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  1. 1. Universidad Católica del Uruguay School of Business Grade Report to obtain a Licentiate of Business Administration Degree BUSINESS PLAN FOR A CALL CENTER IN URUGUAY Fernando Reich Espinosa Tutor: Fernando Castro Pombo, MBA Montevideo, July 2010 Acknowledgements To my mother María J. Espinosa, Fernando Pombo MBA (my tutor), Ing. Washington Salaberry MBA (Head of Technology Planning and Analysisen Zonamerica), Dr. Francisco Ravecca MBA (Executive Director Aguada Park), my cousin Econ. Fernando Reich Rada MBA (Relationship Manager at Citigroup) and my friend Sebastian Rodriguez Straumann. Copyright ® 2010 - All rights reserved
  3. 3. Executive Summary The comparative advantages that some jurisdictions have in relation toothers for the generation of products and services partly explains the choice ofcertain locations with a view to increase profitability in different productive sectors. On the other hand, technological progress has enabled the remoteoperation of production centers. This is the case of a large number of services,such as Call Centers, which are the subject of this paper. The development of a call center in Uruguay aims at offering services tocompanies that need to increase their revenue through personal contact, byimproving the knowledge that the company has of its customers, resulting in ahigher efficiency and lower operating costs. For these purposes, increased sales will not only be obtained by increasingthe target market, but also by expanding the current customer data base,improving the marketing information system and by business process outsourcing(BPO [1] ) so that the services are supplied by a company offering scaleeconomies in order to minimize costs and associated risks. An exception among most companies, Call Center companies have highlyskilled labor force where labor costs are the most important issue. Therefore, the provision of HR, with adequate qualifications and costs, (asrecently demonstrated in relation to the ICT business sector [2] in our country) isthe reason why Uruguay offers a very good solution for this industry, as well as forother Latin American countries with similar characteristics. As a result of the existence of a large unsatisfied worldwide demand for thistype of services, the need to meet this business proposal is far from beingexhausted. This application is composed by the most profitable companies worldwide,such as the companies included in the Global 2000 (the ranking made by Forbesmagazine) and, as the demand for call center activities exceeds the supply, lessprofitable customers would not reasonably be considered. In particular, the services offered by an enterprise of this type are:Telemarketing, Customer Service (consultations, negotiations and Post-Saleservices), Surveys (opinion poll), Loyalty (customer retention) and BusinessProcess Outsourcing. The purpose of this work is to study whether a commercial venture of thisnature located in Uruguay, offers optimal conditions for the export of such services. Copyright ® 2010 - All rights reserved 3
  4. 4. To achieve this, we proposed the following objectives: 1) Submit an internal tool that allows managers to guide firms specializingin Outsourcing Call Centers when making investment decisions in Uruguay (with aspecial emphasis on the Spanish market). 2) Outline the main business strategies for this type of business. 3) Provide an idea of the technological scenario applicable to overseascustomers (as in the case of Spanish companies), and of its costs.Research carried out: For this work, an investigation was carried out with regard to thecompetition. This included call centers present in Uruguay, Spain and the largest inArgentina and in the world. Opinions and interviews were obtained from qualified experts whocontributed with valuable information, views and experiences on this sector. Forconfidentiality reasons their names are not specified in this work. As a result of investigations that included business analyses, weattempted to outline the characteristics of the competition and its future projection.Thus, we were able to confirm the following: • In Uruguay the most profitable markets for this industry are the Spanish and the U.S. markets. Should Greece, Portugal, Italy and Ireland drag the EU towards a steep devaluation of the Euro, or should the economic crisis in Spain tended to increase, our main target market would then be the U.S. market (although this is not a critical issue for our business). • In order to enter the American market, it is vital to negotiate with U.S. and Indian companies and Contact Centers. Indian companies in this industry are those that have a greater presence in the American market. • The current world situation has led to very low interest rates on loans, thus enabling the financing of new ventures that look for stable markets in which to invest in order to escape the European crisis. This is the case of Uruguay. • A possible threat is the resurge of anti-spam laws in the EU and U.S. telephone system (which does not seem likely in the medium term because telemarketing is a dynamic factor of the economy). Copyright ® 2010 - All rights reserved 4
  5. 5. • Uruguays greatest strength to attract this type of companies is that wehave the most qualified workforce in the continent, with the lowest operatingcosts.• It exists in Uruguay financing with low interest (2.5% annually) and if wemake invoices abroad, tax exemptions are 100%.• Tholons, a consultant of Indian origin based in the United States, reportedthis year that, according to the report of Top 50 Emerging Global OutsourcingCities) Uruguay offers the most open business environment of the region withregard to outsourcing. In conclusion: it was determined that this project offers an excellent risk/benefit ratio, along with a convenient financing by financial agents operating in Uruguay. Therefore this business has the necessary financial feasibility to ensure success. From the point of view of the identified risk, a possible disadvantage detected when analyzing this project is a weaker quotation of the Euro in relation to Uruguayan peso. This risk in the exchange rate may be minimized with some tools, such as an insurance policy. Assuming an initial investment estimated of € 1,277,909, with a four years’ evaluation period and a discount rate of 15% to shareholders, (who will only provide the initial deposit by means of an international guarantee) and will finance the future growth of the working capital), the above mentioned initial investment would generate a NPV of € 2,353,333 and an IRR of 99%, thus demonstrating the conveniency and feasibility of this project. Copyright ® 2010 - All rights reserved 5
  6. 6. INTRODUCTION Introduction The object of this report is to carry out a Business Plan for the installationand start up of a call center in Uruguay. During the last five years, the author hasworked in call center activities at two international companies from the momentthey started their operations in Uruguay.This has given him the opportunity of getting acquainted with the businessactivities of two outsourcing companies [3] competing with each other and withradically opposed HR management, throughout the various stages of their lifecycle. Object of the study Outsourcing Companies (Outsourcing ) specialized in Call Centers that are 1)willing to establish themselvesin Uruguay. These companies often operate from abroad (offshore [4] ) and notsituatedin the country where the provide the service. The majority of large area call centers in the world (i.e. those employingover 200 people) are outsourced. We shall limit our study [5] to Spanish speaking customers because this isthe fastest growing segment in Latin America. PURPOSE 1) To present an internal tool that acts as a guide for managers of thespecialized firms in Outsourcing Call Centers and assist them in makinginvestment decisions in Uruguay (with special emphasis in the Spanish market). 2) To outline the main business strategies for this business. 3) To provide an idea of the technological scenario applicable to overseascustomers (as is the case of Spanish companies), and of its costs. The study is oriented to the following markets:Geo: mainly the U.S. Hispanic market and Spain, because companies in thesecountries pay better. Copyright ® 2010 - All rights reserved 6
  7. 7. Although we are strongly determined by the native language of our humanresources, we should not exclude other potential markets to be developed (see2.6.3.1.)Customer Segmentation Explanation: In this activity the customer is not usually the person to whomthe service is intended but rather the company that hires the services of a CallCenter. • multinationals located in Latin America: in many cases they requireregional services covering several countries focusing the operations on a singlereception center or on outbound calls (so that a profitable volume of business isobtained). • highly profitable activities no matter their location due to highspecialization, such as banking, insurance, legal advice (Legal ProcessOutsourcing [6] ) etc. • our own suppliers: in order to work, we must always employtelecommunications providers (links), HR agencies, infrastructure companies,technology and financial services. These companies can reduce costs bynegotiating with them a counterpart in Call Center services.Example: If to work with Banco Santander of Spain we must hire links fromMovistar Uruguay, we can try to negotiate with Movistar Uruguay a counterpart inCall Center services in order to reduce the costs of those links that are beingengaged. • The sales or telemarketing campaigns are usually the most profitableones, because the Call Center charges a fee for sales [7] (in the case of banksthese are called Front Office campaigns [8] ). • Outgoing or outbound calls are usually the ones that pay the highestrates (not excluding incoming or inbound calls). In the case of outgoing calls, it ismore difficult to carry out the sale (the greater the difficulty, the higher thecommission on the sale). • We must have a target of the most profitable customers worldwide,such as companies in the Global 2000 [9] (the ranking made by Forbes Magazine)and, as the demand for call center activities exceeds the supply, targeting lessprofitable customers does not seem reasonable (as explained in the Analysis ofContent Supply see 2.6.2). Copyright ® 2010 - All rights reserved 7
  8. 8. The most profitable industries are listed below (Table 1):Source: Ranking prepared by Forbes Magazine.Reasonably, one may ask: do all these industries require the services of Ca llCenters? The answer is affirmative, because this activity is designed to meet theneed of communication from: • the customer with the companies, as well as of thecompanies with their customers (both ways). No business can exist withoutcommunication between customer and company (feedback [10] ). Copyright ® 2010 - All rights reserved 8
  9. 9. • the internal customer [11] (a concept defined by Karl Albrechtin his book "Internal Customer") also needs to be satisfied in order that thecompany may operate ("If you want things to work out, first thing to do is to workinside," Karl Albrecht ). The more profitable a firm, the greater the risk that thecommunication between its branches, departments, suppliers, partners, etc. is notthe most appropriate one. • Although they depend on unstable factors transactions "frombusiness to consumer” (business-to-consumer [12] or B2C), also have a highermarket volume. They are often used to describe the transactions between thecompany and the final consumer. • "Business to business" transactions (business to business[13] or B2B), although of a smaller volume, are often more profitable because theyare more specialized (such as back office [14] of legitimate businesses and bankaccounts). They are often used to describe the transactions between amanufacturer and the distributor of a product and also for the relationship betweenthe distributor and the retailer.B2C and B2B Source: Kotler, Philip Marketing - 6th ed (with Gary Armstrong),Prentice Hall.In order that the reader may view the type of customers we are aimin to, we arelisting below the 10 most profitable companies (Table 2: The most profitablecompanies) since these companies carry out their services in Spanish for Hispanicmarkets. Source: Ranking prepared by Forbes magazine.Benefits derived from Call Centers ServicesFor the customer: Copyright ® 2010 - All rights reserved 9
  10. 10. • It reduces the risk of making strategic planning mistakes by focusing all the attention on core business [15] (engaged in the task of obtaining higher returns) • It offers a better service or an increase in sales including the possibility of cross-selling, by delegating the CRM [16] (Customer Relationship Management by Thomas M. Siebel) management and 1X1 Marketing (one- to-one marketing, the model of individualized or customized by Martha Rogers and Don Peppers) to a third party specialized in that order. • A greater capacity for growth (by outsourcing may support an occasional growth). • It lowers service costs by: a) achieving scale economies of outsourcing companies. b) eliminating fixed costs (when a company hires a specificcampaign, it only has to consider the variable cost of the campaign, withoutresorting permanent resources). c) replacement of physical branches by phone calls. • Increases the predictability of service costs by eliminating variations (during the term of the contract signed with the outsourcing company). • Reduces the overall business risk; some risk is shared with the outsourcing company and a part of it disappears, depending on the clients ability to: a) penalize the Call Center (through "trigger" clauses [17] ) or b) terminate the lease for services.For the social point of view: • It decreases unemployment(it is the business with more intensive labor that exists) • It offers job opportunities to segments of the population that other jobs do not offer (young people seeking for their first jobs and people over 35 years old). • It offers training for employees in customer services (in many cases in sales, computing, etc.) Copyright ® 2010 - All rights reserved 10
  11. 11. • It is a source of employment for emerging economies (Third World countries with economic and legal stability). • Due to the type of business, it offers an ideal opportunity for people with a medium/low background to move quickly in the organization by resorting only to personal effort.Brief History Overview The history of this activity began with the invention of the telephone in1877. In less than a century the first Call Center appeared, implemented by Ford.In 1990 with the advent of Internet, the world changes eliminating distances,providing Call Center services from across the world.Table 3: Historical background of the Call CenterEvents Year CommentsInvention that made it possible:The Telephone. 1877 New form of communicationTelemarketing [18] 1881 Invented by a German pastry-cookTelefónica is born in Spain 1924 Telephone Operator (Movistar)The Great Depression 1930 Companies try to increase their sales First major telemarketing campaignFirst Call Center (Ford) 1962 which reached 20 million customers Companies try to cut out costs and save rentals (by outsourcing) and to optimize the working time of theirOil Crisis 1973 employees (TMO)Mobile Telephony in Spain 1976 Mobile phone in vehiclesFirst personal mobile phone inthe world 1983 MotorolaVodafone is born 1985 Telephone OperatorFrance Telecom is born / First Telephone Operator (Orange) / Europeocean link 1988 and America connected by a cableInternet is born / Mobile PhoneBoom in Spain. Uruguayinaugurated its first Free Zone First with Movistar and then with Airtelnamed Zonamérica as a (post. Vodafone) and Amena (post.Business & Technology Park 1990 Orange). The cost of long distance calls isVoice over IP 1996 avoided. Copyright ® 2010 - All rights reserved 11
  12. 12. The Euro becomes the official currency of the European Union. The State communication companies inThe Euro in Europe. The first Uruguay (UTE and ANTEL) writeinitiatives of Call Centers in specifications for future bids for CallUruguay 1999 Center services.Uruguayan private enterprisesbegin to assemble their Call Rafap, Bip Bip, Equital, Acodike andCenters. 2000 Riogas.SABRE lands in Uruguay. 2004RCI and Avanza land inUruguay. 2005Atento lands in Uruguay. 2006Extel crm lands in Uruguay. 2008Aguada Park is innaugurated inUruguay as a platform for globalservices under a Free Trade Main AAA complex for Call Centers inZone regulations 2010). Uruguay.Source: author’s production The above historical picture clearly shows: The environment, the need and the purpose for this business • The tool: the means to communicate, telecommunications, with a technological progress that has been evolving throughout history, thus renewing the life cycle of this business. • The need: this activity is designed to meet the communication needs of the client with companies, as well as that of companies with their customers. • The goal is the sale of products or services, which drives the wheel that turns the business life cycle, and the need for phone calls is even necessary as a service (leaving aside the concept of the exchange relative to the sale.) At the end of the 90’s, telephone operators in Spain employed over 10,000people [19] . Labor costs Current trends and these of the next few years indicate that increasingly callcenter services will be provided from Latin American countries due to cheaperlabor costs involved, (the average wage is about one-fifth of current wages paid inSpain) [20] . Labor costs in Spain are even higher than the EU average [21] . Copyright ® 2010 - All rights reserved 12
  13. 13. The annual salary of an operator in Spain is € 12,249.5 Gross [22] The annual salary of an operator in Uruguay is approximately € 2,641.7 Gross [23] to $ 27 / € [24] .Remark: We must take into account the existing knowledge crisis which isworldwide: the mean salary in the market is higher than the legal one and this ismore remarkable whether a bilingual, commercial or more specific knowledge isrequired.Figure 1: Wage Comparison 14000 12000 Source: author’s production 10000 8000 Uruguay 6000 Es paña 4000 2000 0 Salario anual en € This situation makes Latin America especially attractive for Spanishcompanies. Degree of offshoring by Spain in Latin America In 2005 disinvestment [25] of "Real estate and business services" [26] bySpain amounted to 30.3% compared to its total gross investment [27] . Depending on the gross investment data in Spain [28] we can see that the"gross investment abroad", is almost twice as "gross disinvestment."Figure 2: Gross investment Figure 3: Disinvestment versus gross investment Inversión bruta Deslocalización < Desinversión < Inversión bruta en el exterior Inversión 80,0% 61% 14.433; bruta en el 60,0% exterior 30,3% 39% 40,0% 22.975; Inversión 20,0% 61% bruta en 0,0% España Desinversión Inversión bruta en el exteriorSource: author’s production Copyright ® 2010 - All rights reserved 13
  14. 14. Figure 4: Call Stations by Spanish companies Puestos de Call de empresas españolas 60.000 40.930 40.000 Source: author’s production 20.179 20.000 0 Latam España On the other hand only 33% of the posts offered by Spanish companiesare abroad. For this reason, the industrys turnover in Spain is higher than that oftheir overseas branches, as can see from the chart below: Figure 5: Size of platforms [29]Source: ACE [30] -facemd( In conclusion: The branches in Spain have a higher turnover, as a result oftheir being much larger companies (more digits), while foreign branches have ahigher margin because of lower labor costs. All this would indicate that:A) Offshoring (which is less than disinvestment) still offers much room for growth.B) Although the price paid by customers is higher for services provided from Spain,savings in labor cost more than justify establishing the platforms abroad. Copyright ® 2010 - All rights reserved 14
  15. 15. In the next few years, offshoring will grow to the extent that:1) The profitability of the business will exceed the profitability of the alternatives ofequal opportunity cost where the remaining investors are now currently investing(profitability is estimated constant in the medium term and a lower opportunity costin the short term by increased risk in other activities).2) The total investment abroad will increase, either as a result of the growth ofeconomy or due to new funding sources (aimed at increasing foreign investment inorder to protect capitals from the world crisis and to lower costs in the short term).3) Labor costs in Europe and Latin America are maintained at levels similar to thepresent ones (estimated as constant in the long run).4) The trade union movement or the European regulations will not lock this type ofbusiness (estimated as constant over the medium term). CHAPTER 1: SERVICE FEATURES1.1 Basic Service (Communication with the customer)1.1.1 Needs and instrumentsSalePost-sale (warranty)Improving customer care (consultations, negotiations, etc.).Poll (poll)Loyalty (customer retention) andLow cost and business risk1.1.2 ServicesTelemarketingCustomer ServiceInformation SystemMarketing andBPO (in special Legal Process Outsourcing, Medical Process Outsourcing yAccountant Process Outsourcing).1.2 Expanded Service In order to improve trade proposals, two strategies can be defineddepending on the inclusion of:1.2.1 Substitute Services [31] Copyright ® 2010 - All rights reserved 15
  16. 16. To include the provision of Call Center substitute services to: a) Make it more competitive by lowering costs or b) Just because the customer requests these services. The only real substitute to Telemarketing, are spam or door to doorsalesmen (techniques which have increasingly less legitimacy).1.2.2 Additional and Peripheral Services[32] To include the provision of Call Center complementary services for thepurpose of: a) Adding the value to business proposals and thereby making them morecompetitive or b) Simply because the client requests such services. These services may be complementary or substitute, depending on the enduser’s profile of the end user and customer needs. The grouping of modern communication services (graphics, radio, television,e-mailing, online advertising, chat, Twitter, video, self-management via the Internet,systems, interactive voice response IVR, webservicing [33] ) is often called ContactCenters (Extended Service).1.3 Plan Target Customer (Target customer) The Business Plan will develop:1.3.1 Internal Function1. Act as a guide to firms that are already established in Uruguay, and who want toventure into the Spanish market.2. The Free Trade Zones in Uruguay are particularly interested in attracting callcenters to their facilities (Aguada Park [34] , Zonamérica [35] and Free Zone WorldTrade Center [36] ).3. Attracting new investment to the country.4. The Call Center companies of: a) Spain (the largest Hispanic market) b) United States (with an Hispanic population of more than 40 million) Copyright ® 2010 - All rights reserved 16
  17. 17. c) India (97% [37] of the Call Center Customers in India are American, which generates its Call Centers to have branches in Latin America to meet the needs of its clients in USA. Obviously the number of Hispanic speakers in India is very limited and this country does not share time zone with the United States and Europe (the time difference is between 7.5 and 8.5 hours).1.3.2 External Function: Customers: Provide advice to companies requiring the servicesof Call Centers through the possibility of offering bids for serving them fromUruguay. Potential related businesses Most providers of this project require the use of call center services for itsoperations. Therefore, negotiating a return in services (such as customers andsuppliers in the same company), allows for lower operating costs and riskdiversification. The following are the four strategic sectors where we could make alliances: Financial SectorIn the next chart one may see the major banks of Spanish origin (and, therefore,several potential targets such as finance companies and customers for the serviceoffered). Copyright ® 2010 - All rights reserved 17
  18. 18. Figure 6: Spanish Banks Bancos Españoles 2% 3% BANCAJA 3% 14% 4% Banco Sabadell 8% Banesto Banco Popular La Caixa 21% BBVA 45% Banco Santander Central Hispano (BSCH) OtrosSource: ( and and two most commonly used financial services are:Factoring Service [38] : Our business may require this facility to finance the initialinvestment and / or reduce credit risk in general.Rate of exchange insurance: This helps to reduce the risk of a sharp decline ofthe Euro in relation to the Uruguayan Peso.The bank and insurance companies most commonly used used by Spanishcompanies in Uruguay are: Santander [39] , BBVA [40] and MAPFRE [41] .Major financial institutions in Spain: Copyright ® 2010 - All rights reserved 18
  19. 19. HR companies linked to the selection of employment and / oroutsourcing SectorAs this business is fully intensive in the use of labor, it is essential to have abusiness partner [42] in order to provide: • Personnel suitable profiles for the post required. • The number of workers required by the stipulated date. • Competitive costs in relation to other competitors in the market.Recruiting may be direct or through the business partner (employment agency). Inthe latter case they will charge a rate based on:a) The gross salaryb) The complement of the illness insurance quota for each worker.. Figure 7: Employment Agencies in the world Adecco 19,5 Manpower 12,8 Vedior* 7,5 Randstad* 5,7 Kelly 4,5 Spherion 2,1 Volt (Advice) 1,7 0,0 5,0 10,0 15,0 20,0 25,0 Billones de U$S* In EuroSource: Adecco Uruguay ( Telecommunication companies SectorThe choice of the telecommunication company that will provide us with thenecessary links to our business, is often a strategic choice because: Copyright ® 2010 - All rights reserved 19
  20. 20. • Mobile phone companies are the main consumers of the call centers service in the world and one of the most profitable segments; in most cases, they also offer the service of international links. • On the other hand, these international links have a high cost, "this limitation" is actually an advantage, because it can be transformed into an interesting barter of services between the telecommunication company and the enterprise.As seen in the figure below, Telefónica captures nearly the total of the Spanishtelephone market. Figure 8: Phone expense by operatorsSource: AEMTfacemd ( Companies providing infrastructure and services SectorSome companies offer solutions to install a Call Center (turnkey style), at a greatcost through economies of scale. However, one should be careful because oftenthese companies are also competitors. Copyright ® 2010 - All rights reserved 20
  21. 21. As the total investment to install a large-area call center is very considerable3, thisoption allows us to get better prices, credit, leasing [43] or to pay a part of theproject costs with call center services (in the same way as it could be done with thetelecommunication company).However, this alternative reduces our ability to negotiate because we woulddepend on one supplier.Recommended companies: Isbel [44] , Telefax [45] , Logicalis and Arnaldo C.Castro [47] .As shown below, Avaya brands (Call masters or VoIP phones [48] ), HP (desktopsand servers) and Cisco (VoIP phones and electronic network) are the mostcommonly used companies. Figure 9: Vendors ICTSource: AEMTfacemd ( the companies that offer services, we may also include companiesspecializing in the development of Business Intelligence Software(or BI-BusinessIntelligence) and legal bureaus.1.4 The four phases of the life-cycle of a platform The life-cycle of this product may be divided into four stages; Introduction,Growth, Maturity and Decline. We assume that the company already has a customer, since usually onedoes not build large platforms until one has a customer (the volume of investmentis such that it is not profitable to assemble an infrastructure for an eventual case). Copyright ® 2010 - All rights reserved 21
  22. 22. In short, until these companies have a customer (after having won a tenderand signed a contract) they should not invest (except, of course, in marketing andadvertising).1.4.1 Introduction: slow growth in billing, due to the fact that the company: • may have having difficulties in recruiting all the staff they need (insufficient occupation). • may need to develop a Know-how [49] of its own, because it is never possible to import 100% (insufficient training and experience). • they need to improve the infrastructure and technology that makes the service possible (i.e. so as to avoid the risk of not meeting established deadlines and commitments with suppliers and lack of experience or expertise). At this stage, costs can be higher if the company has not achieved asufficient scale economy and even more, if the client penalizes the firm (bonusmalus) for failing to meet certain parameters of the SLA (Service Level Agreement[50] ). In other cases, we must deal with the client by means of a few months’special bonus of the SLA, and at the time of starting up [51] the platform. Table 6: Indicators of quality monitoringSource: AEMTfacemd Copyright ® 2010 - All rights reserved 22
  23. 23. As shown on Table 6, the monitoring indicators requested by the client oftenmeasure the quality of the service; however, monitoring indicators followedinternally by the company are often those that affect the profitability of thebusiness. For this reason, it is very important for the customer to relate billing withthe quality of service provided by the Call Center (otherwise there will be a conflictof interests between the client and the Call Center company).1.4.2 Growth: The market share has been strengthened and consequently, the marketgrowth rate has reached the optimum point. Therefore the company must seizethe opportunities offered by the market, trying to grow as fast as possible. At this stage the product is positioned in the market. Billing results in asurplus and capital recovery is in full process. In an attempt to prolong this phase one should aim at: • Improving the quality of the service by increasing sales or those parameters defined by the customer (if using a variable billing system based on objectives). • Defending from service competition (i.e. the best defense is a good attack). In the free market the customer always chooses the best (ideally, thisimplies comparing similar platforms [52] but with better indicators). In order that two platforms are comparable:a) They must be in the same life-cycle,b) they must provide the same service,c) they should have a similar size andd) be located in Latin America or Uruguay. • Find clients in local and regional market, without ruling out the center’s own suppliers. • Agree with the customer an improved payment for services on the basis of expanded services that were not included in the original contract. Copyright ® 2010 - All rights reserved 23
  24. 24. • Conduct a selective communication with up and cross selling [53] (cross- selling) with consumers, based on their conviction to purchase (due to telemarketing campaigns). This implies the training of suitable salesmen for said selective communication and ensuring a low turnover of such staff. • Establishing lower salaries for the new staff, since rotation is usually very high in this business. Thus, there is the possibility of diminishing wages to counteract the effects of wage increases (due to CPI, wage boards or labor regulations), provided there is enough scope for this (in the introductory phase it is usual to pay a salary slightly higher than the legal minimum, in order to expedite the recruitment process). This will generate several wage categories, depending on the employees seniority.1.4.3 Maturity: The growth rate decreases, sales stabilize, efforts are made to find newcustomers and improve the parameters of existing services (through motivationalplans and training).1.4.4 Decline: Services become unprofitable due to increased labor costs or due tocompeting countries that offer lower labor costs and more skilled labor. Theinstitution will have to eliminate services or ask for State allowances. In conclusion: The life-cycle of a platform has nothing to do with the life cycle of the call centerbusiness in general. For example, a multinational call center company in the growing phase mayhave some branches in decline as a result of the normal business process. CHAPTER 2: COMMERCIAL ASPECTS2.1 Proving that the market exists Copyright ® 2010 - All rights reserved 24
  25. 25. While reality shows that this market does exist, it is also important todemonstrate it. There are many references to articles dealing with the global growth of thisbusiness (which seems to be the latest fashion with regard to business); however,these may be summarized with the following logic equation: The need to increase profitability (there are other needs but they aresecondary), plus the difference in labor costs in third countries inevitably triggersthe offshoring phenomenon. This equation was born with capitalism and will die with it because, as AdamSmith said, "offshoring is almost as old as international trade itself " [54] andbecause, since the industrial revolution, companies profit from this business in aneffort to increase profitability. While this reality is legal in both countries (the country that receives theservice and the one that produces it) and profitable for the entrepreneur, the callservice business will most probably survive any crisis.2.2 Description of the World Market for Contact Centers The call center market in 2008 amounted to U.S. $ 10 billion [55] and now itis currently estimated that the market size for 2012 would be approximately U.S. $21 billion. The annual growth rate according to McKinsey consultants is 37.5%.However, Gartner Group estimates a growth of only 20 to 25% p.a. (a mostconservative estimate indicates that the growth of the sector will in no case be lessthan 20% annually).2.2.1 Primary segments (due to its high yield): Mobile Telephone Services,Finance companies and Banks.2.2.2 Secondary segments: • 0800 • Tourism and transportation (travel agencies / hotels / airports / terminals / cruises / car rental) • Insurance • Deliveries and Distribution • Health (Pharmacies / hospitals / labs) • Telcos (Antel, Telmex) • Media (TV, radio, etc). • Universities • Public Services and Public Administration (gas, electricity, water) Copyright ® 2010 - All rights reserved 25
  26. 26. As shown on the table below, the Telecommunications industry and bankingand financial services group most of the turnover of this industry. Note that thissituation is a decision of call center companies (telcos and banking sectors beingthe most profitable ones). Table 7: Turnover by sectorSource: ACE [56] -facemd( Geographical Aspects A very illustrative picture of this activity is that there are 40.000 Call Centersin the world [57] , of which 30.000 are in the U.S.; this gives us an idea of whatstage of the life-cycle this industry is in, an aspect that will be developed later. Brazil ranks second in the world market for Call Centers [58] (positions).Brazil, despite the fact that the only market for its native language is Portugal, hasestablished itself as the industry’s major supplier for the American market and itshuge domestic market, which far from being exhausted, allowed Brazil to growwithin its own borders. The 43% of alla the Call Centers in the world are based in the U.S. eventhough it is not a host country for this type of business.The above is showing three facts: Copyright ® 2010 - All rights reserved 26
  27. 27. 1) The Call Center American market is not located offshore or, if so, only a smallpart of it is located abroad and has a huge market.2) The global market for call centers is going through a process of growth.3) The native language is not necessarily a limiting factor for this business providedthere is a concentration of bilingual population and an efficient and cheaptransportation system. Out of 417 from 6790 millions of people the Spanish language is spoken byonly 6.1% of the world population [59] a fact that delimits the size of this market. In turn, Spains population accounts for only 0.7% of the total worldpopulation. However, these figures are only theoretical, since it should be borne inmind that not all of the worlds population represents the market; (in fact the onewith the purchasing power is the customer).2.3 Description of the Spanish Market for Call Centers Market size in 2008 is 1.533 million Euros with a growth rate of 9.1% lastyear, well below the global estimate of annual growth of 20 to 37.5% (dependingon the consultant) . It is estimated that the factor that has slowed growth in the sector in Spainis the harsh economic crisis that this country has experienced since early 2008. From the chart below we may also see that this sector has never gone intorecession, although it has had periods of slower growth. Figure 9: Spanish marketDuring the period 2008-2009 the market turnover was of 1.533 million Euros (slightrecession due to lack of financing of the work capital).This project has a market share of 0,2% of the Spanish Call Centers market. Copyright ® 2010 - All rights reserved 27
  28. 28. Source: ACE [60] -facemd( ). Table 8: Our main market Below are the main potential customers for this industry in the Spanishmarket.Source: Forbes Magazine2.4 Why choose Uruguay? The answer to this question has been provided by the consultant Tholons,(chosen by U.S. based companies as the most highly respected one). Tholonsstates: "Uruguay offers the safest destination for outsourcing in Latin America."Source: Tholons [61] , Report on Outsourcing in Uruguay, June 2009. Copyright ® 2010 - All rights reserved 28
  29. 29. 2.4.1 Education and Labor costs: • The perfect equation: Uruguay offers the more skilled workforce in Latin America, together with the lowest operating costs; as described by the following chart, the main minimum wages in Latin America. Figure 11: Minimum wages in Euros Salarios mínimos en euros 300 € 230 € 257 € 218 € 220 € 250 € 200 € 148 € 150 € 100 € 50 € 0€ Salario mínimo de Salario mínimo de Convenio de Salario mínimo de Salario mínimo de Uruguay Paraguay telemarketing de Chile Argentina Uruguay Source: author’s productionRemark: It would be ideal to see the evolution of the salary in the last five years inorder to evaluate in which countries it is raising and in which it is falling down (thisanalysis could not be done due to lack of data).Below is a table comparing salary rates between Uruguay and Latin America, andbetween Uruguay and the rest of the world. Table 9: Uruguay, a stable, reliable, safe and democratic country Copyright ® 2010 - All rights reserved 29
  30. 30. Source: Aguada Park. graph below compares the educational systems of several countries: Figure 12: Educational System Source: Aguada Park. • Language: The Uruguayan Castilian accent is naturally neutral, our population has a strong tendency to adapt the accent to the places they Copyright ® 2010 - All rights reserved 30
  31. 31. interact with; the Uruguayan accent is the most neutral one in Latin America, since the vast majority of Uruguayans has a Spanish ascent. • "Service orientation" of the Uruguayan citizen: This is a major competitive advantage with respect to neighboring countries and is a critical issue for companies who want customers to be served by the most courteous and pleasant people. The reasons for this "service orientation" is the Uruguayan idiosyncrasy itself. • Literacy: Uruguay has one of the highest literacy rates in the world and the highest literacy rate across the continent (97%).2.4.2 Legislation and Courts: • Regulatory stability: a stable, serious and responsible country, with clear long-standing rules with regard to law observance, irrespective of the ruling party. Figure 13: Public reliance on politiciansThrough an agreement between the Uruguayan government and the OverseasPrivate Investment Corporation (OPIC) of USA Uruguay also offers political risk Copyright ® 2010 - All rights reserved 31
  32. 32. insurance for investors. The insurance covers all risks other than credit and claimsare subject to international arbitration. Source: Aguada Park. • Independence of the Judicial Power: This ensures the legal protection of private and industrial property. • Promotion of investment: There are investment promotional schemes and free trade areas to direct offshore investments which are tax free. • Equal treatment for domestic and foreign investors: There are no restrictions on the transfer of profits with free entry and repatriation of capital and dividends. In addition there is as a favorable treatment for imports of production equipment (these are activities for which State authorization is not required) .There is also a free choice of citizenship when recruiting staff. Figure 14: Restrictions on Capital FlowAs shown in the chart below, among several countries, Uruguay is the one withless restrictions on capital flow. Copyright ® 2010 - All rights reserved 32
  33. 33. Source: Aguada Park. • Flexibility in the corporate structure: Foreign investors can operate in the country by setting up a Uruguayan corporation; they can also operate by constituting a limited liability company or other type of personal companies constituted by members who are natural citizens or foreign legal citizens. It is also possible to operate in the country through a foreign company by installing a branch of same. • Compliance with regulations: Data protection laws, laws of displaced workers compatible with those of Spain, as well as excellent diplomatic relations with that country. • Government Commitment: Explicit tax exemption, aimed at promoting the activity of offshore call centers [62] . 2.4.3 Strategic Location:Uruguay is located in a strategic geographical region of the world as a result of agrowing market, the trade agreement of MERCOSUR (see Figure 15). Copyright ® 2010 - All rights reserved 33
  34. 34. Figure 15: Location of UruguaySource: CPA Ferrere - Gabriel Oddone - Punta del Este in April 2008.Figure 16: Montevideo is the administrative capital of the MercosurThe influence zone comprises 251 million people. Uruguay is located in the heartof the largest consumer and production area in South America (potential market). Copyright ® 2010 - All rights reserved 34
  35. 35. 2.4.4 Economy: • Political and economic stability: Uruguay has obtained the "investment grade" (low-risk for investments), as established by recognized companies such as American Duff and Phelps and British IBCA. This distinction indicates that Uruguay is identified as a risk-free country for investments.The following chart shows the business climate in Latin America, with Uruguay asthe best located country: Copyright ® 2010 - All rights reserved 35
  36. 36. Figure 17: Good business climate in Latin AmericaSource: CPA Ferrere - Gabriel Oddone - Punta del Este in April 2008. • International tax excemptions: The Uruguayan State does not charge Income Tax in other countries worlwide. There is an agreement with Spain to avoid double taxation (taxes can be deducted from the initial investment and from all the monthly costs). • Situated close to great economies: The geographical proximity to economies such as Brazil and Argentina, makes it the ideal country for testing new products and services. Many multinationals prefer to try new products and services in Uruguay before introducing them to larger markets. • Funding: Both branches and local companies can be financed through local banks, with loans from abroad or from their head offices or shareholders. • Privileged geographical location: Uruguay is free from natural disasters such as earthquakes, tornadoes and tsunamis. • Free exchange: There is a free exchange market, no limitations exist on the purchase or sale of foreign currency. Investments may be made in any currency.Corruption is one of the factors affecting the economy and business. In Figure 18we see that Uruguay and Chile are the countries with the lowest degree ofcorruption in the continent. Copyright ® 2010 - All rights reserved 36
  37. 37. Figure 18: Degree of corruption and labor unrest, the lowest in MERCOSUR Source: Aguada Park. Infrastructure: • Major road, port and energy infrastructure throughout the country with first-class roads. No blackouts. Everything works in an orderly manner. See Figure 19 below: “Quality of general infrastructure”. Figure 19: Quality of General Infrastructure Copyright ® 2010 - All rights reserved 37
  38. 38. Source: Aguada Park. • Excellent telecommunication infrastructure, with the best quality in all MERCOSUR. Uruguay is the only one country in America with 100% digital coverage. Figure 20: Telephone InfrastructureSource: Aguada Park. Copyright ® 2010 - All rights reserved 38
  39. 39. Figure 21: Cost on account of terrorism in BusinessAmongst the countries considered in the chart below, Uruguay is the country withthe lowest cost on account of terrorism. Source: Aguada Park. Where to locate a call center in Uruguay?2.5.1 Factors to be considered: Telecommunications:In Uruguay, 100% of all provincial capitals and larger urban centers have opticfiber. Wages, labor union conflictivity and absenteeism:While labor union conflictivity in Uruguay is minimal, wage levels and absenteeismare also low (as work is rather scarce, people tend to be carefulabout their jobs). Subsidy:The authorities in the interior of the country are much more likely to grant benefitsto new investors than the central government. In fact, the departments ofCanelones and Salto have created Technology Poles for this purpose. Buildings: Copyright ® 2010 - All rights reserved 39
  40. 40. Buildings should cover an area of at least 800 m2 . Preferably, the walls should betransparent and the buildings should offer offices for rental (for this activity, it is notusual to buy real estate).2.5.2 Access:In Montevideo, there is a demand for this type of buildings in the downtown area.The rental value of office space ranges from U$S 6.27 to 36.57 per m² (dependingon the location, the condition of the office and whether it offers additional facilities). g Aguada Park Photo Example: The Aguada Park complex offers 800m of type AAA facilities, 2especially designed for Call Centers within a Free Trade Zone (exempt from alltaxes in Uruguay, including import charges) and not subject to a monopoly ofservices. The average cost of these offices is U$S 23 per m² (requiring a guarantee of5 months rental). Copyright ® 2010 - All rights reserved 40
  41. 41. However, in the interior of the country rental costs are much lower (neverexceeding U$S 7 per m ) but there is a serious locative difficulty, since it is hard to 2)find a building infrastructure of 800mts (the ideal area for such an enterprise). 2 Alternative solution: In the countryside, in case there is no buildingaccording to satisfy our needs, a good option would be a leasing agreement forthe quick construction of prefabricated modules (in 60 days) by the countryslargest construction company (Campiglia [63] ). The monthly cost of leasing these facilities is equivalent to paying highrental in Montevideo, provided an investment guarantee agreement and a lease fora minimum of two years are signed.2.5.3 Premise Location:The high staff turnover in this type of business and the large volume of workersrequired excludes all available locations. Therefore the following will be required: Security and metropolitan lightingIt is very important to ensure that there is good street lighting and policesurveillance from the terminal or bus stops close to the platform (remember thatthe first shift may start at 4 or 5 a.m. Uruguayan time). Transport:It is vital to have public transport available in the early hours of the morning inorder to allow workers to attend work.If safety, lighting and transport are insufficient, a negotiation may be carried outwith the Public Administration authorities before discarding a good location. Locative capacity for potential future growth:It should be borne in mind that the business can continue to demand more space,so a location that allows for future expansion should be chosen2.5.4 Location in Uruguay Generally, when choosing a city or town, the customer determines theminimum amount of inhabitants desired (usually at least 100,000 inhabitants)without other large area cll center operating in the same location. In Uruguay, the only cities that have a population restriction are Montevideo,Canelones and Salto. The department of Montevideo (capital of the country) Copyright ® 2010 - All rights reserved 41
  42. 42. Population: With approx. 1.5 million inhabitants [64] , Montevideois in a position to provide human resources for 12 active Call Centers for largeareas (There are now five major [65] and several small ones). Socio-cultural Level: Medium-high trade profiles. Ideal location: The riverside area which extends from thedowntown area ("Ciudad Vieja") and the neighborhood of Carrasco (e.g. the FreeZone of Aguada Park and World Trade Center Free Zone). HR Profile: Students (computer training not required) The department of Canelones, comprises a group of cities that are veryclose to one another (approx. 10 to 20 km) and offering good transport links. Population: Approximately half a million inhabitants. [66] . Thisdepartment would provide human resources for 4 active large areas Call Centers(virgin land, until no Call Center exists in this area). Socio-cultural Level: People belong to the middle class (lowerthan that of Montevideo). Prime location: The cities of Las Piedras and Canelones ( thelatter is the capital of the department) are the two most thickly populated cities andthe more remotely located from Montevideo (making them ideal for these type ofdevelopments, since it is not likely that residents would prefer to travel toMontevideo for working purposes). HR Profile: Young people who have completed their high-schooleducation and middle-aged people who are used to work (although they mayrequire computer training). The department of Salto Population: Approx. 150,000 people [67]. This department iscapable of providing human resources for one large areas Call Center ( this isvirgin land, until now, there are no Call Centers). Socio-cultural Level: Similar to that of Montevideo (medium-high)with universities and schools of recognized standing. Ideal location: The city of Salto (capital of the department)concentrates about 100% of the department’s population. HR Profile: As this department is situated close to Brazilian border,the operator profile is ideal for a Portuguese-speaking client (with 100 operators) oran Hispanic client (with 500 operators) . Copyright ® 2010 - All rights reserved 42
  43. 43. The following table shows the location of the different Uruguayan departments:Table 10: Uruguayan Departments (Country’s Capital: Montevideo)2.6 Jurisdiction How does the international market work? From the point of view of the World Market Overview, geographical aspectsand the life-cycle stage of the business,the following can be said about demandand supply:2.6.1 DemandThe international demand for Call Centers services exceeds the supply by far.The figure below examines the structure of the demand for services and showsthat 54% of Spanish customers in the Call Center industry correspond tocustomers whose turnover increased to 45,000 million Euros p.a. Copyright ® 2010 - All rights reserved 43
  44. 44. Figure 22: Structure of the demand for services (in thousands of Euros)Source: AEMTfacemd ( SupplyAs the demand by far exceeds the supply, Telemarketing corporations can choosewhich are the most suitable customers. We are facing a market largely dominated by supply rather than by demand. As a result of all this, companies limit their business operations to thoseoffering a very high yield and a number of interesting positions that allow scaleeconomies, thus optimizing costs (the funds for investment and the capacityopportunities to take credits are finite) while business are abundant). How does the national market works? Most of the services supplied do not have the quality or size required forinternational purposes (this is an issue that shall be analysed in detail underChapter 4 Economic Aspects). In addition, the quality of services is stronglydetermined by the staff’s proficiency in the language (only a small percentage ofthe population would qualify as a “native English speaker”). The demand for Call Centers by domestic companies is usually not aprofitable venture for large Telemarketing companies. This leaves the field openfor domestic enterprises.Market Analysis 2.6.3: Identification of segments:Below is a detail of the different market segments for this project. Copyright ® 2010 - All rights reserved 44
  45. 45. Brazil offers a huge potential market for Uruguay because: • In Uruguay a percentage of the local population speaks Portuguese (it is estimated that at least 5% of the population is of Brazilian origin and lives permanently in Uruguay [68]). The 2007 Students’ Census at the University of the Republic indicated that 28.5% of students can read Portuguese, while 17.6% are able to speak it. • Together with Uruguay, Brazil is part of the MERCOSUR. • It is more profitable for the Brazilian Call Center market to use their own resources to contact U.S. customers than to do so for their own domestic market.Argentina, and Paraguay • They have higher labor costs than those of Uruguay, as well as a greater labor unrest, a lower score in the Offshore Location Attractiveness Index (AT Kerarney) and a higher local cost. • In Argentina, the minimum wage is € 257 [69] (17% over the Uruguayan telemarketing agreement and 44% over the minimum wage for Uruguay). • According to the Global Competitiveness Index, Argentina is at the competitive development stage 2 (position 85). Uruguay is better situated; i.e. at stage "2-3" (position 65). Source: World Economic Forum (2010) The Global Competitiveness Report 2009-2010. • In the case of Paraguay, this country is at the competitive development stage "1-2" (position 124). Uruguay is at stage "2-3" (position 65). Copyright ® 2010 - All rights reserved 45
  46. 46. Source: World Economic Forum (2010) The Global Competitiveness Report 2009-2010. • On the other hand, the minimum wage in Paraguay amount to € 218 [70] (1% below the Uruguayan telemarketing agreement and 23% over the minimum wage in Uruguay). International Source: World Economic Forum (2010) The Global Competitiveness Report 2009-2010. • According to the Global Competitiveness Index, Chile is at the competitive development stage 2-3 (Uruguay is situated at the same stage). • Chile has higher labor costs than Uruguay and the minimum wage is € 230 [71] (5% above the Uruguayan telemarketing agreement and 29% above the minimum wage in Uruguay). • Chile is a country prone to natural disasters (volcanoes, tidal waves, tsunamis [72] and earthquakes). It has 500 [73] geologically active volcanoes and about 60 with eruptive with an historical record of eruptions. It is the country with the largest number of earthquakes in the world (call centers should be located, as far as possible, in an area free from natural disasters, as they are often used as a backup for third countries essential services).Peru Copyright ® 2010 - All rights reserved 46
  47. 47. Source: World Economic Forum (2010) The Global Competitiveness Report 2009-2010. • According to the Global Competitiveness Index, Peru is at the competitive development stage 2 (position 78). Uruguay is better situated, i.e. at stage "2-3" (position 65). • The human development index (HDI) [74] shows that Peru is situated at position 78 (out of 177 countries) a score well below Uruguay’s position: 46. • As regards the Index of Perceived Corruption published by Transparency International [75] Peru is situated at position 75, while Uruguay ranks 25 (the lowest in the MERCOSUR). • Peru is a country prone to natural disasters (especially earthquakes [76]) as it is located in an area subject to frequent seismic activity corresponding to the strip of friction of the relative movement of two tectonic plates (the Nazca plate and the Southamerican plate). With respect to the recommended sites for Call Centers, the comment made for Chile applies to Peru. Figure 23: Earthquakes in Peru during the last 30 years Copyright ® 2010 - All rights reserved 47
  48. 48. Source: C3% BASpain (our target market, which is discussed under paragraph 2.3 of this chapter.)Portugal • As mentioned above, in Uruguay there is a percentage of the population that speaks Portuguese.U.S.A. • Uruguay is located in the same time zone as the United States and Canada; therefore Uruguay is the ideal country to serve the U.S. Hispanic market, demanding services in Spanish (The United States have an Hispanic population of more than 40 million people). • In Uruguay, the English language is widely spoken by young people. Some estimates indicate that approximately 25% of the population speaks the English language, but not at "native English speaker” level. Last year (2009), 3% of the population passed a Cambridge ESOL examination [77]. In the 2007 Census carried out by the State University of the Republic - the largest university in the country – it was reported that 70.5% of the students are capable to read English (out of a total of 81.774 students) and that 50.7% are capable of speaking this language. However, the socio- economic profile of the students who have passed this examination is not in line with that of a Call Center operator. Anyway, English speaking Call Centers are feasible at somewhat higher labor costs. Copyright ® 2010 - All rights reserved 48
  49. 49. Table 11: Global Competitiveness Index 2009-2010 [78]Brazil is not a direct competitor for Uruguay because it is not a Spanish speakingcountry and unfortunately Chile is likely to go down in the ranking due to theearthquake that affected the country this year. Source: Forbes Magazine2.6.3.2 From where to get labor costs? It is essential to count with statistics by country. For this purpose, datashould be sought from the following sources:Laborsta Database [79] developed by the ILO. In Laborsta, it is possible to find the average labor cost per country for thetextile industry, although this cost has nothing to do with the Call Center industryand is probably outdated. Anyway, it offers a rough idea of historical labor costs inthe countries under analysis. In said Web page, labor cost is expressed in time units (ie hourly, monthly oryearly cases, as calculated by each country at the corresponding currencies). Tochange the available data to a single currency, these data must be changed toEuros. Database TRAVAIL [80] of the ILO TRAVAIL shows the working conditions and labor legislation for eachcountry, as well as the minimum wage. Bureau of Labor Statistics of the U.S. Copyright ® 2010 - All rights reserved 49
  50. 50. (Federal Employment Statistics [81] ) shows the wages in almost all countries, in itscurrency of origin. Organization for Cooperation and Economic Development (OCED[82] ) This offers a complete database of all member countries; however it doesnot have specific information about the call center industry and the official sitesoffering labor statistics for the countries we are analyzing. In Uruguay it is possible to resort to the National Statistics Institute(INE [83] ) and the Ministry of Labor and Social Security (MTSS [84] ).It should be borne in mind that we are investigating the total labor cost and not thesalary. The labor cost will be calculated according to the salary specified by thetelemarketing agreement in each country (in case it exists). In Uruguay, the wage established by the telemarketing agreement is € 220(without reductions) per month (24% above the minimum wage). Uruguays minimum wage is € 178 (1/1/09) [85] per month. Competitors Competition at international level: there is not a serious problemin the case of larger call centers, as there is enough for everyone of them. However, in the case of multinationals who employ more than oneTelemarketing company, we should point out that very often they have to competeagainst one another in order to increase productivity. In such cases, a competitiveenvironment is graphically displayed. Only when the market segment is toovaluable, one may see competition in the Telemarketing international market. Domestic Call Centers: For the above mentioned reasons theycompete with each other and are affected by the large activities of the hugeinternational market companies.2.6.4 ResearchThe sample includes: • The eight members of the local House of Telecommunications and other Call Centers present in Uruguay. • The 22 members of the Spanish Association of Contact Centers and other Call Centers in Spain. Copyright ® 2010 - All rights reserved 50
  51. 51. • The 24 call centers that have received accreditation from the Spanish Agency for Data Protection. • The largest contact centers in Argentina and worldwide. • Seventeen related companies not belonging to the sector although there is a high probability that they will join it shortly in the coming years (HR and consulting international companies). Our investigation therefore covered a total of 75 companies (58 callcenters and 17 related companies). Competitor’s analysisNote: All information on competitors with regard to billing, net income and assets inSpain was collected from data by eInforma [86] , but the world global data werecollected from each company’s website. Table 12: Competitors present in Uruguay who work or have worked for SpainAtento (350 posts) and Eurocen (230 posts) for Telefónica Móviles, Avanza (190posts) for Telefonica (landline only) and Hits Telecom. IBM (225 posts) operateswith Indra (formerly Soluziona), Iberdrola and BBVA (Finanzia Autorenting,Finanzia Bank of Credit and Uno-E Bank). Presently, Synapsis is not operatingwith Spanish clients.Source: author’s production Copyright ® 2010 - All rights reserved 51
  52. 52. Table 13: Competitors in Uruguay not operating with customers in SpainIt is understood that these companies do not operate with customers in Spainbecause they do not have authorization from the Spanish Agency for DataProtection. If they did, the operation would be illegal and liable to claims (probablythe customer would have little importance, since the best qualified customers arealways working at zero risk).These domestic companies are usually smaller than the subsidiaries oftransnational corporations (with an average of approximately 70 positions each),and they mainly serve the local market (exporting about 10% of their sales).Sierra & Leth and EULEN SA are Spanish companies; in the case of EULEN this isa multi-services company that has call centers in Spain but not in Uruguay (weforesee that in the near future EULEN will set up a Call Center in Uruguay, as it isalready baseded in the country.)Sierra & Leth operates in Uruguay by means of smart-shoring agreements [87] (orintelligent offshoring) with other outsourcers.Access (250 seats) is owned by the Uruguayan State company (Antel).Telesur is the representative in Uruguay of Plantronics (the brand of Call Centerhulls).Source: author’s production Table 14: Call Centers Companies in the Spanish Association of Contact Centers that have no presence in Latin AmericaExcept for Shoot, which had a negative result, it is very likely that these companiesare studying the possibility of establishing themselves in Latin America, providedtheir assets allow them to do so.However, those that have no presence in Latin America, will very likely choose toestablish themselves in Uruguay, contrary to other companies that are alreadysettled down in Latin America. Copyright ® 2010 - All rights reserved 52
  53. 53. Source: author’s production Table 15: Companies of Call Centers outside the Spanish Association of Contact Centers that have no presence in Latin AmericaIt is possible that these companies, like the ones in th above table, may beinstalled in Uruguay, but in many cases there are small call centers and they do notbelong to the Spanish Association of Contact Centers (possibly due to lack ofassets).The non-membership of the Spanish Association of Contact Centers may bebecause they cannot meet the minimum entry requirements [88] or for strategicreasons (sometimes it happens).Source: author’s productionCCA and CPM have negative net results, from which in a very hasty way can befollowed that they will not come to Uruguay; however, there is also the possibilitythat if they go badly in Spain, they should outsource their services in Latin Americarequesting a capital contribution to their shareholders. Table 16: Companies of Call Centers in the Spanish Association of Call Centers that have no presence in the MERCOSUR but in the rest of Latin America Copyright ® 2010 - All rights reserved 53
  54. 54. These companies are already in Latin America but may be interested in settling inUruguay because: a) They diversify the business risk by means of platforms in different countries and in different economic blocs (such as MERCOSUR). b) It may be a requirement of the customer. c) They may be interested in a regional platform for export of services from Uruguay to Argentina, Brazil and Paraguay and in this way benefit from tax incentives or MERCOSUR intra-regional customs.Source: author’s production Table 17: Companies of Call Centers outside the Spanish Association of Contact Centers that have no presence in the MERCOSUR but in the rest of Latin AmericaDitto to the notes in the above table but with the possibility that these companieshave assets under investment or simply are not in the Spanish Association ofContact Centers for other reasons.Source: author’s productionAn example of the latter is that Digitex (a provider of Telefonica), GEOBAN(supplier of Banco Santander) and STREAM are leading companies. Copyright ® 2010 - All rights reserved 54
  55. 55. Table 18: Call Centers with the highest global turnover Source: author’s production Figure 25: Global BillingIt should be noted that the list lacks some of the market companies becausereliable data on these companies could not be gathered. Similarly, it is consideredthat the previous list and its corresponding chart are fully representative of theindustrys global turnover. Facturación mundial € 1.784.000.000 € TELEPERFORMANCE 1.800.000.000 € (IBERPHONE, S.A.) 1.600.000.000 € 1.400.000.000 € 1.306.000.000 € ATENTO € TELESERVICIOS € ESPAÑA, S.A. 800.000.000 € 631.000.000 € TRANSCOM 600.000.000 € WORLDWIDE SPAIN, 400.000.000 € S.L.U. 200.000.000 € 120.000.000 € DIGITEX 0€ Facturación totalSource: author’s productionTable 19 and Figure 26: Turnover of Call Centers in Spain Copyright ® 2010 - All rights reserved 55
  56. 56. Company Billing Spain €BT 467.836.844 €ATENTO TELESERVICIOS ESPAÑA, S.A. 221.266.000 €KONECTA BTO, S.L. (GRUPO) 179.601.000 €SITEL IBÉRICA TELESERVICES, S.A. 148.224.648 €QUALYTEL TELESERVICES, S.A. 122.044.386 €TRANSCOM WORLDWIDE SPAIN, S.L.U. 88.762.000 €EUROCEN EUROPEA DE CONTRATAS, S.A. (EXTELCRM) 81.384.002 €DIGITEX 79.527.446 €TELETECH CUSTOMER SERVICES SPAIN, S.L. 78.554.000 €TELEPERFORMANCE (IBERPHONE, S.A.) 69.568.000 €GEOBAN 67.999.006 €UNISONO SOLUCIONES CRM, S.A. 64.193.000 €CENTRO DE ASISTENCIA TELEFÓNICA, S.A. (CATSA) 50.482.000 €GRUPO GSS 37.424.573 €TELEMARKETING GOLDEN LINE, S.L. 37.222.229 €BOUNCOPY, S.A. 34.492.000 €AVANZA EXTERNALIZACIÓN DE SERVICIOS, S.A. 32.409.465 €SERVICIOS DE TELEMARKETING, S.A. (SERTEL) 31.489.491 €EMERGIA CONTACT CENTER, S.L. 25.700.270 €SYKES ENTERPRISES INCORPORATED, S.L. 22.348.432 €TELEMARK Spain SL 19.634.813 €TELECYL , S.A. 17.191.254 €RAINBOW COMUNICACIONES, S.L. 16.624.042 €CONTACTEL TELESERVICIOS, S.A. 15.315.245 €ARVATO SERVICES IBERIA S.A. 13.329.501 €BOSCH 13.218.000 €LANALDEN, S.A. 10.704.735 €MEDIOS Y SERVICIOS TELEMÁTICOS SA (GRUPO MST) 8.547.087 €STREAM SERVICIOS DE APOYO INFORMÁTICO, S.L. 8.392.390 €STD MULTIOPCIÓN, S.A. 7.228.358 €CCA INTERNATIONAL (Fonoservice SA en España) 6.724.063 €RESULTA SERVICIOS DE MARKETING, S.A. 5.520.594 €CPM, INTERNATIONAL TELEBUSINESS, S.L. 4.566.290 €GRUPO ASTEL (ASSTEL SIS SOCIEDAD LIMITADA) 2.016.359 €KONOKO 1.194.443 €SHOOT CONTACT CENTER 898.365 €SIERRA & LETH 803.307 €AXIS CORPORATE 566.305 €CONTACTNOVA SL 445.488 €Source: author’s productionWe can see that BT is the clear leader in the Spanish market (in revenue). Copyright ® 2010 - All rights reserved 56
  57. 57. 500.000.000 € BT 450.000.000 € ATENTO TELESERVICIOS 400.000.000 € ESPAÑA, S.A. 350.000.000 € KONECTA BTO, S.L. (GRUPO) 300.000.000 € 250.000.000 € SITEL IBÉRICA TELESERVICES, S.A. 200.000.000 € QUALYTEL 150.000.000 € TELESERVICES, S.A. 100.000.000 € TRANSCOM WORLDWIDE SPAIN, S.L.U. 50.000.000 € EUROCEN EUROPEA DE 0€ CONTRATAS, S.A. (EXTEL Facturación España € CRM)Source: author’s productionTable 20: Percentage of Spain in relation to the world global turnoverTable 20, which is lower and the corresponding Figure 27 does not clarify whetherSpanish companies have a large participation in the market by the weight of theSpanish market in the world market or because the companies investment abroadis minimal (low relocation) in relation to Spain.Source: author’s production Figure 27: Percentage of Spain in the world billing Copyright ® 2010 - All rights reserved 57
  58. 58. 90% RAINBOW 83% COMUNICACIONES, S.L. 80% 77% UNISONO SOLUCIONES CRM, S.A. 70% 66% 63% DIGITEX 60% MEDIOS Y SERVICIOS 50% TELEMATICOS SA 45% (GRUPO MST) 40% GRUPO GSS 30% ATENTO TELESERVICIOS ESPAÑA, S.A. 20% 17% 14% TRANSCOM WORLDWIDE 10% SPAIN, S.L.U. 4% TELEPERFORMANCE 0% (IBERPHONE, S.A.) % de España en la facturación mundialSource: own Table 21: Net results of Call Centers in SpainThe undisputed leader in the Spanish market net result is Atento (owned byTelefónica). Eurocen and Digitex are also providers of Telefonica; so this is morethan clear that the Telefonica group is leading the Spanish market for contactcenters.Company Last Year € ResultsATENTO TELESERVICIOS ESPAÑA, S.A. 7.306.000 €QUALYTEL TELESERVICES, S.A. 3.901.458 €EUROCEN EUROPEA DE CONTRATAS, S.A. (EXTEL CRM) 2.980.819 €TRANSCOM WORLDWIDE SPAIN, S.L.U. 2.933.000 €DIGITEX 2.606.545 €UNÍSONO SOLUCIONES CRM, S.A. 2.460.000 €SERVICIOS DE TELEMARKETING, S.A. (SERTEL) 2.097.778 €TELETECH CUSTOMER SERVICES SPAIN, S.L. 1.739.000 €CONTACTEL TELESERVICIOS, S.A. 1.676.966 €TELEMARKETING GOLDEN LINE, S.L. 1.372.525 €TELEMARK Spain SL 1.329.483 €SYKES ENTERPRISES INCORPORATED, S.L. 737.161 €AVANZA EXTERNALIZACIÓN DE SERVICIOS, S.A. 616.400 € Copyright ® 2010 - All rights reserved 58
  60. 60. Figure 28: Spanish Market net result 8.000.000 € ATENTO TELESERVICIOS ESPAÑA, S.A. 7.000.000 € QUALYTEL TELESERVICES, S.A. 6.000.000 € EUROCEN EUROPEA 5.000.000 € DE CONTRATAS, S.A. (EXTEL CRM) 4.000.000 € TRANSCOM WORLDWIDE SPAIN, S.L.U. 3.000.000 € DIGITEX 2.000.000 € UNISONO 1.000.000 € SOLUCIONES CRM, S.A. SERVICIOS DE 0€ TELEMARKETING, Resultado Último Año € S.A. (SERTEL) Source: author’s production Table 22: Call Centers with negative net income in SpainBT, BOSCH and KONECTA are not only in Spain so that the net result is notnecessarily negative, indicating that these companies have no assets available toinvest in new ventures.BT is the company with higher turnover and assets in Spain.BOSCH and KONECTA are within the more active Call Centers in Spain, whichmay indicate that the negative net result is somewhat temporary and maybe theresult of a planned in advance big recent investment or otherwise they aresuffering from a scale diseconomy due to excessive costs.With respect to CCA, CPM and Shoot the reasons for the negative net result maybe different, such as: an investment, or they are computing a part of the billing inanother society belonging to the same company or simply they are having financialproblems. Likewise, one might assume a priori that these three latter companies donot have liquid resources to undertake a project in Uruguay in 2010 unless theyrequest to their shareholders a new capital contribution or that the statementpresented in 2009 was not a faithful reflection of reality in 2010 (not been able toget enough data to make sure what the financial situation is, much less to discardstrategic plans of these companies). Copyright ® 2010 - All rights reserved 60
  61. 61. Source: author’s production Table 23: Profit margin of Call Centers in SpainIt is commonly said that the smaller is a call center, the more profit margin it gives;but TELEMARK Spain SL, a large company, is at the top of the ranking (this maymean that the company is very well maintained).The case of Contactel Teleservices SA that has a very high margin, is due to agood management and to the fact of its smaller size than the rest of the CallCenters that are in the sample (both).You can also see that the average margin in Spain is very low, which has made theoffshoring to Latin America a business not only exceptional but necessary for thesecompanies to survive.On the other hand it is noteworthy that, even though in many cases the branch ofSpain computes the turnover of branches in Latin America, the main reason for thelow profit margin in general is that, being very low the level degre of the offshoringSpanish companies, turnover in Latin America is sprayed with that of Spain (whichis given by operating costs much higher than those of Latin America).Company Profit marginCONTACTEL TELESERVICIOS, S.A. 10,9%TELEMARK Spain SL 6,8%SERVICIOS DE TELEMARKETING, S.A. (SERTEL) 6,7%STD MULTIOPCIÓN, S.A. 6,4%LANALDEN, S.A. 4,6%KONOKO 4,2%AXIS CORPORATE 4,1%UNÍSONO SOLUCIONES CRM, S.A. 3,8%TELEMARKETING GOLDEN LINE, S.L. 3,7%EUROCEN EUROPEA DE CONTRATAS, S.A. (EXTEL CRM) 3,7%MEDIOS Y SERVICIOS TELEMÁTICOS SA (GRUPO MST) 3,3%TRANSCOM WORLDWIDE SPAIN, S.L.U. 3,3%ATENTO TELESERVICIOS ESPAÑA, S.A. 3,3%SYKES ENTERPRISES INCORPORATED, S.L. 3,3%STREAM SERVICIOS DE APOYO INFORMÁTICO, S.L. 3,3%DIGITEX 3,3%QUALYTEL TELESERVICES, S.A. 3,2%CONTACTNOVA SL 3,0%SIERRA & LETH 3,0% Copyright ® 2010 - All rights reserved 61