Outsourcing growth: Mexican BPO market takes off, led by U.S., global buyers.

International buyers of computer services increasingly trust Mexico-based IT service providers with the complex work companies had previously preferred to keep in house.

Business process outsourcing (BPO) is the fastest-growing segment of Mexico's outsourcing industry, said Federico Ferreres, an analyst at Mexican consultancy Select.

"BPO is growing at 15 percent, while outsourcing in general is growing at 9 percent," he said. "In Mexico, all outsourcing is worth US$500 million and BPO is maybe US$90 million of that."

And BPO is leading the way in exports. "There are maybe US$90 million worth of IT services exported, with BPO worth around US$50 million of that," Ferreres added.

But Mexican companies are more reluctant than their U.S. counterparts to accept more complex services from Mexicans.

"There is an initial reaction of doubt," said Arturo Gonzalez Esquivel, head of Business Transformation Outsourcing at IBM Mexico. IBM boasts clients such as BP, Nextel, Sprint, P & G and Grupo Mabe.

"They say 'we didn't imagine someone could do that for us.' But, then they look at the costs and benefits and it looks very favorable."

"The mix of clients is changing," said Gonzalez Esquivel. "In the last two years we had mostly global clients with regional bases here. In the coming years we expect mainly a mix of small- and medium-sized local enterprises."

He says the company has signed on seven new clients in the last two years, having started with just one, which was acquired along with the company's purchase of PWC Consulting in 2002.

Mexican companies have moved gradually, says Vanessa Amaya, an analyst at consulting firm IDC.

"In 2004, we estimate 75 percent of outsourcing was in equipment," she said. "Clients are realizing they do not need to worry about keeping equipment up-to-date. Before they only outsourced because of costs. Now they have the confidence to delegate processes."

Change Of Focus

"Now the principal decision makers are the chief financial officer and the chief operating officer. The chief information officer is not the main player we go to any more," said Alberto Sanchez, vice president of business process outsourcing for northern Latin America at IT consultants Electronic Data Systems Corp.

He said EDS had been supplying payroll outsourcing for 10 years; and now services 200,000 employees, at clients such as insurer Grupo Nacional Provincial, food manufacturer Grupo Bimbo and drug maker Schering Plough.

"EDS wants to get companies to outsource the whole HR function, not just payroll. We are chasing five to seven clients who will be deciding in this quarter," Sanchez said.

Other companies are on the same path. "Adoption of BPO is high and clients are looking more and more for a single source to provide end-to-end services," said Lesley Pool, spokeswoman for Affiliated Computer Services, Inc., which employs 5,000 in four centers: Ciudad Juarez, Monterrey, Chihuahua and Mexico City.

All the outsourcing ACS does in Mexico is for export. Some 95 percent of the company's clients are U.S. corporations, and the other 5 percent are global enterprises.

"A few years ago, human resources outsourcing only involved payroll processing. Now it's benefits processing, employee assistance centers, and retirement planning. In finance and accounting, it was check image processing, now it's accounts payable/receivable, general ledger accounting, and tax and treasury issues," she said.

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Alexander Manda is a freelance journalist who lives and works in Mexico City. He can be reached at [e-mail].