

• The 22 members of the Spanish Association of Contact Centers and
other Call Centers in Spain.


• The 24 call centers that have received accreditation from the Spanish
Agency for Data Protection.

• The largest contact centers in Argentina and worldwide.

• Seventeen related companies not belonging to the sector although there
is a high probability that they will join it shortly in the coming years (HR and
consulting international companies).

Our investigation therefore covered a total of 75 companies (58 call
centers and 17 related companies).

Competitor’s analysis
Note: All information on competitors with regard to billing, net income and assets in
Spain was collected from data by eInforma [86] , but the world global data were
collected from each company’s website.

Table 12: Competitors present in Uruguay who work or have worked for
Spain

Atento (350 posts) and Eurocen (230 posts) for Telefónica Móviles, Avanza (190
posts) for Telefonica (landline only) and Hits Telecom. IBM (225 posts) operates
with Indra (formerly Soluziona), Iberdrola and BBVA (Finanzia Autorenting,
Finanzia Bank of Credit and Uno-E Bank). Presently, Synapsis is not operating
with Spanish clients.



Table 13: Competitors in Uruguay not operating
with customers in Spain

It is understood that these companies do not operate with customers in Spain
because they do not have authorization from the Spanish Agency for Data
Protection. If they did, the operation would be illegal and liable to claims (probably
the customer would have little importance, since the best qualified customers are
always working at zero risk).

These domestic companies are usually smaller than the subsidiaries of
transnational corporations (with an average of approximately 70 positions each),
and they mainly serve the local market (exporting about 10% of their sales).

Sierra & Leth and EULEN SA are Spanish companies; in the case of EULEN this is
a multi-services company that has call centers in Spain but not in Uruguay (we
foresee that in the near future EULEN will set up a Call Center in Uruguay, as it is
already baseded in the country.)

Sierra & Leth operates in Uruguay by means of smart-shoring agreements [87] (or
intelligent offshoring) with other outsourcers.

Access (250 seats) is owned by the Uruguayan State company (Antel).

Telesur is the representative in Uruguay of Plantronics (the brand of Call Center
hulls).


Table 14: Call Centers Companies in the Spanish Association of Contact
Centers that have no presence in Latin America

Except for Shoot, which had a negative result, it is very likely that these companies
are studying the possibility of establishing themselves in Latin America, provided
their assets allow them to do so.

However, those that have no presence in Latin America, will very likely choose to
establish themselves in Uruguay, contrary to other companies that are already
settled down in Latin America.


Table 15: Companies of Call Centers outside the Spanish Association of
Contact Centers that have no presence in Latin America

It is possible that these companies, like the ones in th above table, may be
installed in Uruguay, but in many cases there are small call centers and they do not
belong to the Spanish Association of Contact Centers (possibly due to lack of
assets).

The non-membership of the Spanish Association of Contact Centers may be
because they cannot meet the minimum entry requirements [88] or for strategic
reasons (sometimes it happens).


CCA and CPM have negative net results, from which in a very hasty way can be
followed that they will not come to Uruguay; however, there is also the possibility
that if they go badly in Spain, they should outsource their services in Latin America
requesting a capital contribution to their shareholders.

Table 16: Companies of Call Centers in the Spanish Association
of Call Centers that have no presence in the MERCOSUR but in
the rest of Latin America


These companies are already in Latin America but may be interested in settling in
Uruguay because:
a) They diversify the business risk by means of platforms in different
countries and in different economic blocs (such as MERCOSUR).
b) It may be a requirement of the customer.
c) They may be interested in a regional platform for export of services from
Uruguay to Argentina, Brazil and Paraguay and in this way benefit from tax
incentives or MERCOSUR intra-regional customs.


Table 17: Companies of Call Centers outside the Spanish Association of
Contact Centers that have no presence in the MERCOSUR but in the rest of
Latin America

Ditto to the notes in the above table but with the possibility that these companies
have assets under investment or simply are not in the Spanish Association of
Contact Centers for other reasons.


An example of the latter is that Digitex (a provider of Telefonica), GEOBAN
(supplier of Banco Santander) and STREAM are leading companies.


Table 18: Call Centers with the highest global turnover


Figure 25: Global Billing

It should be noted that the list lacks some of the market companies because
reliable data on these companies could not be gathered. Similarly, it is considered
that the previous list and its corresponding chart are fully representative of the
industry's global turnover.

Facturación mundial

2.000.000.000 € 1.784.000.000 € TELEPERFORMANCE
1.800.000.000 € (IBERPHONE, S.A.)
1.600.000.000 €
1.400.000.000 € 1.306.000.000 €
ATENTO
1.200.000.000 € TELESERVICIOS
1.000.000.000 € ESPAÑA, S.A.
800.000.000 € 631.000.000 € TRANSCOM
600.000.000 € WORLDWIDE SPAIN,
400.000.000 € S.L.U.
200.000.000 € 120.000.000 €
DIGITEX
0€
Facturación total


Table 19 and Figure 26: Turnover of Call Centers in Spain


Company Billing Spain €
BT 467.836.844 €
ATENTO TELESERVICIOS ESPAÑA, S.A. 221.266.000 €
KONECTA BTO, S.L. (GRUPO) 179.601.000 €
SITEL IBÉRICA TELESERVICES, S.A. 148.224.648 €
QUALYTEL TELESERVICES, S.A. 122.044.386 €
TRANSCOM WORLDWIDE SPAIN, S.L.U. 88.762.000 €
EUROCEN EUROPEA DE CONTRATAS, S.A. (EXTEL
CRM) 81.384.002 €
DIGITEX 79.527.446 €
TELETECH CUSTOMER SERVICES SPAIN, S.L. 78.554.000 €
TELEPERFORMANCE (IBERPHONE, S.A.) 69.568.000 €
GEOBAN 67.999.006 €
UNISONO SOLUCIONES CRM, S.A. 64.193.000 €
CENTRO DE ASISTENCIA TELEFÓNICA, S.A. (CATSA) 50.482.000 €
GRUPO GSS 37.424.573 €
TELEMARKETING GOLDEN LINE, S.L. 37.222.229 €
BOUNCOPY, S.A. 34.492.000 €
AVANZA EXTERNALIZACIÓN DE SERVICIOS, S.A. 32.409.465 €
SERVICIOS DE TELEMARKETING, S.A. (SERTEL) 31.489.491 €
EMERGIA CONTACT CENTER, S.L. 25.700.270 €
SYKES ENTERPRISES INCORPORATED, S.L. 22.348.432 €
TELEMARK Spain SL 19.634.813 €
TELECYL , S.A. 17.191.254 €
RAINBOW COMUNICACIONES, S.L. 16.624.042 €
CONTACTEL TELESERVICIOS, S.A. 15.315.245 €
ARVATO SERVICES IBERIA S.A. 13.329.501 €
BOSCH 13.218.000 €
LANALDEN, S.A. 10.704.735 €
MEDIOS Y SERVICIOS TELEMÁTICOS SA (GRUPO MST) 8.547.087 €
STREAM SERVICIOS DE APOYO INFORMÁTICO, S.L. 8.392.390 €
STD MULTIOPCIÓN, S.A. 7.228.358 €
CCA INTERNATIONAL (Fonoservice SA en España) 6.724.063 €
RESULTA SERVICIOS DE MARKETING, S.A. 5.520.594 €
CPM, INTERNATIONAL TELEBUSINESS, S.L. 4.566.290 €
GRUPO ASTEL (ASSTEL SIS SOCIEDAD LIMITADA) 2.016.359 €
KONOKO 1.194.443 €
SHOOT CONTACT CENTER 898.365 €
SIERRA & LETH 803.307 €
AXIS CORPORATE 566.305 €
CONTACTNOVA SL 445.488 €


We can see that BT is the clear leader in the Spanish market (in revenue).


500.000.000 € BT

450.000.000 €
ATENTO TELESERVICIOS
400.000.000 € ESPAÑA, S.A.

350.000.000 €
KONECTA BTO, S.L.
(GRUPO)
300.000.000 €

250.000.000 € SITEL IBÉRICA
TELESERVICES, S.A.
200.000.000 €
QUALYTEL
150.000.000 € TELESERVICES, S.A.

100.000.000 € TRANSCOM WORLDWIDE
SPAIN, S.L.U.
50.000.000 €
EUROCEN EUROPEA DE
0€ CONTRATAS, S.A. (EXTEL
Facturación España € CRM)


Table 20: Percentage of Spain in relation to the world global turnover

Table 20, which is lower and the corresponding Figure 27 does not clarify whether
Spanish companies have a large participation in the market by the weight of the
Spanish market in the world market or because the companies' investment abroad
is minimal (low relocation) in relation to Spain.


Figure 27: Percentage of Spain in the world billing


90% RAINBOW
83% COMUNICACIONES, S.L.

80% 77%
UNISONO SOLUCIONES
CRM, S.A.
70% 66%
63% DIGITEX
60%

MEDIOS Y SERVICIOS
50% TELEMATICOS SA
45%
(GRUPO MST)
40% GRUPO GSS

30%
ATENTO TELESERVICIOS
ESPAÑA, S.A.
20% 17%
14%
TRANSCOM WORLDWIDE
10% SPAIN, S.L.U.
4%
TELEPERFORMANCE
0% (IBERPHONE, S.A.)
% de España en la facturación mundial

Source: own

Table 21: Net results of Call Centers in Spain

The undisputed leader in the Spanish market net result is Atento (owned by
Telefónica). Eurocen and Digitex are also providers of Telefonica; so this is more
than clear that the Telefonica group is leading the Spanish market for contact
centers.

Company Last Year € Results
ATENTO TELESERVICIOS ESPAÑA, S.A. 7.306.000 €
QUALYTEL TELESERVICES, S.A. 3.901.458 €
EUROCEN EUROPEA DE CONTRATAS, S.A. (EXTEL CRM) 2.980.819 €
TRANSCOM WORLDWIDE SPAIN, S.L.U. 2.933.000 €
DIGITEX 2.606.545 €
UNÍSONO SOLUCIONES CRM, S.A. 2.460.000 €
SERVICIOS DE TELEMARKETING, S.A. (SERTEL) 2.097.778 €
TELETECH CUSTOMER SERVICES SPAIN, S.L. 1.739.000 €
CONTACTEL TELESERVICIOS, S.A. 1.676.966 €
TELEMARKETING GOLDEN LINE, S.L. 1.372.525 €
TELEMARK Spain SL 1.329.483 €
SYKES ENTERPRISES INCORPORATED, S.L. 737.161 €
AVANZA EXTERNALIZACIÓN DE SERVICIOS, S.A. 616.400 €


LANALDEN, S.A. 494.740 €
STD MULTIOPCIÓN, S.A. 466.228 €
CENTRO DE ASISTENCIA TELEFÓNICA, S.A. (CATSA) 424.000 €
EMERGIA CONTACT CENTER, S.L. 404.578 €
ARVATO SERVICES IBERIA S.A. 387.515 €
GRUPO GSS 344.888 €
MEDIOS Y SERVICIOS TELEMÁTICOS SA (GRUPO MST) 284.682 €
STREAM SERVICIOS DE APOYO INFORMÁTICO, S.L. 276.012 €
TELECYL , S.A. 229.685 €
SITEL IBÉRICA TELESERVICES, S.A. 174.997 €
TELEPERFORMANCE (IBERPHONE, S.A.) 162.000 €
RESULTA SERVICIOS DE MARKETING, S.A. 102.387 €
BOUNCOPY, S.A. 95.000 €
KONOKO 49.836 €
RAINBOW COMUNICACIONES, S.L. 47.905 €
SIERRA & LETH 23.730 €
AXIS CORPORATE 22.958 €
CONTACTNOVA SL 13.396 €
GRUPO ASTEL (ASSTEL SIS SOCIEDAD LIMITADA) 10.914 €


Figure 28: Spanish Market net result

8.000.000 € ATENTO
TELESERVICIOS
ESPAÑA, S.A.
7.000.000 €
QUALYTEL
TELESERVICES, S.A.
6.000.000 €
EUROCEN EUROPEA
5.000.000 € DE CONTRATAS, S.A.
(EXTEL CRM)
4.000.000 € TRANSCOM
WORLDWIDE SPAIN,
S.L.U.
3.000.000 €
DIGITEX

2.000.000 €
UNISONO
1.000.000 € SOLUCIONES CRM,
S.A.
SERVICIOS DE
0€
TELEMARKETING,
Resultado Último Año € S.A. (SERTEL)

Table 22: Call Centers with negative net income in Spain

BT, BOSCH and KONECTA are not only in Spain so that the net result is not
necessarily negative, indicating that these companies have no assets available to
invest in new ventures.

BT is the company with higher turnover and assets in Spain.

BOSCH and KONECTA are within the more active Call Centers in Spain, which
may indicate that the negative net result is somewhat temporary and maybe the
result of a planned in advance big recent investment or otherwise they are
suffering from a scale diseconomy due to excessive costs.

With respect to CCA, CPM and Shoot the reasons for the negative net result may
be different, such as: an investment, or they are computing a part of the billing in
another society belonging to the same company or simply they are having financial
problems. Likewise, one might assume a priori that these three latter companies do
not have liquid resources to undertake a project in Uruguay in 2010 unless they
request to their shareholders a new capital contribution or that the statement
presented in 2009 was not a faithful reflection of reality in 2010 (not been able to
get enough data to make sure what the financial situation is, much less to discard
strategic plans of these companies).



Table 23: Profit margin of Call Centers in Spain

It is commonly said that the smaller is a call center, the more profit margin it gives;
but TELEMARK Spain SL, a large company, is at the top of the ranking (this may
mean that the company is very well maintained).

The case of Contactel Teleservices SA that has a very high margin, is due to a
good management and to the fact of its smaller size than the rest of the Call
Centers that are in the sample (both).

You can also see that the average margin in Spain is very low, which has made the
offshoring to Latin America a business not only exceptional but necessary for these
companies to survive.

On the other hand it is noteworthy that, even though in many cases the branch of
Spain computes the turnover of branches in Latin America, the main reason for the
low profit margin in general is that, being very low the level degre of the offshoring
Spanish companies, turnover in Latin America is sprayed with that of Spain (which
is given by operating costs much higher than those of Latin America).

Company Profit margin
CONTACTEL TELESERVICIOS, S.A. 10,9%
TELEMARK Spain SL 6,8%
SERVICIOS DE TELEMARKETING, S.A. (SERTEL) 6,7%
STD MULTIOPCIÓN, S.A. 6,4%
LANALDEN, S.A. 4,6%
KONOKO 4,2%
AXIS CORPORATE 4,1%
UNÍSONO SOLUCIONES CRM, S.A. 3,8%
TELEMARKETING GOLDEN LINE, S.L. 3,7%
EUROCEN EUROPEA DE CONTRATAS, S.A. (EXTEL CRM) 3,7%
MEDIOS Y SERVICIOS TELEMÁTICOS SA (GRUPO MST) 3,3%
TRANSCOM WORLDWIDE SPAIN, S.L.U. 3,3%
ATENTO TELESERVICIOS ESPAÑA, S.A. 3,3%
SYKES ENTERPRISES INCORPORATED, S.L. 3,3%
STREAM SERVICIOS DE APOYO INFORMÁTICO, S.L. 3,3%
DIGITEX 3,3%
QUALYTEL TELESERVICES, S.A. 3,2%
CONTACTNOVA SL 3,0%
SIERRA & LETH 3,0%


ARVATO SERVICES IBERIA S.A. 2,9%
TELETECH CUSTOMER SERVICES SPAIN, S.L. 2,2%
AVANZA EXTERNALIZACIÓN DE SERVICIOS, S.A. 1,9%
RESULTA SERVICIOS DE MARKETING, S.A. 1,9%
EMERGIA CONTACT CENTER, S.L. 1,6%
TELECYL , S.A. 1,3%
GRUPO GSS 0,9%
CENTRO DE ASISTENCIA TELEFÓNICA, S.A. (CATSA) 0,8%
GRUPO ASTEL (ASSTEL SIS SOCIEDAD LIMITADA) 0,5%
RAINBOW COMUNICACIONES, S.L. 0,3%
BOUNCOPY, S.A. 0,3%
TELEPERFORMANCE (IBERPHONE, S.A.) 0,2%
SITEL IBÉRICA TELESERVICES, S.A. 0,1%
Average margin in Spain: 3.1%


Figure 28: Profit margin

From the companies selected in this sample, Contactel is the one with higher profit
margin.

12,0% CONTACTEL
10,9% TELESERVICIOS, S.A.

10,0% TELEMARK Spain SL

8,0% SERVICIOS DE
TELEMARKETING, S.A.
6,8%6,7%
6,4% (SERTEL)
6,0% STD MULTIOPCION,
S.A.
4,6%
4,1%3,8%
4,0% LANALDEN, S.A.

2,0% AXIS CORPORATE

0,0% UNISONO
SOLUCIONES CRM,
Márgen de beneficio S.A.



BUSINESS PLAN FOR A CALL CENTER IN URUGUAY

BUSINESS PLAN FOR A CALL CENTER IN URUGUAY

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