Having customer contact carried out in another country: the possibilities for the Dutch language area are limited. But if you look carefully, you will come across new opportunities for offshoring. On the other hand, 'classic' near and offshore locations will sooner or later have to deal with price increases or geopolitical (risk) factors.

 

Between 2020 and 2030, the Netherlands, Germany, Italy, Spain and Poland will face an increasing shortage on the labor market. That predicted Boston Consulting Group (BCG) as early as 2014. The European labor force is expected to decrease by about 2030 million or 13,5 percent by 4. Germany is shrinking by almost 8 percent or about 4,0 million people, Italy by almost 7 percent, about 2,5 million people and Poland by 9 percent, about 2,3 million people.

Despite automating simple tasks in customer contact (a field that McKinsey describes as vulnerable to automation designated) there is still plenty of work to be done.

Unfortunately, the customer contact field competes with all kinds of other sectors, where there is also scarcity. BCG also has solutions including leveraging the international talent pool, but “by 2030, most of the 25 economies in our study will face shortfalls. Thus, increasing talent mobility can be regarded as only a limited solution” says BCG.

South Africa

It is therefore not surprising that you have to look beyond the end of your nose for customer contact employees. Interest in offshoring is increasing worldwide. We begin this exploration of Ziptone in South Africa. In the first nine months of 2022 alone, the BPO (Business Process Outsourcing) sector Kaapstad 4100 new international call center jobs created. Cape Town, together with the Western Cape, likes to profile itself as the most sought-after location for offshore CX services. The city still sees growth opportunities for around 70.000 jobs in the Cape metropolitan region. Customers are mainly from the US and UK. Not only companies, but also potential employees are tempted with a 'BPO boot camp' for graduates from regular education.

Dutch language available

Dennis Battens (TCMS Solutions & Services) is at home in offshore and nearshore outsourcing. After various positions at BPO players such as Xerox, Conduent and Custom Connect, Baetens advised and supported these parties in finding and setting up new destinations for offshoring and nearshoring of customer contact. And then he put his own offshore facility contact center up in South Africa.

“Outsourcing service providers with multilingual projects are finding it difficult to find people in more and more locations. Together with Sander Schepens, I explored the possibilities in South Africa, among other things. Quite a few Dutch people live in various South African cities. But there are quite a few people available for other languages ​​as well.”

Potential

In South Africa, Baetens believes it can grow to 250 (Dutch-speaking) employees in a number of cities in both Cape Town and Johannesburg. Baetens bases this expectation on the market surveys of four recruitment partners. Cape Town and Johannesburg are cities of millions with several universities, there are also quite a few Dutch people whose children are looking for a job alongside their studies, and many Dutch surfers are active in Cape Town. He also foresees that South Africa will continue to gain popularity as an offshore destination due to the large supply of native English.

Kaapstad

“We started our own contact center in Cape Town for Dutch and German, and recently in Johannesburg. Cape Town now employs 71 FTE and there are 20 people on the waiting list who want to get started as soon as new projects start. In January we will also start with a German-speaking customer. In addition, we are a subcontractor of a large offshore contact center that cannot find the right people itself.” That is a formula from which Baetens still expects a lot. For example, his company also works for Dutch outsourcing parties, including Direct Customer Contact and several other contact centers from the Netherlands. The wage cost advantage in South Africa is about 30-35%, according to Baetens.

Incentive policy

“We are part of CapeBPO, the local trade association. There are attractive facilities and subsidies in the Cape region. If you create a job in customer contact, you can claim a subsidy of USD 1500 per year for five years,” explains Baetens. “That pushes down the rates. They also ensure that there is a sufficient supply of employees trained as customer contact employees available through the boot camp program. It is expected that within six years 600.000 contact center jobs will be added for both the international and the domestic market.”

South Africa was the most favored offshore CX delivery location in 2021, ranking 2nd for three consecutive years according to the annual Ryan Strategic Advisory Front Office BPO Omnibus Survey. In 2021, this research initiative polled the opinions of 628 business contact center decision makers in the demand markets of Australia, Canada, France, Germany, Italy, Spain, the UK and the US. South Africa came first out of 53 different locations, according to survey participants in the US and Canada.

Suriname

South Africa is also home to major players such as Teleperformance, Majorel and webhelp, but they often focus on other locations for Dutch and German. “As a result, they are no competition for us,” says Baetens. “They then opt for Suriname, for example, where a few large and a number of smaller players are rapidly emptying the pond.”

The wage cost advantage for Suriname is still about 50%, says Baetens, but he foresees that when oil extraction gets underway, many new jobs will be created and many people will also leave the customer contact sector. “The oil industry enables Surinamese to work in English, which is less sensitive than working in the Dutch language. It can also be seen as a stepping stone.”

South America

Further in South America, the BPO market is also developing rapidly. At the end of November, the French Webhelp opened its first branch in Merida, Mexico, the first step in an aggressive expansion plan in the Mexican market. The company wanted to hire a thousand people in 2022 and double its size in 2023, as well as investments that will reach $ 10 million in that year. Webhelp chose this tier-2 city because the costs are lower and the conditions are more favourable. The company has a hypermodern building there and invests mainly in attracting students who are lured with good secondary conditions. Such as health insurance for minor and major medical expenses, food stamps and other perks beyond what Mexican law guarantees. Yet the initiators complain that it is now it is difficult to find staff in this relatively undeveloped city of 1 million inhabitants. Webhelp has already mapped out what the next city will be: Queretaro, comparable to Merida.

Facilities are expanding

In addition, Webhelp is on the takeover path in Brazil. Group Services is one of the largest providers of CX, BPO and technology solutions in and supports leading US and Brazilian brands. The acquisition of Grupo Services adds 9.000 people plus outsourcing, digital transformation and AI capabilities across customer service, collections and sales.

Last year, Webhelp expanded to 24 new locations and six new countries – Thailand, Bosnia-Herzegovina, Ghana, Israel, North Macedonia and China – with an additional 18 new site openings in existing locations in the United States, Latin America, Asia Pacific, and Europe, the Middle East and Africa. The company will then have operations in more than 60 countries and employ nearly 125.000 people worldwide.

Colombia

Concentrix has also expanded in Colombia and Costa Rica, but the company cannot compete with Teleperformance; in Colombia, TP is the largest employer in the country with about 40.000 seats. That is not surprising, Colombia is in position 1 the Offshore BPO Index (2022), a weighted measure of the business climate for BPO services. This high score is mainly due to the favorable labor market and the favorable BPO ecosystem. Baetens expects prices to rise here too, especially for native English, which is a relatively scarce skill.

Grupo Konecta is also a major player in Latin America. Grupo Konecta completed the acquisition of the Italian Comdata in November 2022. The combination will create 130.000 contact center jobs with locations in Colombia, Peru, Argentina, Brazil, Chile and Mexico.

Turkey, Greece, Morocco

Back to Southern Europe. Turkey has been a favorite location for working with Dutch returnees for several years now and other languages ​​are also available. But inflation is taking off in Turkey, which means that wage costs are rising, says Baetens. “A few years ago you bought an hour there for 22 euros, now it rises to 28 euros and that will probably continue to rise. The unrest in the country is also increasing. Companies are therefore looking for a plan B and in many cases that is Greece. Conduent has recently started there, as has Teleperformance, which is next to it Suriname is also still active in Portugal, where bol.com is served, among others. Majorel also has his sights set on Greece. For Greece, the wage cost advantage is about 20%, just like in Spain and Portugal. Morocco is upcoming, especially for the French-speaking services, and the wage cost advantage there is still about 30-40%.”

“Albania is an interesting location for German and Italian. Because people from the Baltic states are willing to move to Albania, other languages ​​are also relatively easy to find here; the hourly rate is around 11 euros. The supply of Dutch is very small. Also in Romania, where Competence Contact Center, Telus and Conduent are active, for example, wage costs are rising by about 10 percent every year,” says Baetens.

India, Philippines

Teleperformance wants to expand strongly in India, after becoming the largest employer in Colombia. The company plans to double its capacity in India over the next three years 180.000 employees. But it is precisely in countries such as the Philippines and India that Baetens expects wage costs to rise relatively quickly – this has been the case in India for much longer. And both regions have recently turned out to be vulnerable to natural disasters. American parties are therefore removing the work, also because of the political situation in the Philippines, and a considerable part of it will go to Jamaica and South Africa, Baetens predicts.

The dynamics in near- and offshoring – also clearly visible in Poland, where companies have prepared for different scenarios due to the Russian invasion of Ukraine – make it clear that a wage cost advantage is always temporary. Labor costs are not the only factor, however to keep in mind when offshoring.

(Ziptone/Erik Bouwer)

Also check the Outsourcing file on Ziptone

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