Caribbean builds up BPO credentials

The diverse islands of the Caribbean are celebrated for their beauty and renowned for their tourist industries. Now another sector in the region is gaining strength and attracting investment.

The business process outsourcing (BPO) sector of the Caribbean grew at an average rate of 17% from 2010 to 2015, according to a report by the Caribbean Association of Investment Promotion Agencies (Caipa). 

Increasingly, international BPO companies are tapping into a young, cost-effective workforce that speaks four different languages (English, Spanish, French, Dutch) on top of their mother tongues.

“[The] Caribbean BPO sector has proved its mettle with close to 100,000 employees across the region,” says Rejo Sam, global services strategy consultant and associate director at consultancy firm Avasant. “The services culture, due to the prominence of tourism and related services, gives the region a definitive edge over offshore locations, while an affinity to the North American culture makes the resource pool easily trainable.”

Driving growth

The BPO industry has become a driving force of economic growth, particularly in Jamaica and the Dominican Republic, where it employs a respective 35,000 and 18,000
people, according to local estimates. Moreover, their capitals Kingston and Santo Domingo ranked fourth and sixth, respectively, in fDi’s 2019 global BPO city ranking, which examines project numbers, capital investment and job creation.

Other countries with less mature BPO industries in the region are catching up, hoping to reap similar benefits. These include Belize, which had a BPO workforce of 2900 in 2018 following an annual average employment growth of 18% from 2012 to 2016, according to Invest in Belize data, and Trinidad and Tobago, which boasted 3000 BPO jobs in 2014, according to InvesTT data.

The BPO sector offers Caribbean countries a chance to diversify away from their reliance on either commodities or tourism, in the process supporting economic growth and providing youth employment opportunities in a region with a large informal sector.

“These economies are largely driven by demand from big economies through tourism or commodities,” says Juan Pedro Schmid, lead economist in the Caribbean country department at the Inter-American Development Bank (IDB), the largest source of development finance across Latin America and the Caribbean.

“It is extremely important for these countries to diversify, since they already have a lot of restrictions, including being surrounded by water. The BPO sector is one way for young workers to start working formally,” he adds.

Despite the Caribbean region’s extensive social and economic diversity, its cultural
and geographical proximity to the North American and South American markets, multilingual proficiency and having a New York time zone have turned it into a major recipient of foreign investment for a growing number of BPO investors interested in setting up local centres for their services.

Industry shift

Business process outsourcing refers to the subcontracting of any business-related operations to outside suppliers rather than doing them in house, and generally involves using the services of skilled people at a convenient cost from another geography. Since it is a broad catch-all term that encompasses many business activities across many industries, it is sometimes more useful to refer to specific types of BPO.

“Traditionally we have thought of BPO as contact call centres, but the industry has shifted quite a bit,” says Krista Lucenti, trade and integration senior specialist at the IDB. “The terms ‘global services’ and ‘IT-enabled services’ capture the whole market for outsourcing services, which would also include knowledge-process outsourcing and IT outsourcing.” 

There is a shift in the industry away from basic call centres towards innovation-driven higher value services, as increasingly sophisticated outsourced services have emerged across the Caribbean, including Saint Lucia’s first artificial intelligence (AI) contact centre, OJO Labs, legal process outsourcing provider Innovate LSO in Barbados, and KPMG’s shared service centre in Jamaica.

Rife adoption and consideration of emerging technologies by BPO providers globally has led to a move away from solely contact call centre agent interactions to processes augmented by automation, analytics and AI. For instance, 72% of organisations in the Deloitte Global Outsourcing Survey 2018 are considering or adopting robot process automation (RPA), while among IT and finance outsourced service providers, RPA adoption rates were 87% and 83%, respectively.

A bigger share

The rise of the global economy and global supply chains, combined with the ever-growing possibilities offered by broadband connections, unleashed the potential of a market that is valued at $195.2bn globally, according to figures and estimates by a report by Grand View Research. If emerging markets in Europe, south-east Asia and Latin America, such as Romania, the Philippines and Costa Rica, alongside economic powerhouses such as China and India, have become major global BPO hotspots leveraging their talent and business environments, the Caribbean region is now going to great efforts to follow in their footsteps and increase its share of a cake that, as a whole, Grand View Research expects to expand at more than 7% annually through 2025.

Within this perspective, the Caribbean has essential grounding to excel, and is “an attractive location for global [BPO] services, due to its English language proficiency, a small but educated labour pool, proximity to the US market, reliable ICT infrastructure and supportive regulatory frameworks,” says Ms Lucenti.

Moreover, the region has significant cost advantages, both in terms of the cost of human and physical capital. Labour costs are between 88% (Haiti) and 55% (the Bahamas) lower than the US, while lower average rental rates mean companies can save between 92% (Haiti) and 28% (Barbados) compared with the US, according to figures cited by Caipa.

Besides, the Caribbean’s ICT infrastructure has achieved a degree of competitiveness.

Work-life balance

Through infrastructure for employees, such as buses and childcare places, the BPO sector can be easily integrated into and embraced by Caribbean communities, due to improvements in the social quality of life.

“That is why people are normally very appreciative of it, and the attrition levels are very low,” says Juan Gonzalez, research director for Latin America and the Caribbean at growth consultancy firm Frost & Sullivan.

With the Caribbean’s long-established record in tourism and hospitality, it can provide the necessary training and customer services expertise required by BPO providers. “Not only do they have the aptitude to [satisfy] customers, but they also have been trained on how to speak politely, address clients and how to deal with impudent customers,” says Saurabh Gupta, chief strategy officer at HFS Research.

Caribbean challenges

However, despite its many advantages, there are challenges in attracting investment from BPO firms, some of whom have found certain Caribbean governments lack the holistic and fully fledged strategy necessary to support a rapidly evolving industry.

While their small size has made it easier for BPO firms to access key public sector decision makers, such as cabinet ministers, many countries in the region also find this makes
it impossible to scale up to the degree seen in mature international hubs such as India and the Philippines.

“The number one challenge faced in the region is labour market scalability, as population density is very low across the Latin America and Caribbean region, especially
if you require good English skills,” says King White, founder and president at Site Selection Group, a firm that assists BPO providers in finding new locations.

Additionally, the trend towards automation and higher value offerings in the BPO sector will require significant investment in skills development across the region.

“The industry is now hiring more tertiary-level graduates to do more higher value-added services outsourcing,” says Ms Lucenti. “In the Caribbean, the current BPO sector hives secondary school graduates, and if they want to scale up this is something they need to address.”

Some worry that the Caribbean is not well prepared for the challenge of a move towards the use of emerging technologies in the BPO sector. “The whole concept of labour arbitrage, or getting similar skilled people at a low cost from another geography, from my perspective is reducing. With the emergence of automation, analytics and AI, that is what is captivating the mindset of the global C-suite today,” says Mr Gupta.

Some Caribbean countries are embracing the challenge: Jamaica, for example, teamed up with the IDB to launch programmes such as the Global Services Sector Project to better train workers and promote growth in higher value-added segments of the market. Such initiatives suggest that the Caribbean has what it takes when it comes to future-proofing its global BPO leadership status.