The shared services industry in Latin America has experienced a huge growth surge led predominantly by emerging markets Mexico, Costa Rica and Colombia. But what are the internal factors at play that are driving this growth?
Posted by Barbara Hodge on 31st Aug, 2016
Shared services as a means of lowering cost and improving performance continue to play an important part in forward-looking organizations’ corporate agendas. While the US and UK generally lead the world in terms of shared services, we have seen, over the past five years, extraordinary growth from the Latin American region.
Playing into the region’s favor are the high skill levels of its talent pools, established infrastructure, and time zone proximity to North America (whereby it should be noted that 75% of the SSCs are predominantly servicing in-region, however). However, with the majority of centers in the fastest growing (by number of SSCs) countries domestic-HQ based, it’s also a sign that, across Latin America, enterprises are grasping the benefits of shared services.
Latin America has been experiencing a surge in popularity over the past years, starting around 2010 when the growth in LATAM-focused shared services significantly overtook that of other multi-geography shared services (see chart). This growth was led predominantly by activity in Colombia, where, encouraged by government initiatives will, the shared services industry has nearly tripled in size over that time period. And while some of this growth could be the result of foreign headquartered shared services, Brazil, Venezuela, and Colombia are all characterized by the fact that they have more LATAM headquartered SSCs than foreign headquartered.
While manufacturing has been driving the largest segment of shared services growth across Latin America, the Government sector has so far been notable for its relative absence. However, if Latin America follows the trend in North America, the UK and Australia, this gap may present a future opportunity.
Brazil emerges as the leading market for Shared Services in Latin America – unsurprisingly, perhaps, considering its physical and economic clout, it hosts the most shared services across the region [36% of total]. It also notable that the majority of centers are from regionally-headquartered organizations, compared to many of the other countries, where foreign headquartered shared services prevail.
While the manufacturing industry has been driving the largest segment of shared services growth across this region, the government sector is notable for its relative absence. However, if Latin America follows the trend in North America, the UK and Australia, this gap may present a future opportunity.
One of the characteristics of LATAM shared services, according to our data, is its lower attrition rate, notable when compared to the Philippines, a popular Asian hot-spot. And while financial shared services still lead, approximately 20% of services are in "emerging functions" led by customer service. In fact, the shift away from transactional and towards value adding processing is prevalent across all of Latin America, but especially so in Brazil.
Explore the full report: Evolution of Latin American Shared Services Centers
Find out how LATAM SSCs compare in cost-per-invoice and invoice turnover compared to Asian hotspots, contrast attrition rates, and see which cities lead in terms of shared services. Also: find out where Colombia may present an untapped advantage (slide 11)!