A magnitude-6.4 earthquake struck Puerto Rico on January 6, killing one person, toppling homes and buildings, and triggering a blackout on the island that is still recovering two years after Hurricane Maria. Governor Wanda Vázquez declared a state of emergency and activated the Puerto Rico National Guard to help with recovery efforts.

How might this earthquake disaster have affected delivery of outsourcing services from Puerto Rico (P.R.) to U.S. clients? Infosys’ response to the devastation caused by Hurricane Maria sheds light on whether the buyers of nearshore outsourcing services should expect significant interruptions to service as a result of such natural disasters.

Infosys’ Puerto Rico delivery center

In 2013, understanding Puerto Rico’s risk exposure to natural disasters, Infosys set up a delivery center in Aguadilla, P.R., as part of a deal to optimize global operations for a client Fortune 500 consumer, engineering and aerospace technology company. Advantages from Infosys’ point of view included:

• Local knowledge: prior understanding of the local Aguadilla business environment through its work with the client
• Rafael Hernández International Airport: located near the delivery center, the transportation hub supports a local aerospace industry that sustains a reservoir of local IT and knowledge services skills
• Skilled local outsourcing professionals: P.R. residents enjoy the full rights and legal protection of U.S. citizenship (P.R. is an unincorporated territory of the United States); they tend to be multi-lingual in both English and Spanish, and tend to be inexpensive compared to counterparts in the mainland U.S.
• Tax relief provided under P.R.’s Economic Development Incentives Act: “the cost structure was a little more amenable in comparison to some of the other locations in the U.S.,” said Aniket Maindarkar, head of Infosys’ Americas operations at Infosys BPO, in 2014. The Puerto Rico Industrial Development Company (PRIDCO) offered a 100% exemption on taxes on earnings and profits, and a 90% deduction on local property taxes. PRIDCO’s executive director Medina explained at the time that “although [P.R. is] part of the U.S., we can negotiate tax rates with companies and they do not pay federal tax rates”
• Staff training and other aid: PRIDCO helped train staff and aided Infosys in finding a new facility location
• High profile political support: Infosys’ investment in a P.R. outsourcing delivery center garnered press exposure through the P.R. Governor’s visit at the opening of the new Infosys facilities in Aguadilla.

Disaster resiliency features

At the time Infosys initially established nearshore outsourcing capabilities in P.R., the company publicly announced it envisioned serving U.S. clients in multiple restricted industries, including defense and healthcare. Within a year Infosys had relocated both retained and new personnel into a nearby 12,000 sq. ft. facility that could accommodate up to 300 people. The relocation retained features that would later prove advantageous to disaster resiliency, including:

• Aguadilla’s location on the northwestern side of P.R. helps protect facilities from strong winds and hurricanes that tend to land on the eastern and southern sides of the island
• The local Rafael Hernández International Airport is supported by the infrastructure of a former U.S. Air Force base and is located less than ten kilometers from Infosys’ Aguadilla facility
• The airport offers direct commercial flights from multiple airlines to the U.S. mainland, including the greater New York City area. This is the location of a major Infosys healthcare outsourcing services client served by its Aguadilla personnel
• Backup electrical power, supplied by diesel-powered generators located at the Infosys facility.

Expanding capabilities to the healthcare sector

Since 2016, Infosys has expanded the capabilities of the delivery center from aerospace industry functions to operations in the communications and healthcare industries. For U.S. healthcare clients Infosys began to build out clinical and IT service desk and support for Medicaid business.  Initially, Infosys hired half a dozen P.R. clinical nurses with both bedside and corporate/investigative expertise.

The U.S. legal status and U.S. citizenship of the P.R. personnel supports delivery of restricted defense industry and healthcare industry services (e.g. Medicaid program services) with lower local costs than those of U.S. counterparts. According to U.S. Bureau of Labor statistics, median wages for registered nurses in the U.S. are approximately double those of their counterparts in P.R. However, among the nurses with both bedside and corporate/investigative experience that Infosys recruits in P.R., Infosys’ experience is that the discount for clinical nurse labor rates is narrower: 15-20% discount for a nurse in P.R. compared to New Jersey, and 10% discount for other highly skilled resources.

Lessons from Hurricane Maria

When the Category 5 hurricane hit Puerto Rico in September 2017, it lingered over the island for over two weeks, causing over $90bn in damage and approximately 3,000 fatalities. Nevertheless, despite the scale of the devastation, Infosys reports that its service to clients was interrupted only for one day while it implemented its disaster recovery processes. Diesel generators supplied power to employees for the duration, and most employees resided in the facility rather than go home when off duty. Infosys also retained transportation links with its clients. Despite the atrocious weather, Infosys secured approval to fly by private jet into Aguadilla’s airport on an emergency basis and flew some of its P.R. personnel to client locations in the mainland U.S. Infosys also used these flights to transport vital physical supplies and even cash for salary payments to its Aguadilla personnel.

Through the Maria event, Infosys learned that its communications links required further improvement.  Deployment of satellite links into Infosys’ global IT network now enable resilient communications and internet connectivity independently of local fiberoptic and telecommunications infrastructure.

Infosys’ responses to the Maria event have reassured healthcare clients that its facilities in Aguadilla are adaptive and resilient in the face of major natural disasters. Since 2017, Infosys’ outsourcing services from Aguadilla to mainland U.S. clients have expanded, and in the last year Infosys reports that it has expanded clinical healthcare outsourcing services to a second U.S. health insurance company. Infosys now employs approximately three dozen nurses at the Aguadilla facility. Infosys is prospecting for more clients, and has developed contingency plans for bringing other Aguadilla facilities online should a major client win exceed current excess capacity of approximately 60 seats.