Latin American Land Rush

Steve Hamm

Most of India's top tech services outfits talk a good game about being globally distributed, but, essentially, they deliver low-cost services from just one place: India. Their other delivery centers are mere rounding errors compared to the vast hordes of people they employ in the home country. Tata Consultancy Services is the exception, and Latin America is where is stands out most dramatically from the rest of the pack. The company now has 5,000 employees in 14 Latin American countries, and plans on increasing that number to 7,000 by next year. Its Latin American revenues rose 300% to $159 last fiscal year. And it raised eyebrows earlier this year when it landed a five-year, $140 million contract with Pichincha, a major bank in Uruguay. That started a bit of a land rush among some of TCS's Indian rivals. Infosys is casing Mexico and others are sizing up other countries, according to Gabriel Rozman, president, IberoAmerica, for TCS.

Here's a surprise. Much of the work that TCS performs in Latin America is for clients that are either located there or are doing business there. Just one-third of the business comes from multinationals offshoring work from the United States and Europe. Only 3% of Rozman's employees are Indian--in sharp contrast to TCS' workforces elsewhere.

Latin American clients feel an afinity with India, says Rozman. They appreciate that fact that India, too, is a poor country--and the Indian companies, as a result, aren't wasteful. They also respect the quality of the Indian companies' work. The Indian connection also helps Rozman with recruiting. "India is in such fashion that people in Latin American want to work for an Indian company," he says.

Labor rates are considerably higher in Latin America than in India. Mexico's rates are about 50% higher. Brazil is about 40% higher. And Argentina and Uruguay are about 20% higher. But Rozman says it's quality and convenience (same time zones at North America) that attract his customers.

Rozman's biggest challenge is finding good engineering graduates to do the work. Engineering isn't a popular major in Latin America. That's one of the reasons he recently set up a training center in Uruguay.

But once he hires and trains people, he too-often loses them to poachers. "India's reputation is excellent for technology. Everybody wants to hire out people to get our secrets," says Rozman. "I tell them we don't have any secrets, but it doesn't help."

Before it's here, it's on the Bloomberg Terminal.