The digital road to riches: Mexico positioned to milk cash cow that is service outsourcing. (Tech Talk).

During the 1990s, Telefonos de Mexico (Telmex) and numerous new market entrants poured billions of dollars into modernizing and expanding the country's telecommunications infrastructure. As a result, Mexico boasts one of the world's most modern, 100% digital communications network platforms.

Many of those smaller companies are now either in dire financial straits or out of business. From the ashes of the telecom burnout, however, could arise a new pillar of the Mexican economy: voice and data service exports.

Much in the same way the maquiladora boom provided the country with an important source of export revenue and job growth, professional service outsourcing--delivered to clients abroad--has the potential to bring a significant economic windfall to the country.

This time, however, clients won't be paying for auto parts and electronics delivered on trucks using highway infrastructure. Instead, value will be delivered in the form of voice signals and bits transmitted across what are now rather inexpensive fiber-optic and satellite telecommunications links.

Fed by three critical factors, the impending offshore services boom could very likely bring to Mexico a number of the higher-paying jobs it desperately needs.

First, service outsourcing is rapidly becoming a de facto standard for large and small businesses in the United States and other industrialized markets. At an ever-increasing pace, companies are seeking to spin off call centers, data capture, translations and virtually any other non-core activity that may be farmed out at a lower cost.

Second, moves by U.S. companies to cater to the unique needs of a growing Hispanic market means the Spanish-language and bilingual customer service representation is the fastest-growing segment in the outsourcing industry. Since nearly 70% of all U.S. Hispanics are of Mexican descent, the country provides a natural fit in terms of language and cultural affinity.

Third, and perhaps most important, is the ongoing instability and apparently imminent war in the Middle East. A large percentage of decision-makers in the corporate outsourcing market are already wary of doing business in India, which presently captures a lion's share of business process outsourcing (BPO) and English-language contact center contracts. My personal belief is that one extremist attack on American economic interests in India or Pakistan could begin a massive push to seek more stable environments. Latin American outsourcers are positioned to be the main beneficiary of any such exodus.

Do you think that English-language, call-center services can't be sourced in Mexico? Think again. Today, there are at least 1,000 English-language technical support and customer service positions being sourced out of Costa Rica and Argentina. Expect this number to grow when news of these success stories spreads.

SOME GROUND TO MAKE UP

Although all of the trends appear to point toward a lucrative future for Mexico in the outsourcing market, this is by no means a done deal. Other countries in the region are currently considered more attractive than Mexico as an outsourcing platform. My work with decision-makers in charge of outsourcing provider and site selection shows that they invariably consider other options first.

Cost obviously plays a role in this perception, since operating in Mexico is more expensive than most other destinations in Latin America, mainly due to higher human resource costs.

Nevertheless, there is a larger omission that must be corrected if Mexico is to be a leader in the upcoming migration of services to Latin America: Mexico needs to promote itself as a viable destination for such investments. Costa Rica, Argentina, Chile, Trinidad, Panama, Colombia and others currently have public and private initiatives dedicated to the fostering of service-export industries.

While Mexico has been silent, its competitors have been actively marketing themselves to the world and reaping the benefits. Let's hope the wake-up call doesn't reach the industry too late; there is a lot of business to be won simply by knocking on the right doors. And it sure would be good to put all of that excess telecommunications capacity to good use.

Bruce Sinclair ([e-mail]) is the Technology Industries Director for Infoamericas, a multinational research and consulting firm specializing in Latin American markets.