In September, Genpact opened its new Latin American\n headquarters in Ciudad Ju\u00e1rez, Mexico, just south of\n the United States border from El Paso, Texas. The sprawling,\n custom-built 125,000-square-foot facility on the north side\n of town represents a major expansion of the New Delhi,\n India-based outsourcing provider\u2019s Mexican operations.\n This new facility brings Genpact\u2019s Mexican employment\n to 2,500 people at three sites. The company had $613 million\n in revenues in 2006, employs 29,400 worldwide.\n MORE ON Outsourcing in Mexico\n \n Mexico Grows Into Outsourcing Option\n \n Increasing Interest in Nearshore IT Services\n \n India-based Tata Plans to Hire 5,000 in Mexico\n Genpact (the company was GE Capital International Services\n before becoming an independent company in 2005) has had a\n presence in Mexico as a provider of business process services\n for 15 years. So with MexicoIT (an organization founded by the\n Mexican government in partnership with local technology\n trade groups), marketing Mexico as \u201ca\n world-class\u201d alternative to India for IT outsourcing,\n and increased interest on the part of U.S. companies in\n \u201cnearshoring,\u201d one might assume that\n Genpact\u2019s expansion is part of a ramp-up to begin\n offering more sophisticated IT services to global customers\n south of the border.But Juan F. Ferrara, Genpact\u2019s chief operating officer\n for the Americas, says it isn\u2019t so. Genpact\u2019s\n Mexican operations remain strictly focused providing low-end,\n high-volume BPO services like back-office accounting, document\n management and call center services. \u201cAt Genpact, we do\n IT services out of India, not Mexico,\u201d Ferrara recently\n told CIO Senior Editor Stephanie Overby.In an interview with CIO.com, Ferrara also explained the\n benefits of the Ju\u00e1rez operation as a gateway from the\n U.S. to India, the challenges of the Latin American IT services\n market and Genpact\u2019s expansion strategy.Stephanie Overby, CIO.com: You\u2019re\n originally from Mexico and have been helping multinational\n companies set up shop locally for more than 25 years. How has\n the local market for IT and business process services changed\n over time?Juan F. Ferrara, Genpact\u2019s chief operating\n officer for the Americas: I used to work as part of\n McKinsey\u2019s Business Technology Office (BTO). One of the\n service lines we offered was helping companies develop sourcing\n strategies for their global operations. The majority of those\n conversations were with U.S. companies. Very few local Mexican\n companies were looking at outsourcing, except for a few\n airlines and insurance companies looking at outsourcing their data centers for\n efficiency gains.I opened up McKinsey\u2019s Monterrey operations in 1991.\n They\u2019d had an office in Mexico City but wanted to open\n one in Monterrey, where most of the large, industrial companies\n were.Today service providers in Mexico are serving a combination\n of customers. A good portion of the work is done to support the\n operations of U.S.-based companies operating out of Mexico. But\n more and more of the work is for large Mexican companies\n looking for services on the infrastructure and software\n side.It\u2019s not the traditional view of outsourcing that you\n think of when you think of outsourcing to India. It\u2019s not\n about reducing headcount internally. It\u2019s more about\n supporting a local operation.CIO.com: Genpact has had a presence in\n Mexico for a while. Tell us about the recent expansion in Ciudad\n Ju\u00e1rez.Ferrara: Genpact has been in Mexico for 15\n years. This new building in Ju\u00e1rez replaces the old\n building that dates back to the 1930s. It\u2019s a 40 percent\n expansion in space. It\u2019s a modern environment. And with\n lots of clients asking for more compliance and security\n requirements, we can offer them their own secure space.CIO.com: There seems to be increased\n interest in nearshore outsourcing of IT and business process\n work. And MexicoIT, is actively promoting Mexico as \u201ca\n world-class, quality\u201d alternative for IT outsourcing.Ferrara: There is a lot of interest in\n nearshoring IT services to Mexico. But at Genpact, we do IT\n services out of India, not Mexico. Ju\u00e1rez, where Genpact\n opened its newest facility, is not the strongest in terms of IT\n skills. The opportunity for us in IT services is elsewhere.CIO.com: So what services does Genpact\n offer out of the Ju\u00e1rez facility?Ferrara: We have five lines of business in\n Mexico. They\u2019re mainly BPO types of services, not IT. We\n offer: Back-office finance and accounting services (simple\n transaction pieces), document management, transportation\n management (processing air bills, courier bills, data entry), an industrial center of excellence (services\n ranging from very simple tasks up to high-end satellite\n monitoring for trucks in the U.S.), and voice services\n (customer service and collections, mostly in English with\n Spanish as a bonus).We have 2,500 employees altogether in Mexico, with two\n facilities in Ju\u00e1rez and one in Caborca (a much simpler\n facility).CIO.com: So Mexico is more of a complement\n to India rather than a replacement?Ferarra: Yes. One important advantage of\n Mexico is location. Ju\u00e1rez is a border city not far from\n El Paso, where we are the largest user of the U.S. Post Office. Logistically speaking, BPO\n operations in Mexico makes a lot of sense. It\u2019s a\n gateway. There is an incredible amount of paper that needs to\n be scanned and indexed and transferred to India for further processing, and there\n is a natural advantage to be so close to the U.S.A mortgage operator, for example, may need to have its voice\n operations in the U.S., some back office operating out of\n Mexico, and then have the mortgage processing done in India. We\n can do all of that to serve the global customer. That\u2019s\n part of the design from the beginning, to do the lower-end work\n in Mexico and then transfer the higher-end work to India.There\u2019s also an emerging group of customers in the\n mid-market ($1 billion to $5 billion in revenues) who are a lot\n more comfortable with nearshore operations. If you can offer\n them an onshore location combined with a nearshore location,\n it\u2019s a lot easier to have that conversation about\n outsourcing. That segment will continue to grow.CIO.com: Is the idea of Genpact offering\n higher-end IT services out of Mexico for customers in the\n Western hemisphere completely off the table?Ferrara: I don\u2019t think IT is out of\n the question. It\u2019s just a matter of, where do you invest\n first? Do you invest in Latin America, where our clients are\n actively pushing us to go? Countries like Brazil, Costa Rica, and\n Argentina are stronger in those fields.We have customers who are increasingly defining their\n sourcing strategies: 40 percent India, 40 percent Asia, 10\n percent Latin America, and 10 percent other places. So we have\n to make sure we have a global footprint in IT and BPO. So\n it\u2019s only a matter of time before we\u2019re able to\n offer all of those services in Latin America as well. The\n clients want it because it\u2019s good from a strategic\n sourcing perspective to avoid any geographic concentration of\n risk.There are companies in Mexico who are growing their IT\n offerings and investing in IT services. Genpact is evaluating\n it but hasn\u2019t decided either way.CIO.com: What are the challenges of the IT\n services market, not just in Mexico, but in Latin America\n generally?Ferrara: Latin America has a peculiarity\n other regions don\u2019t have. From a global client\n perspective, most of the Fortune 100, maybe even 200, have\n their Latin American back-office operations split between two or maybe\n three countries: Mexico, Brazil and one other Spanish-speaking\n country in Central or South America. It\u2019s rarely concentrated all\n under one roof.One challenge is, how do you help them consolidate these\n operations and make them more efficient? It\u2019s an\n integration challenge and a technological platform challenge.\n Most global players have custom-built systems for each country.\n It\u2019s not all SAP or Oracle, and they\u2019ve been using\n these custom systems for 20 or 30 years. Because of these\n platform issues, customers don\u2019t see themselves operating\n out of one location.You are also are dealing with upwards of 15 countries in\n Latin America that are all \u201csubscale.\u201d Mexico and\n Brazil have scale, but there are many, many small countries.\n Costa Rica, Guatemala, the Dominican Republic \u2013 those are\n very small countries. You have to know how to do it right and\n avoid saturating the market. You can take some of the best\n practices from India and look at second-tier cities rather than\n going to the main city to set up a large center. You\u2019re\n already seeing that in Brazil and Argentina, where companies\n are setting up call center and BPO operations outside of S\u00e3o Paulo and Buenos Aires,\n where they\u2019re already in second- and third-tier\n cities.And labor costs in some of these countries are much, much\n lower than in Brazil or Mexico or India. The labor arbitrage\n opportunity does not really exist. You end up with small or\n negative labor arbitrage.When you add all of this together, it\u2019s hard for\n global companies to imagine a value proposition for outsourcing\n or consolidating on a shared services model. And this has to be\n client-driven. It absolutely has to be. So there haven\u2019t\n been as many BPO or IT clients in Latin America for these\n reasons.CIO.com: But you obviously do see that\n desire to outsource or consolidate IT and business process\n operations in Latin America increasing in the future?Ferrara: There are some multinational\n companies who are developing a shared services model.\n We\u2019re helping some companies do this as we speak. They\n want the operational expertise \u2013 Six Sigma, lean culture,\n process standardization. And for those reasons they\u2019d\n prefer us to take over their operations. They want to distance\n themselves from the back-office operations and transfer those\n assets to someone who can operate in a better way. BPO in Latin\n American will grow. More and more clients are asking us about\n it. It\u2019s really only just begun.CIO.com: When it comes to global expansion,\n Genpact seems more interested in organic growth than in\n acquisitions. Is there a reason for that?Ferrara: We\u2019ve made some selective\n acquisitions \u2013 two U.S. acquisitions [Money Line Lending\n Services, a mortgage provider, in July 2006, and Creditek\n Corp., a finance and accounting services outsourcer, in 2005].\n But mostly we have been growing on our own. My sense is, you\n have to do a little bit of both. There is no right or wrong\n model.