Location Selection for Shared Services Operations in Latin America
For companies that have moved beyond a country-by-country model to leverage scale across geographies, while a few might consider a location that delivers services globally, the most common model is to have a physical location that supports one or more geographic regions. With only two primary languages (Spanish and Portuguese), making the location decision for the Latin America region doesn’t have the same language issues that can complicate a similar decision for Europe or Asia. However, political, legal, and infrastructure issues for the region are potentially greater concerns needing careful consideration.
A manager at a global company wanted feedback from other member companies on how to best make the location decision for the Latin America region. Within a few hours, using iPollingTM, he had answers from peers with helpful experience and knowledge, allowing him to make a more informed location selection.
Here is the background statement on the reason for the poll: “Our company is interested in opening a Shared Services Accounting location in Latin America. We were originally considering Mexico or Costa Rica and are very interested in knowing which Latin American countries other multi-national corporations have selected. Any insights regarding the strengths and weaknesses of your Latin American location would be of great help.”
The first iPollingTM question asked about the primary location for a Shared Services operation in Latin America. The three top countries for location were Mexico (42%), Brazil (25%), and Costa Rica (17%). Here are the details:
The second iPollingTM question considered the primary reason for choosing a specific location. Interestingly, the reason for “favorable labor quality and cost” was the top reason for only 33% of the respondents. The factor most often cited as the primary reason was similar to one often mentioned for other regions – proximity to an “existing company location”.
As suggested by the discussion generated between members on this topic, making the location decision is a complicated exercise, with factors that change over time, and with subtle differences that are based on the specific circumstances that exist for each company. In other words, while it is helpful to know the details regarding how other companies approached this issue, the right answer for your company is likely to be unique, based on your specific circumstances.
Here are several of the comments added by iPollingTM participants:
- We have two main centers for the region: 1) USA/Mexico City, 2) Brazil (Sao Paulo). All centers report to the Shared Services Director based in the USA.
- Unfortunately, there isn’t always a clear answer to this question. If you have operations in Brazil, it is recommended you create a multi-location center. Serving Brazil from outside the country is difficult. Cross-boundary service delivery and financial/tax regulations make it very complicated for Brazil specifically. Once that decision is made, then top locations in previous location assessments performed with Big 4 consultants point toward Argentina and Mexico. Costa Rica is pretty tapped out – lots of competition for labor. Up and coming locations are Colombia and Panama. So, in summary, my experience is Brazil +1, with the plus one being a top choice based on existing business operations locations or pure SSO capabilities present in the country.
- While we did leverage an existing business and location, we also viewed the cost components to be favorable.
- We excluded Mexico at the time (2010) because of the political climate there. We were impressed with Costa Rica because they have built an industry around SSCs.
- My company’s analysis was performed about 4 years ago. We chose Mexico due to the availability of a multilingual workforce with the type of skills we were looking for at a reasonable cost. Costa Rica was considered, but we felt we could not compete with the large BPOs for talent in such a limited talent pool.
If your company has a Shared Services operation in Latin America, what country is the primary location? What were the key factors used to make the location decision?
Who are your peers and how are you collaborating with them?
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