Industry Commentary

CAD Hike a Reality-Check for Northern Nearshore Outsourcing

By August 7, 2017September 17th, 2021No Comments

The citation ‘nothing lasts forever’ has a great deal of resonance to life in general.  In the business context, it is especially accurate when describing the fluctuations between the Canadian Dollar and its US counterpart.  As noted by many industry observers, the recent upward movement in the value of the CAD has increased Canada’s cost as a nearshore delivery point.  And, while outsourcing clients need to be observant in this regard, it also serves as a wake-up call to providers that Canada’s value proposition should be based on broader customer experience, as opposed to simple cost arbitrage.

A quick search on any currency conversion website shows the volatility of the Canadian Dollar over the past half-year.  In fact, since May the CAD has risen from .72 to a recent high of just over .80, relative to the USD.  No doubt BPO providers that have been touting the cost advantages of Canada as a delivery point for front-line services are concerned; from an arbitrage angle, Canada has become pricier in a relatively short period of time, based on factors beyond the control of the outsourcing community.  These include a what some perceive to be an overdue hike in the Bank of Canada’s prime lending rate and a flurry of strong domestic economic news, all against the backdrop of concern around US political stability.

Over the past two years, much has been made of Canada’s re-emergence as a northern nearshore destination, with a great deal of stock being placed by many stakeholders on a less expensive CAD.  It is true that Canada’s attractiveness increased as its currency fell from parity with the Greenback, but that was only part of a larger dynamic.  As was highlighted so succinctly at the recent Nearshore Americas Sourcing Decisions summit in Toronto, Canada’s value proposition in 2017 is very different than it was a decade ago.  Outside of the ever-present cultural / commercial alignment between American consumers and contact center agents north of the 49th parallel, today there are several new key selling facets for Canadian BPO.  These include a more technically-adept workforce, the opportunity of leveraging some of the country’s major urban centers for BPO delivery, improved air transport links between both countries as well as an increasingly multilingual pool of talent.

The fact is that providers cannot afford to position the Canadian value advantage simply around cost.  If history has proven anything in the context of Canada’s outsourcing space, it is that exchange rate fluctuations are a reality.  A cheap CAD is always going to be a temporary phenomenon driven by multiple exogenous factors and cannot be counted upon over the long term.  Rather, Canada should be positioned as a premium delivery point for US enterprises that are eager to work with providers capable of delivering high-value interactions (both voice and digital) for American consumers.  Outsourcers must balance lower costs driven by a cheaper CAD with the strengths of the country’s workforce, proximity to major US centers and affinity between the citizens of both countries.  Only then will the Canadian nearshore value proposition be competitively positioned.