What Do You Do with an Empty U.S. Embassy? | Article

for sale in NicaraguaQuestion: What do you do with an empty American Embassy when the U.S. government moves to a new facility?

Answer: You turn it into an uber-secure offshore call center for the financial services industry. What better place to put a data center than a bunker with four-foot-thick concrete walls in the center of a walled compound?

This is the story of the second incarnation of the American Embassy in Managua, Nicaragua. It starts with Christopher Marlett, the CEO of MDB Capital Group in Santa Monica, California. “I knew outsourcing was about to explode in Nicaragua,” says the new owner of the embassy compound. “There were no facilities that were up to snuff by U.S. standards. When the embassy went up for sale, we saw an opportunity to open a world-class facility.”

Marlett’s prediction about Nicaraguan outsourcing came from personal experience. His company funded a start-up called PatentVest, a business intelligence firm whose analysts do the groundwork for companies seeking patent intelligence. The requisite research is detailed, tedious, time consuming, and often boring.

Why PatentVest experimented with offshoring

There is a two-month training cycle because of the exacting nature of the research. In 2006, PatentVest began experiencing a high turnover rate. “We would keep people an average of six months, which frustrated me,” reports Marlett. So he “decided to experiment” with offshoring to see if he could improve his retention rate while receiving the high quality of research the work demanded.

Where to go? Marlett is half Nicaraguan. He built a home on the beach there to relax with his family. So it made sense to base his experiment there.

He rented an office in Managua and personally hired 10 people. He was astonished when he discovered “they got more data organized in their first three months on the job than our California team did in 12 months,” he reports. So he grew the Nicaraguan organization. Today he has 17 people working for PatentVest there.

Offshoring was so successful he wondered if he could offshore some duties from the investment banking firm itself. He started looking for analysts who could research U.S. companies. MDB Capital was experiencing the same turnover problem that PatentVest did. “We had heavy turnover because junior analysts want to become senior analysts. The fastest way to do that is to move on,” he explains.

Marlett discovered there were “a lot of professionals with U.S. college degrees who were out of work in Nicaragua.” He was able to hire seven Nicaraguan researchers for $25,000 a year “all in” versus the $125,000 he had to pay for the same job in California. They were also “high quality” researchers with a better work ethic than the associates he hired in the U.S. To date, one left to take a great job with a major international bank and the rest are gaining valuable knowledge that is making them more valuable to his business.

The Nicaraguan research project was so successful Marlett looked for additional jobs to offshore. One time-consuming job in an investment banking firm belongs to the road show coordinator. Once the firm has completed its research, it takes the company on the road to meet institutional investors. Planning these trips requires great attention to detail. Today both road show coordinators for the firm are Nicaraguan.

Marlett even offshored his personal secretary. When you call him at the office in California, his secretary answers the phone in Nicaragua. She then sends an instant message to the CEO about the call. He responds; if he accepts the call, she puts the caller through. “She’s a great secretary. She takes care of everything, including my travel reservations, just as if she were sitting next to me,” reports Marlett.

Finally, the CEO shipped all his Web work to the Nicaraguan office. The investment banking firm also has an internal Wiki which the Nicaraguans populate.

Today, MDB Capital and PatentVest have 35 people in the Managua office. “I have been impressed with two things: the quality of their work and the low turnover, the two biggest costs in my business,” says Marlett. He says “offshoring has enabled us to slim down our overhead, an important fiscal move in this terrible market for investment banking.”

Deciding to become a supplier

Marlett had nothing but kudos for his nearshoring experience. So he was surprised to hear the horror stories about offshoring from fellow professionals at an International Association of Outsourcing Professionals convention. “I said to myself, nearshoring is so much easier for Americans,” he recalls thinking.

He saw a business opportunity, but he had one concern: How deep was the Nicaraguan market? Was it big enough for global players, who he believed “would show up in Nicaragua sooner or later?” Convinced the labor pool was deep enough, he began in earnest to start the process of becoming a nearshore supplier.

One thing he was not concerned about was politics. “Every political faction in Nicaragua is interested in outsourcing,” he reports.

Convinced becoming a nearshore supplier was a good investment, he began looking for the real estate to start his new business. Nine months into the search, the U.S. government put a for sale sign on the old embassy property. He took possession of the real estate on June 1, 2008. The property is now called “MDB Capital’s Outsourcing Complex.” It plans to open November 1, 2008.

The embassy is a 10-acre walled compound. The building has 100,000 square feet of office space, a spacious cafeteria, and a large outdoor pool. The investment banking firm also added a fitness center and a day care facility equipped to offer educational programs. There is parking for 600 cars. He is looking to also open an English language institute and an International Association of Outsourcing Professionals (IAOP) certified training facility.

It is currently on three power grids and has over a megawatt of back-up power. The embassy also has its own water supply. “Because it was the U.S. embassy, the infrastructure is massively redundant,” he notes.

It also is one of the most secure locations in the country. The company is converting the 4,000 square foot bunker into a data center that will be a central Internet POP for Managua. “This is perfect for financial services companies and other companies with “mission critical” applications who need their data secure,” he says.

The building can house up to 1,590 call center seats. MDB Capital will be renting to one or two outsourcing companies to minimize the competitive factors in the complex. The real estate operation is aptly named Embassy Properties.

“It was serendipity that we could do this,” says Marlett. He believes that if he builds it, the call centers will come.

Lessons from the Outsourcing Journal:

  • Although they are not available very often, the U.S. Embassy is a great place to renovate into an offshore outsourcing complex because of the redundant infrastructure and emphasis on security.
  • Successful experiences with nearshoring provided a business opportunity to become a supplier for an investment banking firm always looking for new ideas.
  • Nearshoring is becoming a popular option for North American firms. Nicaragua is well-suited to become a nearshore call center location.

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