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Alorica Aims for CMS No. 1 Spot in U.S. with Bets on LATAM & CX Transformation

 

NelsonHall recently attended Alorica’s analyst day in Guatemala City for an update on strategic developments. Here I take a look at how Alorica’s EGS integration is progressing, at the company’s U.S. nearshore strategy from LATAM, and at plans to drive CX transformation through consulting and analytics.

EGS acquisition: a path to the global CMS top 3

As we covered in June, the EGS acquisition propelled Alorica to a global top 3 CMS vendor by revenue, with 2016 estimates of $2.3bn.

Today, ~ 150 days into the integration, Alorica has achieved operational visibility, integration of the client accounts, implementation of a single pricing model, financial integration, a combined leadership team, and a regional structure. In the process, Alorica maintained a high level of communication for its joint workforce of over 92k employees in 147 locations by creating a dedicated portal on the acquisition and weekly personal letters from Alorica’s CEO, Andy Lee.

Alorica’s main integration team had an early start by beginning the process approximately two months before the deal signing, forming a team of internal experts and external consultants. Alorica organized integration teams across the two companies to identify best systems, processes, and cultural traits. For example, EGS workforce practices which had better agent retention rates have been extended to Alorica’s workforce, and Alorica’s corporate NPO supported by the employees has established chapters in EGS’ sites to foster a consistent culture.

The target for next year is to launch the new corporate website by January 11th, complete the physical locations rebranding, and implement a uniform recruitment process utilizing advanced analytics and demand planning tools. Alorica’s 2017 focus will be on execution as it aims to reach $3.1bn revenues based on organic growth by 2020. It has already adopted a dynamic strategy approach, where 55 of the company managers and senior leaders gather to select 12 strategic initiatives for the company, assign a champion for each, and execute milestones toward those initiatives every 90 days. 

The key objective for the company is to become the CMS BPO leader in North America, targeting the largest global consumer market. In healthcare, in particular, the EGS acquisition brought a sizable portfolio and capabilities, and the combined company has the potential to benefit from the sector’s high organic growth and high barriers to entry. 

Alorica bets heavily on LATAM countries as nearshore destination

With a combined workforce of 13k people at 17 locations in 9 countries, both EGS and Alorica have actively grown their footprint in the LATAM region in support of the U.S. Present in Mexico, Central America, the Caribbean, Brazil, and Uruguay, the company aims to sell the region on a multi-country delivery model to achieve cost advantages and risk mitigation while benefiting from the cultural alignment, physical and time zone proximity, and a large agent pool of over 5m. Providers in the region also benefit from sizable bilingual skills fueled by a strong population movement to and from the U.S. The language potential of the region also lies in the increasing Spanish speaking population in the U.S. which is currently over 41m native and over 11m bilingual speakers.

For Alorica, its LATAM expansion strategy is a mix of the addition of tier 2 cities (Guatemala, Mexico, Jamaica), expansion in existing cities (Honduras), and new market entry (Colombia). The company still lacks sizable presence in South America, particularly in high-growth delivery destinations such as Colombia, and has not developed the LATAM domestic markets, currently standing at single digit percentage revenue. 

The challenges for BPO providers in the region are country-specific, and Alorica relies on its local leadership with multi-country experience to work with government authorities, universities, and trade organizations in areas such as tax incentives, infrastructure, and education. For example, in Guatemala, a high potential delivery country with over 68% of the population under 30, 6.2m workforce, and ~ 80k people returning from the U.S. per year, Alorica has 4k staff and is looking to expand substantially, opening its latest contact center with 1k seat capacity in March 2016. To increase its talent access, the company has partnered with educational institutions to open a finishing school to teach BPO required skills under Alorica developed curriculum and materials.

Employing WAHA to further diversify delivery mix

Another opportunity which the company is exploring to further diversify its delivery mix is the Work-At-Home model in selected LATAM locations. It is trialing WAHA with a new economy brand out of Mexico, and an online retailer out of Uruguay. The challenges of the model in these countries are the labor laws and cumbersome regulations. Still, with close to 6k employees in 26 U.S. states, Alorica’s WAHA capacity is a strategic element of the company’s delivery infrastructure. It has been used not only to meet seasonality but also to increase talent access, for example hiring at-home pharmacists for the healthcare provider sector.

Analytics and consulting skills to drive CX transformation

With a strong delivery mix for the U.S. market, Alorica is looking next to its analytics and consulting capabilities to lead transformational initiatives for its clients. The two key pieces are the customer experience transformation team and its center of analytical excellence. For example, EGS analytics teams worked on 54 client programs in 2015, and for 2016 will have 150 program engagements. For a ride sharing company, the company reviewed the driver application experience and passenger sentiments both from an internal perspective such as document processing, and from the customer perspective, traveling with the brand and its competitors and serving as drivers over a 90-day period. This holistic approach, together with the data analysis feed, provided a set of recommendations resulting in an estimated $1.5m of annual savings from document processing optimization.

At the beginning of next year, the company is planning to double its CX consulting team with operational, sales, and consulting experts aligned by domain expertise, in order to increase the breadth of its engagements. The company sees this embedded consulting as a key part of their growth creation and retention. As next steps, it is preparing to expand its text and speech analytics toolbox, and to partner with machine learning and AI companies focusing on customer-facing processes. For 2017, Alorica is targeting at least 5% revenue growth, anticipating 12 new logos generating roughly 25% of that growth, with 75% of the new revenue coming from organic growth in its existing client base. 

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