The Foreign Trade Agreement (FTA) is no longer an unfamiliar concept. By 2013 most American companies understand and appreciate the value of offshoring. Since the Indians were among the first suppliers to pioneer the concept of sending work across geographical boundaries, American companies feel comfortable offshoring major functions to Indian service providers.
Outsourcers in other countries would like to be considered on the short list at selection time too. American companies, however, have been reticent since they have had a decade of good experiences with India. "Our service providers want to work for US companies, but the buyers have been wary," reports Juan Carlos Gonzalez, vice president of investment for ProExport Colombia, the Colombia government entity in charge of promoting foreign investment, international tourism and non-traditional exports.
Colombia's service providers decided to tackle the challenge head on. The Colombian government (which includes the US Embassy), ProExport and other agencies worked with the Office of the United States Trade Representative (which is part of the Office of the President) to sign a Foreign Trade Agreement. The Trade Representative's office monitors the trading partners' implementation, "enforcing America's rights under those agreements," according to the Trade Office.
Colombia and the US signed their Foreign Trade Agreement in May. According to the Trade Representative's office, Colombia is now the 18th country to meet the qualifications to earn an FTA since 1958 when they came into existence.
Gonzalez says the "FTA sets out clear, long-term rules on how to do business between the US and Colombia. It gives us a label of authenticity and accountability." He says qualifying for the FTA "gives American businesses the right idea about Colombia. It shows our companies can comply with all US laws."
The Proexport executive adds the Foreign Trade Agreement was important to the South American country because its outsourcing industry continues to grow despite the world economy's tough times. "Outsourcing is a priority business sector for Colombia because it creates good jobs for our citizens," Gonzalez explains.
The value for Heinsohn
Heinsohn is one of the largest IT service providers in Colombia; it has 700 employees. It develops products and services for pension funds. The company, founded in 1977, did well until 2002 when domestic and regional competition increased markedly. "Big projects became difficult to get. We needed to find a new source of business," says Santiago Gil, vice president for consulting services.
Before the FTA, almost all Heinsohn's buyers were either domestic or in another Latin American country, according to Gil. "We want to offer our services to America because the market is so much bigger there," he continues.
The FTA "helps us overcome the challenges Americans may have with doing business with Colombian companies," he adds. He believes it will help US buyers "think of Colombia as an outsourcing possibility." Gil adds the Colombia government is working with different American agencies "to remove the barriers we found before the FTA." The FTA is critical, according to Gil, because "it isn't obvious why companies should do business with Colombian companies." He says there are four main reasons:
- Talent. Colombia has a deep pool of IT talent with a wide range of skills.
- Location. Colombia is a near shore partner in the same time zone as New York City.
- Logistics. It's easier to fly to Bogotá from the US than Bangalore.
- Stable economy. The economy has been stable and growing for the last 25 years.
Heinsohn's first step in entering the US market is to offer its consulting services. Then it plans to market products that have matured in Colombia. "We are very optimistic about this," Gil adds. "We are putting a lot of effort into our US launch. We welcome the challenge…and the opportunity," he says. Gil views the Foreign Trade Agreement as a watershed moment. "It's good for Heinsohn. It's good for our IT sector. And It's good for the country," he believes. Would you hire a Colombian service provider? Why or why not?
About the Author: Ben Trowbridge is an accomplished Outsourcing Consultant with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, BPO, IT Outsourcing, and Cybersecurity Managed Services. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides valuable insights and guidance to buyers and managed services executives. Contact him at [email protected].