Kirk LaughlinSource: Financial Times/ft.com
Think of Chile and you probably think of copper, wine, salmon… but IT?
Fuelled by government investment, the IT industry grew 18.5 per cent in revenue terms to $3.5bn in 2010. Though still tiny in overall terms – 1.7 per cent of the total economy – the industry is positioning itself both to lure technology companies to the region and to export IT services like software design, online banking services and digital marketing, especially to the US.
Carlos Fernández, CEO of Chile-IT, a non-profit, government-backed organisation, says investment in the industry is running at about $4bn a year and growing at an annual rate of 8 to 10 per cent. Chile-IT seeks to spur the development of the industry and develop partnerships in the North American market where Chilean companies can provide IT expertise to local companies.
He says: “We are being recognised more and more as a leader in the global market. With cultural similarities to the U.S., time-zone capability and a tech-savvy demographic, Chile is becoming a centralized IT hub for South America. The government is firmly committed to making the technology industry a priority and we are excited about the continuing growth of the industry in 2011 and beyond.”
Unlike, say, Indian companies, which provide offshore services to other clients, Chile-IT, which was set up in 2009, is focusing on developing partnerships whereby North American companies can tap Chilean companies in the US for digital services. Its member companies generated $5m in US sales in 2010.
Chile has more than 500 IT companies, including Coasin Global Services, Datco, Eticsa, Excelsys, Ki Technology, NovaRed and Synapsis, and more than 60 multinationals have opened offices in Chile including McAfee, Certifica and Worleyparsons. University IT courses in Chile have the highest growth rate compared with courses involving economic sectors.
Chile-IT says some Brazilian and Mexican companies are operating in a similar field, but it believes Chile is carving out a niche for itself. Despite the appreciation of the peso, which exporters in general have groaned about in Chile, Fernández says Chilean IT companies are “still able to sell a value proposition” because they are not simply selling a product but “trying to harness the US labour force to bring value added services”.
Is Chile becoming LatAm´s IT hub? well, not really. Chile is a very interesting place and it has a lot going for it, but LatAm´s IT hub? Nice informercial. Just consider the size of the place: GDP 260B, 12M chileans. Contrast that with GDP 530B and 20M inhabitants … in Mexico City Metropolitan area only. You have enormous concentrations of IT in Mexico City, Sao Paulo, and even places like Guadalajara, Monterrey, Curitiba, Porto Alegre that are bigger and more sophisticated. So – excelent IT hub? YES. The #1 LatAm hub? far from it, but does not have to be. Chiel is carving its own niche, which is a fantastic strategy. Something that is not helping Chile is the lack of English speaking engineers, which is a pre-requisite for growth. But Chile is a fantastic and beautiful country with hard working people – so I wish them well!