By Steve Mezak

Are you interested in exploring the agile methodology for developing software at your company, but you’re worried that it feels like writing a blank check to the developer? It’s a commonly held belief among companies looking for outsourced software development that agile could potentially cost more than traditional methodologies. However, the nature of how agile development works, combined with a well-defined structure for funding it, ensures that you can produce a great piece of software without breaking the bank.

Two approaches to funding Agile – Fixed Budgeting Approach

The first step to ensuring that your company’s agile development meets your budget requirements is deciding upon whether to go with a fixed budget or continuous funding. A fixed budget is exactly what it sounds like–your company sets the maximum amount that they’re willing to spend for the software, and the development team works on the project until they hit the budget ceiling. Fixed budgeting is a good funding approach for companies that are not entirely familiar with the agile development process, and they want to make sure that there is a distinct budget cap.

Because the agile development process insures that you have a finished piece of software at the end of every sprint, you’re saving time and money with either continuous funding or fixed budgeting.

A fixed budget doesn’t mean you end up with an unfinished project. Instead, agile development works hand-in-hand with fixed budgeting because stages of the project (or sprints) are each completed within a set amount of time; at the end of every sprint you have a complete piece of software as well as an update on how much of the budget is left.

The development team covers the most important and critical features in the first sprint, shows you the result, and you give the  green light for the second sprint to add more features, work out bugs, or even take the software in a different direction if that’s what market conditions require. Though it may not be as comprehensive and feature-rich as you might want in the future, it’s still a solid version 1.0 that you can beta-test since the most critical features are already developed.

Funding Agile – Continuous Funding Approach

Continuous funding is typically used by more experienced companies that know how agile works and are confident in the development team. The company outlines what they need, the team figures out how long it will take, and they create a detailed prioritization of the product backlog of features, separating those features into a smaller backlog for each sprint. If they reach the end of the sprint without fully completing all the features, they take it out and move on with what works instead of dragging out the deadline for who knows how long trying to figure out just one bug. The difference between continuous funding and a fixed budget is that continuous funding allows the development team to work on critical and non-critical features at the same time because the budget allows for more time to continue working on various features rather than focusing only on the mission-critical ones.

The Best Part About Agile? You Save Money Either Way

Because the agile development process insures that you have a finished piece of software at the end of every sprint, you’re saving time and money with either continuous funding or fixed budgeting. Instead of waiting for months or years to see the end result, you get a real, workable update within a specific period of time, giving your company the opportunity to evaluate and decide whether the project is moving in the right direction. Having these mini releases also allows you to gather more funding because you can release the software, get feedback from your users (or the market), then see if it’s worth getting additional funding for an improved version, or determine whether it’s time to go back to the drawing board. Either way, the agile development process helps you make sure that your company doesn’t sink too much money into software development. The agile methodology does quite the opposite, in fact.

Steve Mezak is founder and CEO of Accelerance, Inc., which helps customers engage the right development team to create high-quality software. Read more and watch videos about using the agile methodology for nearshore software development on the Accelerance blog.

By Filipe Pacheco

Stefanini IT Solutions, one of the biggest players in the IT and Outsourcing industry in Brazil, has just made another move towards expansion in Latin America — this time, towards the southern part of the continent. The company founded and managed by Marco Stefanini has now bought Top Systems, one of the biggest producers of core banking software in Uruguay.

The Montevideo-based firm is focused on IT services for financial institutions and already had the Brazilian company as an allied partner. Its main product, called Topaz, is used by financial institutions of different sizes, mainly banks, microcredit institutions and compliance departments. Topaz uses Service Oriented Architecture and Java technology.

“Even though the company is based in Montevideo, their products are utilized throughout Latin America, including Central American countries. For us, it is a strategic move to get closer to clients we do not have today,” Marco Stefanini told Nearshore Americas. The CEO did not disclose how much was spent in the acquisition of Top Systems, which has about 120 employees working from Uruguay today. According to him, the conversations that culminated in the deal lasted for about six months.

Initially, Top Systems will continue to operate with its original name but will use the colors and the logo of the Stefanini.  “But we might change that in the future, we have not thought about it yet,” said Mr. Stefanini, who is in the United States today. He did not disclose financial details of the transaction.

Top Systems was created in 1987 with the aim to generate “innovative technological solutions” for its clients, it is an ISO 9001 certified company. Besides its headquarters in Uruguay, the company also has an office in Lima. Its main competitor in the domestic market is Bantotal.

“With expertise in this market and with the 20 biggest Brazilian banks as clients today, Stefanini complements its offering in core banking, providing access to institutions of any size,” says Marcos Monteiro, Business Consulting director at Stefanini. Today, financial markets represent 33% of the revenues of the company, and more than 90% of the private banks in Brazil are served by the firm.

On April 26th, Top Systems announced a partnership with Stefanini to serve a Brazilian client called Banco Coperativo Sicredi – a financial organization focused on cooperation entities that is very strong in funding in the Southern States of Brazil, especially Rio Grande do Sul, which borders Uruguay.

The Uruguayan perspective

“This is an important move for the Uruguayan software industry as a whole,” comments Mario Pucci, partner in MVD Consulting, a boutique business consulting firm that specializes in change and operations management, as well as globalization strategies for multinational companies.

He explains that even though the banking industry is considerably small in comparison to that of Brazil, the local software companies have specialized themselves to provide core financial systems technology in many Latin countries, and are quite a reference when it comes to financial software production in the region.

Another positive point of the acquisition says Pucci, is the strengthening of the Latin American market as a whole, and the closer contact between regional companies to develop the regional software market, “that way they can compete with Indian and American peers,” he adds.

“Just recently foreign investors started to consider players in the Uruguayan market, which has always been formed mostly by local companies. But there is a moment when they need scale to grow, and these investments are welcome for that,” Pucci said in an interview with Sourcing Brazil.  “At the same time, Brazilian companies seek to expand abroad, they need to.”

Another positive point of the acquisition says Pucci, is the strengthening of the Latin American market as a whole, and the closer contact between regional companies to develop the regional software market, “that way they can compete with Indian and American peers,” he adds.

Ready for new acquisitions

“We are currently in conversations with other potential companies that can be purchased around the region. Those talks are always happening,” said Stefanini.  This is the second company from the IT financial sector that Stefanini has bought in less than six months. At the end of last year, the company bought Orbitall, the IT branch of Itaú, one of the biggest private banks in Brazil.

Within one year between 2010 and 2011, Stefanini acquired two firms in the United States (TechTeam and CXI), and one in Colombia (Informática & Tecnología).  “Moments of crisis are the best ones to grow, when the really good opportunities come up,” remarked Stefanini in an interview with Sourcing Brazil in May, 2011.

With the acquisition of CXI, Stefanini expanded its capacity to offer American clients services in staff augmentation, turnkey IT solutions, end-to-end ERP services, and functional sourcing. It also reinforces the alliance with SAP that CXI has had since 2006, which makes Stefanini a SAP certified partner in the United States.

Medellin is one of those cities that you never want to leave. Blessed with mountains on all sides,  a Mediterranean climate and some of the best beef dishes anywhere in Colombia (especially when over a barbeque), Medellin is shaking loose from the shackles of its past and putting a remarkable amount of focus on global services. We spent a few days there last week – and got to know how the Paisas people see Colombia’s second biggest city evolving as a hub for innovation and global engagement.

By Kirk Laughlin

Seemingly out of nowhere, Medellin is sweeping onto Latin America outsourcing’s center stage in a dramatic flourish, winning deal after deal and – by beckoning to the world – totally reshaping what the city stands for by openly confronting the wreckage of its darkest days. Medellin’s dramatic transformation is easily one of the most captivating stories in all of Latin America IT.

A City in Bloom

Due to a series of favorable conditions – including highly engaged and deep-pocketed corporate institutions (starting with Bancolombia), a rich array of universities many of which have engineering and computer science programs, the establishment of policies and agencies focused on nurturing the right conditions for BPO/ITO services and a stunning physical environment where “Eternal Spring” and large amounts of greenery make for a lot of happy souls – Medellin may be the ultimate ‘hidden gem’ in the Americas’ sourcing marketplace. Very simply, Medellin functions. Mass transit – including a metro that extends from the south to the north basin of the metro area – is clean and efficient. Traffic is a non-issue, unlike its big brother, Bogota.

But of course there are no guarantees for Medellin. Its positioning as a mountain, interior city has done little to enable international exposure, unlike thriving BPO port cities of Cali and Barranquilla. This is one of several reasons many knowledgeable observers express concerns about the bilingual talent available among the city’s 3.5 million inhabitants (in the larger metro area).

Investment in Full Flow

While much has been made of the watershed decision by HP in 2010 to set up in Medellin, a wave of new investment is potentially setting the stage for a formidable tech ecosystem that in the next few years could mirror – on a smaller scale – the strides of major hubs such as Guadalajara and Sao Paulo. Kimberly Clark recently named Medellin one of three global innovations centers, a huge coup that demonstrates a deep confidence in science/tech human capital. The organization expects to launch a 200-person operation in the next few months in the “Rionegro” area not far from the airport.

Existing operators in the area include multionationals like Tata Consultancy Services, Unisys, Allus, Teleperformance and Infosys, which has a small team focused exclusively on supporting Bancolombia’s core banking / ERP operations. In fact, it was Infosys’s Gita Jayanth, a senior finance executive working in Medellin, who instituted a program to take the 100 top computer science students attending EAFIT university in Medellin every summer to Bangalore for specialized training. The program is now in its third year running. “This is an outstanding program with no strings attached,” said Helmuth Trefftz, Chair of EAFIT’s Computer Science Department.

The timing of HP’s official move into Medellin is producing an increasing amount of head-scratching. The company has started paying month rent on its sparkling new facility in the new “Ruta N” area – as part of a 15-year lease. But sources tell us that the timing of HP’s installation of staff into the offices is still in question while others are skeptical that HP will actually open the facility despite all the planning that has already gone on. The company has maintained a small staff in a building within the EAFIT campus, but many believe that restructuring in the wake of CEO Meg Witman’s late 2011 arrival at HP has shifted its offshore services priorities.

The $50 million Ruta N facility will opens its doors within the next few weeks.

Ruta N is the name of a three building complex in an area of the city that used be blighted by crime. The city financed the project – worth $50 million – which is seen as a symbol of the new focus on global engagement and tech innovation, combining public and private interests.

City leaders are quick to point out that Medellin may look like it’s hell-bent on making a name for itself globally, yet there is still a cautiousness that prevails. The city is extremely aware of how it’s perceived from the outside and still seems somewhat wounded by the global condemnation wrought by years of drug-related violence that tore deep into the heart and culture of the “Paisa” people. The homicide rates of the early 90s, where as many as 500 people were getting killed a month, is nowhere near what it is now. But according to statistics from ACIMedellin, the city’s trade promotion group which facilitated a visit last week by Nearshore Americas, homicides have inched up some from their lowest point – during 2006-2008.

The city remains one of the world’s fifty most violent cities, but it should be pointed out that US cities – New Orleans, Detroit, St. Louis and Baltimore are also in the top 50 ranking by Mexican organization, Consejo Ciudadano para la Seguridad Pública y la Justicia Penal.

Social Inclusion

Medellin’s leaders, grounding their efforts on social inclusion aimed at fostering economic equality, are persistently focused on reaching out to the long-isolated “comunas” to become part of this new, knowledge-driven era. It’s a big and complex job. David Escobar, Medellin’s City Planner is deeply involved with the efforts and sees many signs of change. “The city has reclaimed its self-esteem,” said Escobar who credits much of the city’s transformation to former Mayor Sergio Fajardo (who is now governor of the state of Antioquia) who set in motion heavy spending on education, the arts and the installation of multiple new libraries sitting in once battle-ridden areas.

The call to come to the capital of Antioquia is being heard around the world, including in King of Prussia, Penn. where local company Yuxi Pacific set its sights on Medellin during the last year after seeing its operations in China falter due to rising inflation and hard-to-find English speaking talent.

Medellin is 25% cheaper than labor in Costa Rica, says Michael Puscar, CEO of Yuxi Pacific. (Far right)

“The English ability is way better than I thought,” says CEO Michael Puscar, who runs a 50-person software and Q/A studio for content publishers looking to exploit new “Big Data” management tools. Puscar examined Argentina, Peru, Costa Rica and Mexico before settling on Medellin, which has a city population of 2.5 million. “Salaries here are 25% less than Costa Rica or Mexico. It was a no-brainer,” says Puskar, who does stress that the value proposition of Colombia could be in serious jeopardy if the Peso continues its rise. The currency has risen nearly ten percent since early January, putting pressure on the margins of foreign operators.

The availability of English-speaking talent is potentially one of Medellin’s biggest vulnerabilities. While exciting US-owned firms like Yuxi have had little trouble finding bright, bi-lingual professionals – most Colombian-owned operators worried to us that the demand for English speakers could quickly outstrip supply.

“We have a huge gap with English speaking people. I consider it a big issue,” says Carlos Castro, the CEO Enlace Operativo, a BPO and ITO services company headquartered in Medellin, with 1,700 employees in Bogota and Medellin. Almost all of Castro’s firm relies on Spanish-only speakers, but that could change in the longer term should the firm decide to pursue BPO business in the US. “It’s going to take a lot of years to address the issue,” he says.

In terms of attracting investment, Castro gives credit to the long-term planning focus of the national government. He says the work of ANDI, which is effectively the ‘chamber’ for the country’s BPO / ITO sector, along with Proexport and local investment promotion agencies spread across the country work closely together.

In fact, the close coordination of seemingly ‘rival’ cities shows just how much Colombia is making BPO a priority and continues to reflect back to the long-term thinking of former President Alvaro Uribe who partnered with Minister of Trade and Industry Luis Guillermo Plata to engineer what is looking like one of the best prepared BPO markets in all of the Americas going into the next stages of market expansion.

Michael Cooper, a US native who has lived in Medellin for 30 years said the city’s transformation during the last 8 to ten years has been “unbelievable.” Cooper is executive director of Medellin’s Centro Colombo Americano, a cultural and educational institution, which provides English instruction to over 6,000 students in the Medellin area per year.

Looking to make connections in Medellin or get deeper insight into the market’s potential? Contact Kirk Laughlin

By Filipe Pacheco

Genpact is definitely a global leader when it comes to business process and technology management. But, in Brazil, the company`s strategy is to learn with the Brazilians how to be successful in the local market and the intentions are to start to follow a growing path from now on.  “We are a global company with local presence. In Brazil, we knew it was necessary to come up with a Brazilian team that understands the local market very well,” said Affonso Nina, Genpact`s new Brazil`s country manager. “And, with that process, we had to have in mind the word adaptation“. Genpact started operations in Brazil in August 2011. At that time, Tiger Tyagarajan said that the expansion into the country was “in line with our growth strategy to bring our global business practices and expertise to rapidly growing emerging economies, to serve global corporations expanding there as well as local growth companies.”  After 10 months acting in the local market, the Brazilian unit of Genpact already has quite impressive projects going on, which are in line with the widely known potential of the company abroad.

With two operation centers located in São Paulo, the economic and financial heart of Brazil (but also its most expensive city), the company provides mostly back office finance and accounting services to the local units of Astra Zeneca, a global biopharmaceutical firm, and General Electric, which are services very closely related to the creation of the company.

Growing Local Business

On another front, Genpact also provides consulting services in different parts of the country to two other multinational companies with operations in Brazil. One of them is a supplier to Nissan, the Japanese automaker, in Curitiba, Paraná; and the other is Anglo Gold Ashanti, one of the biggest gold producers in the world, in Minas Gerais.

“The intention is to grow more and more in both fields, processing services and consulting from now on. The Brazilian market has a strong demand for both,” said Nina, who emphasized that companies from different segments in the country are expanding and demand business process services of different kinds. “And we can do that well.” 

“Since the launch of our operations in August up to now, we have been prospecting the Brazilian market, and have been learning with it. Now, from the second semester on, we are ready to act more aggressively seeking growth, we are ready”, say Nina, a Brazilian who coordinates about 50 employees in the country; he aims to grow that number in the near future. The company does not disclose numbers regarding the operations in the country so far.

BPO Taking Advantage of Country Growth

By the end of 2012, the number of employees working for the American giant might grow considerably. Nina told Sourcing Brazil that the company is already looking for another Brazilian city to launch a third office. It will be taken into consideration, before making the decision of where to go, the access to qualified workforce more than anything else, explains the CEO. The decision to come to São Paulo first was made mostly considering the close contact to clients, which should influence on the new destination as well.

According to Nina, this is a moment in which Brazil is growing considerably, and BPO services naturally can take advantage on that. “It is not like the contact center industry, which is very well established in the country already. We have room to grow.” He reinforced that the strategy implemented since the launch of the operations in the country is mainly to grow with local clients, who can be Brazilian companies or local multinationals. “That is why we need to hire people with local expertise that know the local market well.”

Red tape, scalability, labor analysis, financial incentives and investment risk are among the burning issues for a Nexus panel joining together Ann Harts, Kevin Parikh and Fabrizio Opertti

By Dan Berthiaume

If you are a BPO professional and have had a sneaking suspicion in the past five to 10 years that contracts are getting more complex, it’s more than a hunch. For reasons including the growing importance of IT to the BPO equation, increased sophistication of BPO buyers, and the evolution of BPO beyond a means of lowering transactional labor costs, BPO contracts are growing more and more complicated.

To find out more details about the situation regarding complexity of BPO contracts, Nearshore Americas recently spoke with two BPO contract experts: Marc Tanowitz, principal at outsourcing advisory firm Pace Harmon, and Stan Lepeak, director of global research, management consulting at KPMG. Tanowitz and Lepeak discussed exactly why and how BPO contracts have become more complex, the effect this increased contractual complexity is having on the BPO industry, and how vendors and buyers can collaborate to reduce contractual complexity while preserving the integrity of BPO projects.

BPO Grows Up

The most basic contributor to the complexity of BPO contracts is the simple fact that as BPO matures, users want to do more with it. “Five to seven years ago, BPO was focused on labor arbitrage,” says Tanowitz. “It was about finding resources in low-cost locations to do what they were told.” Tanowitz says this earlier iteration of BPO mostly dealt with broad transactional work such as accounts payable (AP) and general ledger.

However, according to Lepeak, more recently BPO has become a vehicle for delivering more sophisticated services. “There is now a more broad scope,” he says. “Multiple processes are pulled together and there is an offshore element.”

Technology Creeps In

Another major factor Tanowitz and Lepeak both cite was the growing importance of IT to outsourcing, even to BPO projects that don’t primarily focus on outsourcing technology systems. The increasing role of IT in BPO is also a reflection of outsourcing’s growing scope and sophistication.

“Now you often find IT bundled with business processes,” says Lepeak. “Companies also outsource the infrastructure supporting processes.”

Tanowitz’s commentary echoes that of Lepeak. “The BPO market shifted from labor deals to deals with a large IT component,” he says. “Providers deliver analytical support for discrete business processes, such as a collection tool.”

BPO Buyers Want More

Tanowitz and Lepeak both also refer to a maturing of BPO buyers along with a maturing of the BPO market. “BPO contracts were originally fairly simple, some were even written on vendors’ contract paper,” says Tanowitz. As a result, contracts were heavily skewed in favor of vendors, providing them with protections while not giving buyers the same level of protection or options for adding services or changing scale as their needs changed through the life of the contract.

However, Tanowitz said that eventually BPO buyers became more savvy and started demanding service level agreements (SLAs), price benchmarks, and other considerations which better protected them in the event of changes in project scope, currency value or vendor performance, but also greatly added to contract complexity.

Lepeak says buyers actually became “unrealistic” in their demands. “For example, BPO buyers wanted big cost savings, but no offshoring,” he explains. “Or they wanted to put in an ERP system but not change their processes.”

Lepeak vendors who did not have experience in delivering these types of sophisticated BPO services agreed to unrealistic contracts, “Which is why most of the big BPO deals of six to seven years ago were flops.”

Finding a Contractual Balance

Tanowitz and Lepeak both agree that the worst days of BPO projects being held up or resulting in vendor-buyer disputes due to contractual complexity are over, but the industry can still do much more to relieve complexity without damaging the quality of service delivery. Lepeak says buyers need to find a balance between pushing too hard and settling for too little, while having realistic expectations of BPO innovation.

“In reality, it is difficult to create a contractual arrangement that guarantees innovation,” he says. “Innovation comes from taking risks and doing things outside the box, which are hard to put in a contract.”

Instead, Lepeak says buyers should understand that lawyers and risk managers representing both parties in a BPO contract will likely nix anything that seems too risky, and accept the fact that well-written BPO contracts “offer less innovation but fewer failed deals.”

Tanowitz offers what at first sounds like a counterintuitive strategy of making contracts more complex upfront to provide more flexibility later in the life of the contract. “Do it right, do it once,” he says. “Deals change. Service levels may need to increase or be relaxed. Put in the mechanisms upfront to enable changes (without having to renegotiate the entire contract).”

By Bertha Leal
Walking through the doors of Cafe Havana is like walking through the doors of time and stepping into the Cuba we all love and remember.

Operated by owners Mauricio Aimone and Gabriel Mas and located on the corner of Calle de la Media Luna con Calle del Guerrero, right in the heart of Cartagena, Cafe Havana is known as “La Esquina del Movimiento” which roughly translates into The Street Corner of Dancing. It doesn’t fail to do its name justice. Plastered on the walls are the photos of some of the greatest legends of the Cuban music heritage like Benny More and Antonio Machin. Take it to the dance floor and dance the night away to the beats of a live band playing anything from jazz, to rumba, to salsa and the occasional sweet bolero for the romanticos.

After you’re done sweating up a storm on the dance floor make your way to the bar and let the guayabera-clad bartenders whip you up a freshly made mojito, garnished to perfection with sprigs of mint. The shelves are stocked with brands of rum, brandy, whisky, vodka, and beer. You must try their Cuba Libre which at only 15,000 pesos a pop you can afford to get two! With your chilled glass in hand close your eyes and lean back. In the palpable heat you can almost feel the breeze from the palm trees, the waves from El Malecon. Your body may be in Cartagena but your soul will be in Havana.

On any given night you never know who might just wander in. Regulars and locals can shake their hips along with some very prominent guests. Secretary of State, Hillary Clinton, was recently seen at the establishment. Pictures immortalizing her visit show a Hillary with her hair down, a thin film of sweat on her brow and hands high up in the air. It is a picture that so entirely captures the true spirit of the bar as a place where you leave your worries at the door and succumb to the rhythm of the bongos. And if it’s good enough for Hillary, it’s good enough for us. Take it as a high recommendation, you cannot leave Colombia before you visit Havana.

For more information on Café Havana you can visit their website cafehavanacartagena.com or call 57 314 5196745 for reservations.

By Luke Bujarski

 Mexico’s telecoms sector has gained a bad reputation for under investment, poor quality and high costs. Fixed line and mobile telephony rates are among the most expensive across the OECD and bandwidth is subpar compared to download speeds in other LATAM markets.  While government initiatives poised to foster competition continue to hit roadblocks, America Movil is feeling the heat and things are slowly changing.  New carriers like Nextel are building stronger brand loyalty especially within the enterprise market.  Pressure from the Federal Competition Commission has also pushed telecoms czar Carlos Slim to pledge greater investment in ICT infrastructure and more fair pricing strategies.  We spoke with Ernesto Piedras the CEO of CIU – a Mexico-based telecommunications industry consulting firm to give us a breakout of the current landscape and how things might play out over the next two-three years.

 NSAM:  Can you give us an overview of Mexico’s current telecoms landscape?

Piedras:  Mexico is a very dynamic market especially in the mobile sector where we have 98.7 million open lines and see 10 percent annual growth.  Last year’s revenues for mobile services were 17.7 billion dollars – out of 35 billion for the entire sector including fixed lines and internet.  Seventy percent of the mobile market is held by Telcel.  Movistar controls 35 percent and Nextel holds 3.9 percent of total lines. Nextel is a growing competitor as it has become the image of good service particularly with the business community.  Nextel actually accounts for 12 percent of total mobility revenues. Virgin Mobile America is also set to enter the market this year.

NSAM:  What about fixed lines?

Piedras:  The fixed line segment is 19.5 million lines which is very little under any standards considering the country’s large population.  What’s interesting is that traditional fixed line players including Telmex are losing customers to the cable companies that offer bundled phone services to their 11 million paid TV subscribers.  Cost for a dedicated fixed line tends to be high and doesn’t make much sense to consumers that have mobile phone options, but people are willing to pay for premium television which also offers telephone services.

 NSAM:  How does quality and bandwidth in Mexico measure up?

Piedras:  Mexico is 2.5G as a whole with major cities well covered, but rural areas and small towns have virtually no service.  Until recently infrastructure investments have focused on coverage expansion and not so much on increasing bandwidth.  Telcel recently announced a very important investment for 3G services and Nextel will be launching 3G as well.  When you talk about broadband internet you also have to distinguish between what is considered broadband in the world and what is broadband in Mexico.  The OECD says that you cannot call it ‘broadband’ unless download speeds are at least 2megs per second.  In Mexico download speeds are much lower.  When I travel it’s always a shock to come back to Mexico compared to download speeds in places like London.   Essentially you are paying top dollar for minimal service.

NSAM:  Are Mexico’s telecoms costs as expensive as experts claim?

Piedras:  Mexico has the highest telecoms costs across the OECD.  Also remember that Mexico has a relatively low GDP/capita compared to other OECD countries [10 thousand USD] so mobile services are very expensive for the Mexican consumer.   Out of 98 million lines only 16 percent are contract while 84 percent is prepaid services.  However, the smart phone market is growing rapidly and people are willing to pay top dollar for the latest technology.

NSAM:  Will government be able to bring additional competition into the market?   

Piedras:  Overall I am optimistic about the future and what’s coming in terms of competition and alternatives for customers.  In the past we had absolute regulatory capture with government authorities controlled by the main telecoms companies.  In the current administration there has been more independence of the regulators but government still lacks ‘teeth’ when it comes to antitrust regulation.  Last week’s decision to drop the $1 billion dollar fine against America Movil for unfair pricing practices demonstrates the limited power of the Federal Competition Commission, the main regulatory body in Mexico.  Lack of competition is also negatively impacting infrastructure investments.  Although the main companies [America Movil & Movistar] comprise 90 percent of the market, they only invest about 40 percent of total investment.  Every year they come out with generous announcements but when you look at actual investments they don’t commit.

Roberto Poujol, managing director at TXM Global, talks about next generation ICT solutions.