Nearshore Americas

At Last, Argentina Software Sector Sees Light At the End of the Tunnel

The Argentine  IT industry is showing surprising strength during the last year, despite a steady stream of downbeat news about fiscal crises and economic uncertainty. The country’s software industry registered more than 10 percent growth in 2012 and generated more than US$900 million in export revenue, according to a statement from the country’s  Minister of Industry, Debora Giorgi.

“Earlier we developed software for small companies, now more Fortune 500 companies are knocking on our door seeking to have their software developed in an agile environment,” says Alex Robbio, Vice President of Belatrix, one of the largest software developing companies in Argentina. Belatrix experienced tremendous growth (around  40 percent), during the last year – demonstrating the resiliency of the software sector. The growth comes despite Argentina’s most important trading partner – Spain- enduring one of the worst economic disruptions in the country’s history.

An increasing number of companies in the country are adopting agile software development methodology, an area where the country is showing some real leadership.

Whether inflation is taking a bite out of the profits of outsourcers remains a highly debated topic.  “IT employees in Argentina earn the same salary as their counterparts in neighboring countries including Brazil, Mexico and Costa Rica,” said Robbio, brushing aside the argument that inflation is eating into the profits of IT companies.

The Driving Force

What is driving the industry, however, is the steady influx of skilled workers and the rising popularity of agile software development. While IT companies in India are struggling to adopt agile methodology, firms in Argentina are increasingly finding success.

“I think Agile is the driving force and that is what we are specialized in,” says Cesar DOnofrio, CEO of Making Sense, another IT company from Argentina.

Developing software in an agile environment requires the vendors to be in constant contact with clients so requirements and changes could be immediately communicated and deadlines met.

“It is a trend Argentina is capitalizing on,” says Robbio, adding that almost every IT company in the country has adopted agile methodology with some degree of success.

“Many of my clients say they have now realized that having software developed in an agile environment is difficult in offshore regions. The time zone difference and the cultural mismatch are the main reasons.”

Until few years ago, the IT industry in Argentina was heavily concentrated in the City of Buenos Aires but now is spreading out to even little-known cities including Rosario, Córdoba, Mendoza, Tandil, Mar del Plata, Bahía Blanca and San Luis.

Companies, big or small, are looking at ways to expand overseas. Point Club, an online shopping club created by Juan Pablo Santiago Torras and Pampuro, has recently expanded into neighboring Chile and is now reportedly planning to expand further into Colombia, Brazil and Peru.

Generating Skilled Labor

CESSI, Argentina’s IT industry association, has in the meanwhile embarked on a mission to generate skilled labors for the industry, and is encouraging member firms to collaborate with universities and train the students in IT services skills.

It is because of these skilled labors, DOnofrio says, Argentina did not lose its competitiveness even in the face of rising inflation.

The CESSI says the industry wants 7000 new graduates to enter the IT segment every year to help the sector keep pace with its current growth rate.

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“The quality of engineers is pretty good in Argentina though the number of engineers graduating every year is small compared to countries like India,” DOnofrio said.

The government, on its part, offers 50 percent tax break on the profits made by IT companies, and allows firms to use the payroll tax for covering the cost of training programs.

Despite the efforts, skilled engineers are still in short supply. “The labor market is really tight everywhere in the region. I don’t think you can find out any software engineer sitting idle without a job,” said Robbio, adding that the training programs are yielding results and a good number of engineering graduates are entering the sector.

The Association, in the mean time, is setting up offices in the United States and hiring lawyers, PR executives and tax analysts to assist the Argentinean IT companies looking for expansion or contracts in North America.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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