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Opportunities, current and future trends in the Spanish outsourcing market

21 January 2009

Spain was well known for its cuisine, culture and architecture, but less so for economic reasons, said Andrés García Martín, Investor Services Manager at Invest in Spain – part of the Spanish Ministry of Industry, Tourism and Trade. However the country boasted a dynamic, solid and modern knowledge-based economy, he said, and was the world’s eighth largest economy overall.

What’s more Spain was in an extremely privileged position for access to key markets throughout southern Europe and Latin America. ‘That means potential access to more than 45m consumers in Spain and 443m in Europe,’ he said. Historical connections also gave Spain privileged relations with Morocco and Algeria and, crucially, it was a connecting hub for the 560m potential customers of South and Central America. Spanish companies’ long established connections here meant ties went far deeper than simply language and culture, he stressed.

Spain also had an ultra-modern transport infrastructure and an exemplary, mature IT sector. ‘It’s not just that we have a huge number of people with these skills, but our IT sector is growing well above the European average,’ he said. The country was also extremely economical in terms of wages and infrastructure compared with Western European averages, while at the same time able to offer all the business, political and cultural benefits of EU membership, and physical proximity to the UK. ‘We’re not necessarily the right place if you’re just looking for routine software operations, but if you’re looking for centres of excellence then we are,’ he said.

So what was the outlook for the growth of outsourcing in Spain? ‘We cannot escape the world economic downturn,’ Gonzalo Ulloa, Head of the IP and Technology Department of the Gómez-Acebo & Pombo legal firm told delegates. However, the economic climate meant that governments would increase spending on infrastructure and technological projects, he said, and Spain was no exception.

‘Spain is one of the most economically dynamic countries, even considering the downturn,’ he said. The outsourcing industry had grown exponentially in the last 15 years, supported by the highly developed IT sector, with even small and medium sized businesses embracing it. The number of consultancies and law firms offering advice to the outsourcing sector was testament to how the market had strengthened and matured, he stressed.

In a challenging economic climate, nearshoring should be seen as a business opportunity and Spain was now extremely attractive for companies seeking a nearshore destination, even with the falling value of sterling against the euro, he said. This was particularly the case for those organisations looking for a higher level of services but without the associated difficulties of traditional farshore destinations like China.

Spain’s legal and regulatory framework also made it an attractive outsourcing destination, said associate lawyer in Gómez-Acebo & Pombo’s Intellectual Property and IT department, Ibán Díez López. ‘Spain is a stable country with an efficient legal system that fully meets with European standards and therefore offers great security for clients,’ he said. Furthermore, any investment in Spain that was considered a bridge to outsourcing resources to Latin America was supported by several double imposition treaties, and Spain’s strategic position with Latin America also meant that European standards of data protection – a key thing to consider at the beginning of any outsourcing project – were synchronised with countries like Argentina.

In terms of dispute resolution, while litigation in Spain could frequently be long and expensive, there was now widespread acceptance of arbitration as an alternative route – far more flexible and less expensive and time consuming. Labour law, however, was a major issue, with significant liability issues around the transfer of labour rights, although these were not always insurmountable. While there was no specific model for negotiating contracts, meanwhile, there was a wide margin for negotiating outsourcing contracts, and Spain had implemented all international agreements regarding intellectual and industrial property.

The country’s outsourcing market was being consolidated, but there was still great potential for growth and development, said Gonzalo Ulloa, with the  market experiencing growth of 59% between 2003 and 2007. This had mainly been within the IT infrastructure sector – as the forerunners of outsourcing had been the IT departments of major companies – but BPO was now gaining ground and evolving rapidly. In 2008, it was estimated that outsourcing’s contribution to the consulting sector would have reached 44%. ‘The Spanish outsourcing market will continue to maintain a rate of growth,’ he said, with applications outsourcing and BPO leading the way.

 

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