Q&A: Alejandro Camino, Softtek
Alejandro – Alex – Camino is the CMO of Mexico-based IT provider Softtek, and a prominent and increasingly influential thought leader in the Western Hemisphere’s nearshore sector (including playing a key role in the development and growth of theLatAm Alliance). Outsource got together with Alex at October’s SIG Summit in California to hear his thoughts on how his organisation is reacting to current changes in the market landscape; the pros and cons of decentralisation; the importance of “China for China”; and why the automation revolution offers huge opportunities – and challenges…
Outsource: So, Alex, what are you guys up to at the moment?
Alex Camino: What are we up to? Well, as you know, we are headquartered in Latin America, but we have one foot in the USA; we’re pretty much evenly split between the US and LatAm in terms of revenue – with some components of course coming out of Europe and Asia, but with the vast majority coming out of the Americas. It has been interesting over the past couple of years in several aspects. One of the big trends that we are seeing today – particularly in the US market, but also emerging in some of the more mature Latin American economies, with Mexico probably being a little bit ahead – is a change in big outsourcing contracts. There is an opportunity there in a changing landscape. We see that the concept of those big outsourcing contracts – five years, eight years, 10 years – is becoming less and less relevant because the landscape is changing rapidly, in all sorts of areas including macroeconomics and of course technology. There has been a degree of disappointment on the buyers’ side with those large contracts, and with how the outsourcing providers have been reacting to those changes; sometimes in those large contracts there is very little room for flexibility and some buyers have felt trapped.
We see those contracts breaking up into smaller pieces – and this shift is opening up opportunities for companies like us (we are probably a mid-tier provider – we are 11,000 people, which by Latin American standards is very big, but compared with the large Indian firms we are only 1/10 or less of their size). These opportunities have to do with something we call the “digital gap”, or the “digital/IT gap”. The fact is that at the end of the day the CIO today faces an urgent need to close that gap – for some organisations it’s a huge gap, for others it’s less profound – and to adapt to what some such as Gartner refer to as bimodal IT. I am not sure if I buy that bimodal model completely – at the end of the day you cannot have two speeds; everything needs to be synchronised – but it is a reality that there is a gap between some technology components in the business (the “business technology”, as Forrester says) and the traditional technology. Moreover there is a gap not just in the technology but in how it is managed, and how it is serviced.
There is a big opportunity to reinvent everything – how it is governed, how it is automated, how it is measured – that we see favouring a company like ours which is perhaps nimbler than the very large organisations. It’s also an opportunity for Latin American providers specifically, thanks to our proximity to our buyers which enhances that nimbleness. That is one of the key aspects that we see.
There are of course other things going on in our region. In Latin America as you know most economies have been severely hit by the downturn in the prices of certain commodities, most obviously oil (after many years Mexico finally opened its oil sector at the worst possible time with prices collapsing) and that has had an effect in slowing down economic growth in most countries, which you can see in the form of marginal GDP gains. One aspect of this is that the “multi-Latinas” as some magazines call them – very large Latin American headquartered companies that are expanding overseas – see an opportunity and they are growing faster than ever, growing into overseas territories at pace; for example, not a lot of people might know this but the largest baker in the USA is a Mexican bakery, Bimbo. You can also see in dairy products, as another example, a Mexican brand called Lala has been buying many US brands. Or in telco: the largest provider of prepaid cellphone services is a company owned by Carlos Slim. Companies like those have been expanding, and that represents a very important shift that we see of Latin American companies globalising.
O: Of course, it isn’t just economically that there is a lot going on in Latin America right now; politically there is a degree of uncertainty in many corners of the region, most obviously Brazil with huge popular protests, and Venezuela which appears to have gone off a cliff. At the same time the US itself is in a remarkably uncertain state politically at the moment [this interview was conducted on the day of the final presidential debate between Donald Trump and Hillary Clinton – ed]. How does a man in your position strategise with such uncertainty all around?
AC: It is difficult. In Latin America even the past is unpredictable… It is hard to plan – but the way we are structured as a company helps us in that regard. Our operations in Argentina are run in Argentina, very independently, and it is the same in Brazil, in Mexico, in the USA – there are some corporate guidelines but they are minimal; the local offices have the upper hand in determining the right strategy for them. A centralised command and control structure doesn’t work in this environment. Something that works is having decentralised decision-making, decentralised go-to-market strategies that help us understand the realities, the challenges and the opportunities that we encounter in any specific market.
If you look at it, that’s how the US Army is functioning today. It is not a centralised command; they have decision-making capabilities in each individual unit. We didn’t think about that beforehand, but we have grown like this and it has proven to be successful in this environment. Of course sometimes we have to shake the balance a little bit and provide more centralised aspects that can help us leverage the capabilities that we have in one region and take them to another – a failure to be able to do that can be one of the downsides of a highly decentralised structure and that is something that we are aware of and that we are always trying to address. Most of the services that we have been able to develop for the US market can be applied to the Latin American market; sometimes with a decentralised structure it isn’t that easy to develop the necessary awareness of how things happening in one area can benefit our teams in other areas. So it is always a balance game – but overall I have no doubt that being highly decentralised helps us a lot to navigate this uncertainty.
O: You mentioned Europe and Asia. What are your hopes for Asia – are you putting a lot of effort into that region?
AC: In Asia we have two components. Firstly we have India, which is for us global delivery: we do not go to market in India.
O: Is that because the competition is too fierce?
AC: Yes, we don’t have the brand recognition in the market and we are facing huge giants there, so it’s an uphill battle. But we certainly leverage the delivery capabilities that they have. The other component is China. In China our approach was to use it as part of a global delivery network – we call it the “global nearshore”: wherever you are in the world you will always have a nearshore component – and in China that meant servicing Australia, Asia-Pac etc. However, China is not very good at exporting services – it has proven to be difficult – so for the past couple of years we have taken a different approach which is “China for China”. We realised that we needed to have local talent there: out of around 400 people that we have in China probably only one is not Chinese.
What this means is that we have a very good understanding of the market with that model and we are starting to see a lot of innovation coming out of there, and very good opportunities in the domestic market. We just need to reinforce the commercial aspects and it has proven a little bit tricky to come along with an outside perspective and try to penetrate the market – and we have seen this with all the multinationals that have declared failure there and have exited the market. It is a very unique market and we see that it has to be locally approached – hence “China for China”.
It is providing us with very good solutions – we have one absolutely fantastic solution in particular – coming out of our centre in Wuxi, a hundred kilometres or so north-west of Shanghai, a small city by Chinese standards. What we are testing there is an identity management system: when you enter the train station you are carrying your ID which is RFID-enabled, and we combine that with facial recognition so we can match the ID with the person without them having to go through security checkpoints. The cameras there are constantly identifying everyone, and if we find a mismatch we send an alert to the security station and they go and check. It’s a very cool technology that has been developed there and we are looking forward to how to introduce that worldwide.
O: And what about Europe?
AC: Very good things are happening in Europe. We made an acquisition last year of a boutique financial services tech firm – mobile banking and things like that – in Madrid. We are now focusing more on the Spanish financial services market, and trying to leverage that capability. As you know most of the large Spanish banks have significant presence in Latin America so it is a very good combination with our footprint in Latin America and having a beachhead in Spain with internet and mobile banking technologies. This year we are basically doubling our size in Spain. We have a delivery centre in Galicia, and from there we serve the UK and also our clients in France. We also just opened a commercial office in France, which is our first step there; we are testing the waters in Paris and hopefully we will have good growth over the next few years there.
O: Do you see anything on the horizon that might challenge those ambitions – and, indeed, the ambitions that you have generally for the company?
AC: We feel very positive in terms of the outlook that we see particularly in our biggest markets of the US and Mexico. We just won a large contract with a transportation company, and we won this against a large Indian incumbent. That served as a proof of concept of what we were seeing: that having a very nimble approach that is focused on helping the CIO to close that digital gap really works. It has also proven the fact that those macro aspects I mentioned earlier – the large contracts breaking up, the disillusionment on the side of the buyer – are having a real impact. With that same approach we have also just signed a deal with a large restaurant chain. We feel bullish about all this.
One area which is a potential challenge and where therefore we are making significant investments is automation. We think automation will play a very important role in the next few years, so we are investing in that; in particular we are building an automated assistant platform. At the moment it is focused on relatively trivial aspects, but aspects that can improve our productivity – things like instead of jumping between two or three different systems to find the status of a requisition, we simply use a voice command and the assistant takes care of the rest. That sounds trivial – but we are already seeing a 3 to 4% increase in productivity amongst the people starting to use it, so I have no doubt that as that matures it will have significant impacts.
Importantly we do not have that perverse incentive of size and volume and having to work out what we are going to do with a hundred thousand people when automation kicks in… I don’t have that problem. So we’re going to be investing heavily in our own technology, but of course we can’t develop our own technology as fast as we can incorporate third-party technology, so we will be taking both approaches at once. We are very bullish on automation and we see it as a very interesting factor that can help us take the company to the next level.