Dominican Republic: The Rising Star of Outsourcing in the Caribbean and Central America

The Caribbean and Central America region (CCA) are being viewed as attractive delivery destinations for global contact center services. Low cost of operations, time-zone proximity with the United States, availability of both English and Spanish language speaking talent, strong infrastructure capability and educated labor force in this region offers an attractive value proposition to organizations looking for a nearshore destination for contact center services.

Within the Central America region, Costa Rica and Guatemala account for approximately 50% of the offshore contact center market. These countries were preferred destination but increasing maturity and limited capacity to serve the offshore demand is a major challenge for these top two locations. Amidst of this, Dominican Republic has come up as a rising outsourcing star among entire CCA region. It has surpassed other nearshore destinations in CCA region in all aspects, be it cost arbitrage, supply of labor or availability of service providers to engage with, and has become the most preferred destination for contact center services by North American companies.

Overview of CCA Region Contact Center Market Over the past several years, India and Philippines have been leading the offshore growth momentum in provision of English-language contact center services. But recently, there has been a steady movement towards nearshore delivery of these services, particularly by the United States.

Nearshore, in the context of this whitepaper, primarily refers to Central America and the Caribbean, which have the advantage of being in the same time zone as North America and share cultural similarities. Cities like San Jose and Guatemala City have established themselves in this market, but due to limited supply of agents in Costa Rica and quality issues in Guatemala, other locations such as Santo Domingo, Santiago (Dominican Republic) has come up as a rising destination to serve U.S. companies.

The Dominican Republic (35,000) and Jamaica (14,300) occupy almost 46% of the CCA region work force, with individual contribution of 33% and 13% respectively. The Dominican Republic has increased its share by 7% in the pie from 2012 to 2014 and has become the top region based on the supply of agents. Limited supply talent and quality of service were the major challenges in Costa Rica and Guatemala. Hence, Dominican government identified these areas and took few strong steps which are:

Inclusion of Contact Center Industry under Special Permanent Free Zones: Earlier manufacturing and assembly industries were allowed under special trade zones. Recently, the contact center industry also qualifies under the special permanent free zones. Advantages of falling under these zones: 100% exemption of taxes, duties, charges and fees related to production and export activities and exemption in corporate tax rates.

Various global and regional contact center service providers established and expanded their operations within Dominican Republic. Santiago developed as a potential tier 1 location after the development of Santo Domingo.

Introduction of English Immersion Program: CCA region was primarily known for Spanish language driven delivery locations. Employability of talent for English language skill was the major challenge in CCA region. To overcome this issue, the Dominican government introduced an “English Immersion Program” to augment English speaking agent pool.

Value Proposition of Dominican Republic for Contact Center Industry The Dominican Republic has become the call center hub for North American companies due to large talent pool, low cost of operation, cultural similarity and strong government support to investors.

Why companies should select Dominican Republic as an outsourcing destination

Abundant supply of agents to meet demand: It is not surprising that more companies with a global footprint, capable of sourcing from anywhere in the world, are choosing Dominican Republic for contact center services. Total numbers of contact center agents in CCA region were 124,600 in 2011 and the CCA nearshore market is on target to exceed agents (368,020) by the end of 2017. Out of which, Dominican Republic occupies nearly 33% share in total CCA region agents workforce strength. It is expected to touch 56,000 a growth rate of 60%, highest in the entire CCA region. Such scale is capable to meet the demand of large size contact center operations (2000-3000). Inability to support large operations is one of the major hindrance in Costa Rica and Puerto Rico in spite of good quality of labor.

Dominican Republic has the highest population in CCA region only after Guatemala. The region has the quantity to serve the scale and quality of manpower to give best services.

How Dominican Republic ensures to provide quality services

Buyers of contact centers across the globe are emphasizing the quality of a contact center over cost arbitrage. The quality leads to higher customer satisfaction and has commercial benefits too. Hence, buyers prefer the location that addresses quality. Dominican Republic emerges as a location which ensures quality services.

Close Cultural Ties: Eighty percent of the contact center industry’s revenue is derived from U.S., of which 60% of outsourced services are based on Spanish language capabilities. This is due to an increase in Hispanic population in the U.S., which has reached 54 million in 2013, constituting 17% of the nation’s total population.

-On the contrary, Spanish is the only official language of Dominican Republic and more than 95% of the population is proficient in speaking Spanish.

-Hence, communication becomes more neutral and natural for customers, resulting in higher quality services.

Improve in mix of services: Earlier the country was known for Spanish-based voice services; hence the share of Spanish-based services was 80% and English was only 20%. But, strong government initiatives assist a drastic improvement in the mix of service portfolio from 80%-20% in 2011 to 78%-28% in 2014. It is expected that by the end of 2019, Dominican Republic will be equally preferred for English-based service and ensure same satisfaction as Spanish.

This growth will lead to satisfaction across the language be it Spanish or English.

Cost Matters and Dominican Republic is the most cost competitive location in Caribbean and Central America Region

-Quality has become the focus point of investors. However, cost is still more important to investors due to the competitive global landscape. Executives are realizing the significant cost savings benefits of outsourcing to Dominican Republic while also enhancing their customer experience and strengthening their ROI (Return on Investment).

-Dominican Republic offers 35%-60% cost arbitrage compared with tier 2 locations in the U.S. such as Dallas. Cost arbitrage differs even within CCA region and Dominican Republic offers maximum saving opportunity, though the margin of saving is not very significant.

-Agent Cost: The agent’s salary is the major component of cost, which accounts for 60%-65% of total cost of operation. Daily Agent cost is 4.3% lower than its close competitor Costa Rica. This is mainly because, Dominican Republic has huge population and agents size than Cost Rica.

-Real Estate Cost (per sq.ft): The country with its more than 65 free trade zones has ample capacity to serve the demand of operations.

-Telecom and Technology Cost: Reduction in the telecom rate is the result of liberalization and a fall in technology cost particularly Internet cost, nearly by 50%. Telecom rates are highest in Costa Rica among all the Central America and Caribbean regions, due to lack of local and international sector players. Overall, cost of operation has remained stable over the past five years in Dominican Republic, 2-5% additional saving realized for US companies while setting up operations in Dominican Republic due to devaluation of local currency (PESO) against dollar by about 10%, over the past five years.

-Best Industries that can be served from Dominican Republic: The region has ample supply of well qualified human capital in different areas of knowledge. It generates over 500,000 students across 44 universities and colleges in the country. Among university students, finance and management, engineering and social, are most popular fields of study.

-The country has the perfect combination of domain (finance and accounting, engineering and science) specific knowledge and language capability (Spanish and English) to serve excellent services to North American companies, primarily banking, financial services and insurance; telecom and healthcare verticals.

The Caribbean and Central America are witnessing growing interest as delivery destination for global contact centers. Within the CCA region Dominican Republic has bypassed all the major countries on all key fronts: aggregate agents, labor availability, cost of operation and quality.

No doubt Dominican Republic has come up as a rising outsourcing star in Caribbean and Central America region and has become a preferred destination. Outsourcers have identified Dominican Republic as a way to overcome those areas which has reached their saturation level. The country has all the capability to commensurate an outsourcer’s expectations.

References

The sources of idea and support for the analysis in this whitepaper have been websites of broker services agencies, blog and other resources on in-store marketing, retail merchandising etc.

Some of the prominent sources include:

http://www.thebusinessyear.com/publication/article/38/3913/dominican-republic-2014/ringing-the-changes http://www.nearshoreamericas.com/bpo-industry-expect-years-aggressive-growth-dominican-republic/ http://investindrsummit.com/servicios.php https://research.everestgrp.com Interaction with suppliers