Chile, South America, Shared Services, Offshoring
Chile: Latin America’s rising star?
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As companies continue scouring the globe for better ways to do business, Chile is being discovered as a business services platform for Latin America and beyond. Named the best country in Latin America for doing business from 2005 to 2009 by the Economist Intelligence Unit, Chile's economic growth, transparent legal framework, solid macroeconomics, and political and social stability provide an attractive setting for business. The country has one of the lowest public foreign debt rates in Latin America, and the government maintains a strict policy of fiscal discipline. The Chilean Economic Development Agency (CORFO) works closely with businesses on foreign investment projects, offering financial and advisory assistance, and through its High Tech Investment Program (Invest@Chile) manages a range of financial incentives.
Chile currently ranks among the top ten countries worldwide for offshoring, according to a recent A.T. Kearney report (see box below). With a labor force of 6.1 million people, over 30% of which have studied beyond the secondary education level, the country is well able to serve the staffing needs of the multinationals setting up operations there. Having long pioneered the advancement of telecommunications in Latin America, Chile was also the first country on the continent to privatize its telecommunications industry. In the 1990s Chile experienced record telecom investment, providing it with an important infrastructural advantage within Latin America. Chile now uses three international fiber optic networks and satellite services, ensuring fast and dependable connectivity with the rest of the world.
Chile continues to be the low-financial-risk leader in Latin America, a trend fueled by fair investment rules, open markets, political stability and a clear consensus to continue on the course that has brought so much economic growth to the country in recent years. Chile's country-risk has fallen persistently during the last several years, reflected in bond spreads that continue to drop relative to US Treasury bonds and considerable oversubscription for major bond offerings by foreign investors confident in Chilean enterprises (Source: JP Morgan).
Strategic Location
Chile offers reliable transportation and communication links – both within the region as well as internationally. From April through October, Chile mirrors the US Eastern time zone, which means Chilean-based operations are no more than three hours apart from the rest of the continental US for half of the year. From November to March the local time in Chile is two hours ahead of the US Eastern time zone and five hours ahead of US Pacific time.
Chile's Rankings as an Offshore LocationChile is ranked 8th among 40 locations for offshore services, according to the Global Services Location Index study published by management consulting firm A.T. Kearney. The index analyzes the top 40 offshoring destinations against 40 indicators in three major categories: costs, people skills and availability, and business environment. According to the report, Chile offers the best business environment and infrastructure in Latin America. 1. India Further evidence of Chile's rising importance as an offshoring location is its ranking as 15th out of 60 countries in the Economist Intelligence Unit's 2005 study “Future Leaders in Global Offshoring.” The ranking places Chile first in Latin America. 1. India |
Communication Infrastructure
Thanks to the active involvement of highly competitive foreign operators, Chile offers a state-of-the-art communications infrastructure. The Chilean telecom sector is the most deregulated in the region:
No. mobile phone subscribers 9.6m
Fixed telephony operators 15
Long distance carriers 33
Mobile telephone operators 7
ISPs 54
Digital lines coverage 100%
Source: Undersecretary of Telecommunications 2004
E-Ready Society
In its 2005 e-Readiness Ranking, the Economist Intelligence Unit (EIU) identified Chile as “Latin America's most e-ready market,” highlighting the country's introduction of electronic invoicing. This EIU ranking evaluates each country's technology infrastructure, e-business environment, social and cultural conditions influencing Internet usage, and the availability of services. Chile scored particularly well for business environment, supporting e-services, and legal environment.
| E-Readiness Ranking (The Americas) | |
| Country | Ranking |
| USA | 1 |
| Canada | 2 |
| Chile | 3 |
| Mexico | 4 |
| Brazil | 5 |
| Argentina | 6 |
| Venezuela | 7 |
| Colombia | 8 |
| Peru | 9 |
| Ecuador | 10 |
| Source: EIU (www.eiu.com), 2005 |
The Chilean government is actively encouraging an e-business culture through the development of new laws and Internet applications. It has already developed several successful on-line services, resulting in increased efficiency and transparency.
Government Commitment
In 2000 the Chilean Economic Development Agency launched Invest@Chile, a program designed to attract and facilitate technology-intensive foreign investments. Sponsored by the Ministry of Economy, the program operates in cooperation with the Foreign Investment Committee and offers the following types of incentives:
• Funding for studies assessing the feasibility of an investment project; carried out by external consultants or by the companies themselves.
• Funding for the execution of a working plan to launch the project.
• Funding for on-the-job employee training following launch. The training grants apply to employees residing in Chile hired to fill positions resulting from the project's implementation.
• Grants for the acquisition of land, buildings, infrastructure, equipment, and long-term rental of office space.
• Funding for R&D and innovation projects.
Shared Services Operations in Chile
BHP Billiton
BHP Billiton Financial Shared Services Center
Year Established: 2001
Location: Santiago
Employees: 76
Reach: South America
Projected Revenue 2005: US$5.7 million
BHP Billiton's shared service center provides administrative support to several of the
company's businesses located in South America. The operation centralizes transactional functions ranging from supply processes to accounting. The office also handles human resource responsibilities such as personnel maintenance, benefits, recruitment and management of international assignments. BHPB's center is one of the company's four shared service operations around the world, which all operate at a “best business practice” level of excellence. The other Centers are in Houston, St. Johannesburg (South Africa) and Adelaide (Australia).
BHP Billiton began its Santiago shared service center with 36 employees and 1 client, and now it has 5 clients and annual revenue of US$5.7 million. The company plans on extending the center's reach to the rest of its South American businesses, and will continue to pursue innovation as it increases the range of services offered.
Unilever
Unilever Financial Shared Service Center
Year established: 2002
Location: Santiago
Employees: 160
Reach: Latin America and the Caribbean
Investment: US$11 million
Unilever's Financial Shared Service Center is part of Harmony, an ambitious project integrating the entire company's information systems throughout Latin America. Unilever chose Santiago through a rigorous selection process in which PriceWaterhouseCoopers evaluated 12 different locations in 7 countries: the USA,Mexico, Costa Rica, Brazil, Uruguay, Argentina and Chile. Chile's winning characteristics included: competitive cost of high-quality HR, world-class telecommunications infrastructure, and political and economic stability. The Santiago center manages accounts receivable, accounts payable and other financial processes for Unilever's businesses throughout the region, and has steadily continued integrating Latin American territories into its services since the center's inception in 2002. Today the center attends Chile, Peru, Ecuador, Uruguay, Paraguay, Venezuela, Argentina and Mexico. By the end of 2005 it will have integrated 9 more Central American and Caribbean countries and have a total of 200 employees. Unilever plans to continue building on its successful shared services platform and plans to expand the services it offers from Santiago. The Santiago facility is leading the company's efforts to centralize services worldwide. The center is Unilever's best practice model for shared service operations in other regions, including Europe and the United States.
Choose Your Partner Since the 1990s a vast range of call center companies have installed operations in Chile to serve the local,regional and international markets. Main Outsourcing Companies |
Nestlé
Chile is now home to Nestlé's Latin American regional head office. In 2003 the company created a shared service center to centralize operations as part of the US$150 million investment Nestle has planned for Chile over the next several years. The center supports the recently created Nestle Austral division, which concentrates financial, legal, communications, technical and quality assurance operations. The division serves the Argentinean, Bolivian, Paraguayan, Peruvian and Uruguayan markets.
Zurich
In 2000, the financial services provider Zurich chose Chile for its Latin American headquarters. “Chile's world-class communications network and its stable economy were key factors in that decision,” recalls the regional CEO. Zurich soon after also opened a shared service center in Chile, providing IT, auditing, human resources, actuarial and other services for regional subsidiaries.
Citigroup
Chile Development Center (CDC)
Location: Santiago
Year established: 2002
Employees: 106
Reach: 22 Latin American countries and USA
Revenue 2004: US$6 million
Citigroup operates several Latin American software and support projects from its Regional Development Center in Santiago. The center handles software development for Citibank and runs a technical help desk to ensure high quality operations throughout their Latin American branches. Advanced telecommunications allow them to access remotely and modify systems located in different data centers managed by Citigroup, whether to add functionality to an existing product or to introduce new services.
Success: Cost Savings
• US$2.5 million saved in 2003 by centralizing Latin American operations in Santiago
• US$3.6 million saved in 2004
Savings in Salaries
• Junior Programmer (3-5 years experience) 66.5%
• Project Manager 65%
• Help Desk Support Senior 60%
What began as a pilot project of 30 people in 2002 has now expanded to a team of 106, with 84 people working on software development and 22 in the technical help desk. The center recently expanded its activities to include software development for Citigroup entities in the USA. Projected growth from 2005 to 2006 will entail hiring over 100 more employees to handle additional development projects.
Knowledge of English is a requirement at the Citigroup Development Center, and 60% of their employees speak English fluently. The entire help desk is bilingual. French and Portuguese are also spoken.
Santander Bank
ALTEC - Latin America Technology Center
Year Established: 2001
Location: Santiago
Employees: 736
Reach: 8 banks in Chile, Mexico, Puerto Rico,
Colombia, Argentina, Brazil, Venezuela and Spain
Projected Revenue 2005: US$60 million
Investment: US$7.7 million
ALTEC is a shared service center for Santander's technology development operations in eight countries. In 2004 ALTEC rendered US$49 million in services throughout Latin America, making it one of Chile's top exporters of professional services. As of April 2005 the center had provided 2.4 million hours of systems maintenance, software development and technical support. ALTEC is one of a handful of software developers in all of Latin America to achieve level 5 CMM certification.
Cost Savings and Product Improvements
Before establishing ALTEC, Banco Santander had 14 banks in Latin America, each doing its own software development. By centralizing development in Santiago, the company is:
• Realizing significant annual cost savings
• Standardizing technology products throughout the bank, which results in higher quality services.
ALTEC has already contracted 16 new employees for 2005, and plans on hiring up to 20 more people before the end of the year.
ALTEC's rapid growth has led the company to outsource a substantial amount of work. The center estimates that it currently subcontracts over 500 additional engineers and developers via external companies. Small companies have sprung up in Santiago to handle the additional demand for software development.
Over 100 university graduates have already benefited from ALTEC's Young Professionals Training Program. Successful applicants receive three months of training and then undergo one month of on-the-job practice before joining the ALTEC team.
About the author:
Claudio Maggi
Head of Investment Promotion,
Chilean Economic Development
Agency (CORFO)
For more information, visit www.hightechchile.com
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