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Near Shore Destination
Costa Rica
The P&G Story
March 2011
Atul VashisthaChairman
Neo Group
BestOutsourcingJobs
www.neogroup.com
© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Presenters
Alfonso Cos• Former Global VP, Shared Services, P&G
Atul Vashistha• Chairman & CEO, Neo Group
Pilar Madrigal• Director of International Affairs, CINDE
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© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Content
The P&G ExperienceDestination Costa RicaCINDE
Q&APresentation available later on
• Cinde.org• neogroup.com
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© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Outsourcing Location Trends
Leveraging Unique Capabilities
• Competitive Advantage of Nations
Geographic Risk Diversification
• Global Delivery Model
Captive Centers (BPO)
• Multi-functional centers
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© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Nearshore Trends
The Americas Opportunity
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Proximity Time Zone Affinity Skill-sets
© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Country Assessment Framework
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Co
un
try
Ass
essm
ent
Human Resources AttractivenessScalability risk
Number of industry employees
Attrition – Overall and client
Financial AttractivenessSalary Level (ITO, BPO, KPO) for entry level
Salary growth (ITO, BPO, KPO) for entry level
Rent (Grade 1 CBD)
Rent growth
Cost of living increase
Geopolitical AttractivenessPolitical risk
Crime rate
Terrorism/Ethnic tension/Social unrest
Natural disaster risk
Infrastructure Attractiveness
Government support/Incentive
FDI attractiveness
Power supply
Transportation
Software parks/SEZ’s
Business Environment AttractivenessEase of doing business
Cultural compatibility/Support facilities for expats
Quality of life
Access to healthcare
Pollution levels
Quality of education
Business and support amenities/5 star rooms
Industry AttractivenessIndustry size ITO
Industry size BPO
Industry size KPO
Projected industry growth ITO
Projected industry growth BPO
Mature Service Providers
Macro Economic AttractivenessMacro Economic indicators
Currency attractiveness
© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Why Costa Rica?
• Ranked 3rd in the world on “Environmental Performance Index”
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Multi-Functional Centers, Large
call center capacity
Good Infrastructure
Cultural Compatibility
for Expats
Low geopolitical, business ,
macroeconomic & environment
risk
Costa Rica
Workforce quality Multilingual
Water Supply Power Supply
Housing Schools
© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Macro Economic Attractiveness
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• Stable democratic country since 1948• Typically a low fluctuating currency.• No army since 1948, instead a big investment in education and
environment• The GDP contribution from the services remains very high for
Costa Rica pegged at 68% for 2009.• Costa Rica has a low trade deficit of 2%
Parameters Attractiveness
Macro – economic indicator
Currency risk
Very Low Low Medium High Very High
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Source: Neo Group
© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Geopolitical Attractiveness
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• The last World Bank Survey for Global Governance Indicators ranks Costa Rica in the first place within Latin America for political stability.
• The country has had no terror attacks, social unrests/strikes and is the greenest country in the world.
• Costa Rica has low trade deficit and low payment risk which is the best among the Latin American countries.
Parameters Attractiveness
Political risk
Crime rate
Terrorism/Ethnic flare-up
Natural disaster risk
Even more stable than the U.S.A.
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Source: EIU
© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Infrastructure Attractiveness
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• Very good government support, good power supply, good transportation and with a good support from the Foreign Direct Investments (FDI’s).
• Internet services are the most readily available and sophisticated in Central America. • Extensive highway system, two major international airports and two seaports. All major U.S., European,
and Latin American passenger and cargo carriers• The government fosters growth with incentives, which finds favor with the FDI’s and increases the private
participation.• The power supply situation is one of the best in the world with renewable sources of energy being used
wherever possible and Costa Rica has a surplus of Power which it exports to the other Latin American power deprived countries.
• Abundant water supply, reliable hydroelectric power and an advanced telecommunications system.
Very Low Low Medium High Very High
i
Parameters Attractiveness
Government support
FDI attractiveness
Power supply
Transportation
Software parks/SEZ’s
© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Parameters Attractiveness
Attrition – Overall
# of offshore/outsourcing Services Sector employees
~32,000
Scalability Attractiveness
Human Resources Attractiveness
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• Attrition in the offshore/outsourcing Services Sector is lower than Asian locations• Costa Rica offers a good human resource pool in the Latin American region, especially with
the bilingual skills (English, Portuguese, Spanish, etc.) and good educational background (6% of GDP is allocated for education).
• According to the fdimagazine, Costa Rica has the best in the category of availability and quality of human resources, with scores higher than major competitors like the Dominican Republic, Panama and Puerto Rico.
• Costa Rica has one of the highest literacy rates (95.9%) of the American Continent. Education is mandatory until the 9th grade.
• Around 35.6% of the total population are between 15 – 35 years (annual growth rate of 2.1%).
Very Low Low Medium High Very High
i
© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
An Attractive Location: San José
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• Ranked 3rd in the world on “Environmental Performance Index”.• The city has well-educated, creative, innovative, English-speaking and highly productive
human resource. San Jose has technical and superior education institutions that generate qualified human resource, such as: Technical high-schools, Private and public universities, National Learning Institute, CEFOF, CENFOTEC.
• 50% of the elementary schools and all high-schools have computer labs and receive English lessons. This allows children and teenagers to learn the language and computer skills at a very early age.
• Great location for expatriates. Ranks first in the Happy Planet Index.• 62% of the employable workforce lives in the greater metropolitan area where San Jose is
located.
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© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited13
Costa Rica: SWOT Analysis
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Excellent human resources Quality education Good business and support amenities Conducive environment for doing business No limitations on capital funds transfers associated
with an investment, regardless of the currency. CINDE – Great support resources Cultural compatibility for expats Stable/pleasant climatic conditions Access to good health care
Salary levels for the ITO and BPO employees are higher than other developing locations.
Costa Rica has a local software supportive business park formed mainly by highly productive PYMES (SMEs - small and medium sized enterprises). But not enough software firms or human resources.
Smaller local ITO companies
Multi-functional capabilities for BPO, such as the case of Align, P&G and Experian.
Deep call center experience, ie: Sykes, Aegis and KPO such as Amba Research and WNS
Leverage same time zone coverage for USA and Costa Rica, which has a long daytime working shift (5 am to 7 pm)
Leverage bi-lingual, with one of the highest gross participation of population in labor pool (50%)
Leverage neutral accent Close proximity to other larger centers such as Sao
Paolo
Smaller labor pool Rising cost of labor (average less 3%/yr in US$) Not enough resources in a specific area of expertise
or too high recruiting parameters Payroll fringes (social security, pension plan, etc.)
account for a fixed percentage of the employees salary – 34.5%
Strengths Weaknesses
Opportunities Threats
© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited14
Recommendations
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• The population of the country is about 4.5 million people and the Services Sector employment is around 32,000, which is 1.4% of the labor pool. This makes it an ideal location for smaller centers (<1000), though it can support larger call centers.
• English and Spanish language based processing of work can happen real time in Costa Rica, whose time lines exactly match with U.S MDT timings.
• Government support can be leveraged to acquire tax benefits/concessions as the Costa Rican government is promoting the offshore/outsourcing industry with CINDE and Procomer serving as strong support organizations.
• Strong focus on education and good universities makes it an ideal center for higher end multi-functional operations.
• Ideal place for companies with a large carbon foot print to start operations as Costa Rica is the greenest country in the world and carbon foot prints can be acquired with ease.
© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Q&A
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© 2011 Neo GroupAll rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited
Neo Group Global Headquarters
4000 Pimlico Drive, 114-108
Pleasanton, CA 94588.
Contact Information
Atul VashisthaChairman
Asia-Pacific Headquarters
No. 16 & 16/1 5th Floor
Phoenix Towers, Museum Road
Bangalore 560025, India.
Amsterdam, Netherlands
Sao Paolo, Brazil
Monterrey, Mexico
Bogota, Colombiawww.neogroup.com