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The number of North American outsourcers setting up call centers in Bogotá to offer near-shore services is steadily on the rise, as a number of economic and social factors are continuing to facilitate the unprecedented growth in the Colombian capital.

Over the last few years, the South American country’s call center industry, which is primarily concentrated in Bogotá, has expanded rapidly. According to the Colombian Association of Call Centers, in 2006 the industry’s outsourcers generated revenues of $216 million with 30,000 work stations, up from $44 million and 3,700 workstations in 2001. This represents a composite annual growth rate of 38 percent in revenues and 42 percent in seats over the last five years.

Leading the charge in this sudden southern migration is a balanced mix of domestic and multinational outsourcing providers. Colombia is home to some of the region’s largest call center providers such as Teledatos, Multienlace and Contact Center Americas, all of which employ over 4,000 agents. The larger multinational players include Atento, part of the Spanish conglomerate Telefonica, which employs over 5,000 agents and Sitel whose operations rely on over 2,000 agents. Other smaller yet higher-end operations are run by IBM, Unisys, Hewlett Packard and Citi Group.

In terms of size, industry insiders estimate that Bogotá’s 30,000 agents in 2006 place it roughly on par with Argentina and behind Mexico and Brazil. The call centers in Colombia now handle 1.6 million calls per day, on average, of which about 62 percent are inbound and 38 percent outbound.

Priming the Pump

There are a number of factors priming the Bogotá pump, including a skilled labor force, low cost of doing business, modern telecommunications infrastructure and strong economic incentives, as well as plenty of office space, according to Luis Eduardo Rosales, a sales manager with call center outsourcing giant Sitel.

“Bogotá stands out in Latin America for its remarkable growth in offshore services,” Rosales said. “Establishing operations is a fast and efficient process for an investor thanks to the qualified workforce, availability of appropriate real estate and tax exemption for export of services.”

In fact, many are predicting an even greater surge in Bogotá’s call center space. Only a relatively short flight from some of the southern cities in the U.S. and situated in the same time zone as New York for most of the year, Bogotá is a convenient location for American businesses to near-shore their call center and BPO operations.

Central City

The city, with a population of seven million, is the hub of Colombian business and has a busy banking, insurance sector and stock exchange. Bogotá is also the center of the telecommunications network and has the biggest industrial facilities in the country.

In the past, adverse weather conditions, unreliable networks, security concerns and other factors have hampered other regions in South America from becoming players in the contact center outsourcing game. However, with its temperate climate, reliable fiber-based communications infrastructure and improved security, Bogota is now poised to see rapid growth of the contact center industry. According to Virgilio Barco, executive director of Invest in Bogotá, the city is “ready for an even greater influx of business and is positioned for continued growth.”

And, Barco says, the growth is spread across all industry segments, as more and more multinational players are calling on the city to host their increasing nearshore operations.

One company that recently entered the market is New York-based computing giant IBM, which is running call center and BPO operation in Bogota. Leopoldo Rother, a business development executive with IBM, said the company chose Bogotá as the headquarters for its Latin American Contact Center because of the availability of a high-quality labor force.

“We have found a talented pool of employees who are extremely service-oriented and bilingual … which allows us to easily expand to new markets,” Rother said. “The city has an outstanding telecom infrastructure, is located in a convenient time zone with a privileged geographic location. Combined with positive economic performance and the local labor legislation, these elements make Bogotá an excellent choice for efficiently consolidating an international operation in one place.”

The Economic Advantages

American companies like IBM have been able to lower costs while creating higher standards and improving stabilization of foreign countries by outsourcing an assortment of manufacturing and service work. In turn, this has motivated governments across the globe to offer economic incentives to lure new businesses.

Tim Searcy, CEO of the American Teleservices Association, says from an economic standpoint Colombia is a bargain. The entry level wage for an agent is the monthly minimum wage, which at the current exchange rate of $2,000 Colombian Peso per U.S. $1 equals U.S. $216. According to the UBS Prices & Earnings Report for 2006, the annual income of agents and supervisors for a contact center in Bogotá is one of the lowest in Latin America.

Of course, pay range depends on an agent’s experience and tenure. A bilingual agent can earn up to 40 percent more than the entry level wage. Supervisors earn a monthly salary upwards of $500 to $1,000. Managers’ salaries range from $3,000 to $5,000 monthly. The difference in salary levels compared to the U.S. is significant, considering labor costs generally make up the largest portion of a call center’s budget.

Government Incentives

Because governments are well aware of the potential boon call centers can bring, politicians tend to push legislation to create various business incentives. For instance, Colombia’s labor legislation allows for the possibility of having two daily shifts without overtime pay, as well as greater flexibility in hiring and firing. Perhaps more importantly, there is an exemption for exports allowing for services rendered in Colombia and used exclusively outside its national borders by firms without any economic activity in the country to be exempted from value added tax.

The government has also created “Virtual Free Zones” allowing any firm situated in the city that generates at least 600 new direct jobs or invests $32 million to benefit from the fiscal, customs and foreign exchange related benefits of a Free Zone. The business taxes in the Free Zones are about 15 percent, a huge savings compared to the current standard rate of about 34 percent.

The Skilled Labor Force

While inexpensive labor costs are obviously a big motivating factor in choosing an offshore call center location, an educated labor force can be just as important. And, an educated workforce that speaks English can be even more important. Approximately half of Bogotá’s 108 higher education institutes require their students to meet established second language competency levels in order to graduate, according to Bogotá Chamber of Commerce with data provided from the Ministerio de Educación Nacional.

Bogotá’s higher education population and enrollment rates have steadily climbed in recent years. Currently there are over 400,000 students enrolled in higher education institutes including university and technical training institutes.
Also, the national training entity (SENA - Servicio Nacional de Aprendizaje) offers tailor-made programs for call center agents on the company’s premises. Other programs are open to the general public.

Several established multinationals in Bogotá constantly highlight the strong commitment and quality of customer service of the Colombian employee as one of the city’s competitive advantages.

“I have worked in many places around the world and have never had employees as educated, smart, professional, hardworking, passionate and loyal as in Colombia,” said Karl Lippert, CEO of multinational beer brewing giant SABMiller.

According to research firm Datamonitor, “Outsourcing providers indicate that Latin Americans, as well as Spanish-speakers in the United States, prefer the neutral Colombian accent over all others.”

In addition, the Colombian contact center industry, aware of the need to develop the skills of its workforce, has invested almost $ 4.5 million dollars and over three million hours of training for its employees.

Plenty of Office Space

Rental rates for top-grade office space in Bogotá are approximately $3 per square foot. However, spaces suited for call center activities can cost as little as $1 per square foot. With the added cost of renovation, if necessary, the cost per square foot in these areas is approximately $1.7 per square foot.

And construction in Colombia is growing at a healthy pace. In the last year, approved construction space for offices increased 34 percent, totaling 4.5 million feet.

The Communications Infrastructure

The Colombian telecommunications market has been liberalized and unregulated considerably in recent years, which has helped improve service and brought prices more in line.

Throughout that period the country has modernized its telecommunications infrastructure and now has a modern digital network of satellite telephony, microwaves, and lines of optical fiber.

Colombia has access to three, carrier-grade fiber optic submarine cables, with a fourth expected to be fully functional in the second half of 2007. This should guarantee the necessary redundancy for a stable and safe communications network and increase international connection capacity by at least 40 percent.

Current monthly rates in Bogotá for a clear channel connection from Bogotá to varying international cities begin at around $1,000. Current monthly rates in Bogotá for local E-1 channels range from $200 to $300.

Regarding the use of VoIP, carriers are allowed to use this technology to handle their long distance traffic as long as voice communications are neither originated nor terminated on the local public network. The local telephone, data and mobile services compete in open market conditions - as will long distance as of August 2007.

Already There

As U.S. companies continue to expand their reach throughout the world and look for new call center locations that will provide the best return on investment, Bogotá is continuing to attract firms that are moving back from India and other Asian countries to places closer to home.

“Bogotá was the natural launching point of what is currently an important Latin American presence for Digitex,” said Javier Llanes, managing director of Digitex International, adding that the continued convenience and quality offered by the city will likely attract much more business.

The author can be reached at [email protected]

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