Medellin, Colombia: The new hot destination for nearshore customer care solutions

MEDELLIN, COLOMBIA: THE NEW HOT DESTINATION FOR NEARSHORE CUSTOMER CARE SOLUTIONS

How we ended up selecting this vibrant modern Colombian city to host our Call Center operations

By Adolfo Bonilla
Nearshore Connect
August, 2020

In the quest to find the absolute best location for a call center operation that would underpin our nearshore business strategy, we engaged in a discovery exercise meant to find that ideal place in the Latin American region where to build the right customer experience opportunity for our clients.

It was not the first time we have gone down this path. However, change in this business is constant and organizations are regularly forced to re-evaluate the decision making criteria, the weight given to the relevant factors, the current needs of the existing clients and as much as possible, the future needs of new ones. Locations that seemed ideal a few years back might not be that attractive anymore, while new geographies evolve and develop to become a very attractive option for this type of operations.

Our destinations’ short list was soon filled with the popular locations in the region. However, there was one more that required some deliberation: Colombia. Along with business partners and colleagues, I had been watching with interest Colombia’s peace process and how the country was slowly but steadily coming back from those dark years in which drug trafficking and obsolete marxist guerillas caused so much death and pain. We were convinced that, once peace could be finally achieved, the country would come to claim its place at the head of the regional economies. Also, the Colombian Call Center industry seemed to me a lot like that of my own home country, Costa Rica, back in the 90’s, offering the foreign investor good arbitrage opportunities, low labor market saturation and an attractive pool of people with a good call center job profile.  There is a big difference though: Colombia has a huge internal market with ten times the population, which makes the business less dependent on service exports. So, all things considered the country was added to our exploratory list.

We have always known that NSC’s business can only be an attractive solution for our clients if the high standards and criteria considered relevant by the industry are met:

1. Competitive Labor and Operational costs that justify the risk and complexity of an expansion abroad and contribute to maximize the business value proposition.
2. A talented bilingual work force that can offer high quality labor in a sustainable and scalable fashion.
3. Access to state-of-the-art IT infrastructure at competitive prices and acceptable delivery times
4. A reliable Judicial System
5. A matching Time Zone
6. Good cultural alignment in relation to the United States
7. A friendly business environment.

On top of these requirements, any location to be selected had to be one in which the supply chain participants had the capacity to innovate and rapidly adapt to change.

After thoroughly assessing all the destinations on our list, it was Colombia and specifically Medellin the one that made sense to us. Factor by factor, this was our reasoning:

Competitive Labor and Operational Cost

We found Colombia to have an extremely attractive labor cost that rivals some South East Asia locations, with savings that range from 35% to 40% when compared to the United States and Canada. A very convenient exchange rate and a dynamic local market with the ability to produce and supply mostly everything keep the cost of living comparatively low and releases the pressure on salary inflation. The Call Center industry has experience steady growth for the past decade and it is to expect that the salary levels will experience some inflation in the longer term.

And within Colombia, cities like Medellin and Cali are more cost competitive than Bogota, since in the city capital, the competition for human talent is more aggressive and the labor market more saturated.

Human Talent & Bilingual Capabilities

When assessing Colombia’s bilingual capabilities and each of the three cities evaluated (Bogota, Cali and Medellin) we had to take a careful approach as detailed reliable data was not easy to produce.

Let us start by saying that, when compared to other countries, Colombia’s bilingual capabilities (English/Spanish) have a lot of room for improvement. Their education system has not been able to effectively produce a good output of qualified bilingual professionals and the individuals often must resort to private institutes or teachers to gain those capabilities. The government has created programs that have been enforced during decades but still, about 90% of the students end up with a level of A1 or A2 by the time they finish their high school education (when they finish it) leaving Colombia in the position 68 between 100 countries evaluated by the firm EF in their EF English Proficiency Index.

That being said, the big metropolitan areas offer an advantage in terms of volume, so, while percentage wise they do not fare well, in reality the number of bilingual people with a B2-C1 level of English is enough to provide for the business in the short and mid-term. There are renewed efforts by the government to improve Colombia’s bilingual capabilities that should help in the longer term and respond to the growing demand on this skill that the Call Center industry and other economic sectors present.

Information Technologies Infrastructure

When it comes to telecommunications Colombia is somewhat behind in providing reliable and affordable access to its population in remote areas. However, in larger cities like Bogota, Medellin or Cali, the service quality, availability, and reliability meet the operational standards of any developed market at a competitive cost. Voice and Data travel to and from Colombia through six submarine cables, all of them in the Caribbean Sea: Arcos, Maya-1 / SAC-LAN, América Móvil 1, CFX-1, GlobeNet, SAm-1 and Pan American, while over a dozen bandwidth providers, local and multinational, compete for a share of the market  The electric grid is very reliable, and in some urban areas  the redundancy is triple or quadruple, which gives the call centers in those zones confidence on the operations continuity in case of a power service interruption.

Equipment: There are plenty of local vendors offering all the equipment necessary to set up the call center infrastructure, including routers, firewalls, PC’s, laptops, servers, and all kinds of peripherals. The local engineers and technicians have the skills and experience to complete any type of IT Infrastructure project. Because of the market’s size and dynamic behavior, most of the equipment from recognized global brands can be procured locally at good prices, which spares the project manager from dealing directly with overseas vendors, transportation services, tariffs and customs.

Judicial Security

The United States and Colombia signed a trade promotion agreement that entered into force in 2012. “A Level Playing Field for U.S. Investors and U.S. Services Providers:  The TPA ensures that U.S. companies in Colombia are protected against discriminatory or unlawful treatment, and provides a neutral and transparent mechanism for settlement of investment disputes”.( https://ustr.gov/trade-agreements/free-trade-agreements/colombia-tpa)

While the agreement is relevant, it is not exclusive to Colombia since many other countries in the region have reached similar deals. In the absence of it, though, it would have played against the country in the decision-making process.

The country is very legalistic, known by “having the region’s most sophisticated approach to legal principles” (Vivanco, Jose Miguel. Human Rights Watch) with a highly respected and devoted bench of judges. The problem though is that such traditions also make the system overly complex and that, lately, some perceive the system as being politicized.

In our assessment, we concluded that Colombia offers the foreign entrepreneur an appropriate legal framework to feel safe and protected by the law, especially when it comes to labor and commercial matters, and that a good and reputable local law firm had to be recruited from the very beginning to walk with us every step of the way.  

Political Stability

The country has a history of strong democratic institutions, combined with the state’s inability to exert its authority in all the territory due to the guerrillas and drug cartels. It is a paradox that makes an objective evaluation complex. The military has played an important role in fighting those evils but in the process has been perceived as an evil itself and has been accused of violating the populations human rights. In view of all this, we looked into analysis and reports readily made available to the public by international organizations, that have categorized the risk as low, in the short term with a tendency to grow in the medium and longer term.  (https://www.theglobaleconomy.com/compare-countries/)

Note:  As I worked on this article, the news on the arrest of former Colombia’s president Mr. Alvaro Uribe broke. The current president, Mr. Ivan Duque, a close ally and fellow member of the Democratic Center Party, expressed his support and belief on Uribe’s innocence. Both have heavily criticized the terms under which former President Santos reached a peace agreement with the FARC guerrillas.

This news came after a decision had been made on the location and created some concern for our leadership tem. However, as the events developed, we felt confident that Colombia’s political system and its institutions were solid and could guarantee the stability that we all look for when it comes to operating abroad.

A matching Time Zone

Every organization has its priorities and strategies, just like every country and region have their strengths and appealing factors. For us, with an emphasis on nearshore operations, Colombia’s time zone, matching Central Time during Day Light Savings, and the East Coast during the rest of the year, perfectly served our purpose.  This gives us and our clients the benefit of being only a short few hours flight away from our operations and sharing the same business hours as customers, employees and local business partners.  

Good Cultural Alignment

We have all been there, that awful experience with some customer support agent on the other

side of our planet that shows no real empathy for your issue or has communication skills that rub you wrong simply because your both are living in completely separate and distinct cultures. When an operation is expanded or taken abroad to a nearshore or offshore location, we want the customer experience to be enriched and satisfying, to levels as good or better than the ones obtained onshore. It is not just a matter of cost and arbitrage. It is also a matter of risk mitigation, capacity management, and language availability.  In our industry, human talent continues being the main and most important factor, and we look for it everywhere.

However, a big chunk in the ability of a person to do a good job as a call center agent is beyond their language skills, their product or technical knowledge and the processes and tools offered to complete the task: it’s the person’s ability to put him or herself on the same cultural level as the customer they are helping. Being able to recognize a sarcastic comment on the go, understand local slang and colloquial expressions or get into small talk while waiting for the system to complete a transaction matters a lot.

We found that Colombia’s population, especially the younger generation, is very invested in the United States cultural trends and very current in their sports, music, and general pop culture expressions. The access to video and music streaming platforms in cities like Medellin or Bogota is prevalent and that supports these population segments with their language skills as well.

Migration happens to also be a relevant factor, with many people that were raised in the United States coming back to Colombia now that they feel the country is safe again, and bringing with them all the cultural traits adopted while living abroad. In conclusion, a good recruitment process in Medellin can provide human talent that virtually eliminates the need for cultural training.

Business Environment

Few countries in the Latin American subcontinent are as entrepreneurial and innovative as Colombia. Their economy, both formal and informal is full of small entrepreneurs that enjoy a very dynamic local market, with their own strengths and challenges.

 For a foreign company in the Call Center industry, the situation is very advantageous, with benefits and tax exemptions meant at creating jobs and helping the service exports grow. The creation of a legal entity is fairly simple, and the government offers a wide range of support and guidance through national and local foreign investment attraction agencies, coordinated by PROCOLOMBIA. In the Business Freedom Index, Colombia has consistently ranked remarkably high among the Latin American countries.

An interesting factor with the potential to be both a risk and an advantage is the impossibility of having bank accounts in US Dollars.  The exchange rate fluctuates very freely with minimal intervention of their central bank, so the investor must carefully assess the risk and decide how much dollars to convert to local Colombian Pesos to have the necessary local funds to operate.

As a side note, at the beginning COVID-19 pandemic, the Colombia government released the list

of business that were considered essential and would be allow to remain open. The contact center business was on that list. And, where other major contact center hubs (like the Philippines) were shut down and enforced rigorously, Colombian contact centers remained open. Safety requirements for social distancing and sanitation were instituted but the brick and mortar centers remained opened. This was a major benefit to those operating within the country.

Summary

All in all, Colombia came as our top choice in the region for a company of our nature when it came to operational cost, business environment and business freedom, location and IT Infrastructure. It is also competitive with other regional destinations in terms of Judicial Security, Political Stability and Cultural Alignment and, for the purpose and scope of our business, the Human Talent is exactly what we needed to offer our clients high quality reliable Customer Care and Tech support operations with low complexity, that can be developed to higher levels of maturity in time.

And in Colombia, Medellin ended up on top of our list with a value proposition that exceeded our expectations because of three reasons when compared with Bogota and Cali:

a) The service-oriented mentality shown by the human talent we found there along with a low saturation level in the call center labor market

b) The great transportation and services infrastructure available in the city, complemented by a modern architecture and relatively improved levels of personal and business security.

c) The vibrant pace of a modern city that is offering its huge potential to the world, being selected as the fourth location for the WEF Centre for the 4^th Industrial Revolution, showing that it is the future what matters, and not so much a past that is now only material for bad TV shows.

Note: I have avoided going into a higher level of detail to keep this piece light and short. If you are interested in discussing its content or obtaining more information about our analysis on Colombia and the city of Medellin, you can contact me at:

 adolfo.bonilla@nearshoreconnect.com or @adolfo_bonilla in Twitter.