Sunny, low-cost Costa Rica is one of the go-to countries for marketers and agencies to outsource services, but agencies are taking a new look at the Central American country as a regional hub for North and South America.
Omnicom-owned digital agency Critical Mass is announcing today the opening of a Latin American headquarters in Costa Rica’s capital San Jose to work with clients like HP on regional projects.
Costa Rica has long been home to call centers, back office functions like IT and accounting, and basic production. Procter & Gamble, for instance, plans to open a supply-chain planning center for Latin America there.
Critical Mass started a Costa Rican digital production facility in 2009 called Hangar Interactive, where the new Critical Mass office will be based.
“Our clients were putting significant cost pressure on us,” said Dianne Wilkins, CEO of Critical Mass. Opening and sending work to Hangar let the agency “slice the bottom one-third off” of projects, she said. “[Now] we’re adding the top two-thirds to what we’ve already got at Hangar in digital production,” she said. “Critical Mass will add strategy and client service capabilities.”
Basic production costs in Costa Rica are about 30% to 50% of what the same work would cost in North America, she said. For full Critical Mass agency projects in Costa Rica, the cost will be about 40% to 60% of what the agency would spend in North America, largely driven by the higher cost of talent.
In addition to the cost advantage, Costa Rica is on the same time zone as the U.S., and has a good talent pool drawn from a well-educated population.
Another digital agency, WPP’s Possible Worldwide, has already learned that, and has a Costa Rica office with 75 people, about the same size as Possible’s Los Angeles office.
“We don’t think of it as an offshoring capability, we think of it as a standalone office like New York or Cincinnati or Singapore, or in some cases the extension of an office,” said Shane Atchison, Possible’s CEO. “As soon as you say it’s low cost and just production, I think you’re going to get [worse] work.”
To upgrade the work from Costa Rica and integrate its staffers, he said he told each of Possible’s four U.S. offices to add at least five employees based in Costa Rica to their org charts, reporting in to the U.S. office and working with its projects and clients. When Possible’s Seattle office was integrated into the network recently “I said you’ve got 90 days to find five people in the Costa Rica office who’ll work on Seattle clients,” he said.
More than 90% of the Costa Rica office’s revenue comes from U.S. or international work, and less than 10% from local Costa Rican clients, he said.
For Publicis Groupe, Costa Rica is still a basic production hub, but organized at the holding company level. Publicis has 500 people based in Costa Rica and Colombia, working exclusively on digital production at a dedicated production center, according to Jean-Francois Valent, CEO of Publicis Groupe Production Platforms, at Publicis-owned Mundocom Worldwide. He said virtually all the work is done for the U.S. market, and a very small amount for several European countries.
Other holding companies, like Omnicom, are more decentralized, although Hangar is already working with another Omnicom agency, Rapp. “The intention is to set up for Critical Mass, and then be willing to open up to other Omnicom firms that might need services,” Ms. Wilkins said. “If it’s good, they will come.”