Chile aims for the high-end of offshore outsourcing

IDG News Service - Chile aims to be a key supplier of IT and related services to the U.S. market, but its key challenge is that it does not have the large number of trained people required to compete with the large software and services operations in India and the Philippines.

The country is now planning to grow its outsourcing business to the U.S., by focusing on high-value work, and also by partnering with other Latin American countries that have larger populations and skilled staff.

For a country like Chile with a small population and market, the U.S. is an obvious target market for IT services, said Juan Carlos Munoz, CEO of Chile-IT, a trade organization of Chilean outsourcing companies that aims to promote Chile's services business in the U.S.

Chile has a population of about 16.6 million people, and the number of staff working in the country on IT services for global markets is smaller than the number of staff in a single large Indian outsourcing company.

In 2008, for example, Chile's global services revenue was about US$840 million, and the industry employed about 20,000 people, according to a study by research firm IDC for CORFO, the Chilean economic development agency.

Over 50 percent of this revenue, however, came from Latin America, with the U.S. accounting for 21 percent. The larger part of the revenue also came through foreign companies operating in Chile, rather than from the more numerous local companies, IDC said.

Over half of the country's global services revenue came from engineering services, application software development, and research and development (R&D) services, according to IDC.

Chile's intention is however not to compete with India and the Philippines in volume businesses like software development and other services, but to focus on high value-added services, said Carlos Bustos, global services director of NovaRed. "You can't get the people required for that kind of work in probably the whole of Latin America," he said.

Getting good quality technical staff in Chile is not a problem for NovaRed in Santiago, which offers managed security services mainly to customers in Latin America.

The work that NovaRed does is niche and specialized, and doesn't require a large number of people, Bustos said. The company's main facility in Chile employs 150 people, but the company has also set up a services center in Argentina with 40 staff, to address the local market and to take advantage of local staff. This strategy of expanding in the region to hire staff may continue if business from the U.S. picks up, Bustos said.

Customers in the U.S. get services from NovaRed in the same time zone, rather than from staff working on a night shift at higher rates at an Indian outsourcer, Bustos said.