James Wong | Weny Isawati | Chad Rissman | Gregg Davison
Outsourcing and Off-shoring Opportunities
- Stage 3
Some of the companies we visited while in Brazil and Argentina were at the forefront of the birth of offshore outsourcing over 30 years ago and they helped set the climate for countries like the United States to take advantage of outsourcing opportunities in India and Latin America. The U.S. dollar is very strong versus the Argentine Peso and the Brazilian Reals with a current Exchange Rate of approximately one U. S. dollar to three Pesos or Reals. Argentina's economic slowdown and currency devaluation presents interesting outsourcing opportunities for IT companies and providers around the world. In addition, Argentina is one of the least expensive labor markets in the world. For example, the average call-center salaries are about $1 per hour and programmers' salaries are $11 per hour, which is 15% less than India, one of the biggest outsourcing country. Argentina is a great source of tech expertise with attractive costs and multilingual ability because it has an excellent network of public universities. On the other hand, Brazilian programmers cost 30% less costly as an outsourcing location in comparison with Indian programmers, which cost 50% less costly as an outsourcing location. Many companies in Brazil stress teamwork culture, which affects the way Brazilian approach software and project development. Additionally, when the question was posed at the ABN Ambro visit, about choosing an outsourcing partnership, they replied that they decided to use Brazilian companies even if India proved to be cheaper. They felt that India was not as creative as Brazil and would not justify the cost benefit.
Another factor is the maturity and organizational standards and certification achieved by the Argentina and Brazilian workforce. The Capability Maturity Model (CMM) developed by Carnegie Melon University in the U.S. measures a company's maturity software process level. There are five maturity levels, each having a set of process goals Level 1 through Level 5. The majority of companies we visited were at Level 4 or Level 5. Some companies were engaged in CMM (I), which integrates all the CMM processes into a single process improvement framework. Companies within Argentina and Brazil are quickly transitioning from a CMM maturity level to a corresponding maturity level of CMM (I).
Both Brazil and Argentina are in the attractive stage of off shoring
and outsourcing readiness because of the time zone difference, which allows
for 24 hours customer support and culture similarities to western culture.
Both countries offer an affordable infrastructure of bandwidth, efficient
telephone communications, and world-class buildings and facilities. For
example, A.T. Kearney applies standardized and simplified data transfer
and connection by installing an IP telephony hotline that connects to
Argentina's call-centers for free from companies located in other countries,
thus eliminate the distance problem of outsourcing and off-shoring process.
Likewise, Brazil's potential as an outsourcing venue lies in time zone
differences and culture similarities to those of western culture. For
example, Rio de Janeiro is only one to three hours different from New
York seasonally. In addition, Brazil's diversified culture offers similar
racial, religions, and family lifestyle to the U.S.A. and other western
countries, which leads to cross culture team building in the work place,
however, there are issues with language. Nevertheless Brazil and Argentina
have high tax rates, as high as 49% in Argentina. Both countries have
a high crime rate and unstable currency rates. Therefore we rate Argentina
and Brazil as Ready but not Attractive.
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