Quito, the capital of Ecuador with a population of just under 2.7 million, has a long history of nearshore IT development and a knack for supporting small- and medium-sized development companies. Although the boom has waned somewhat, there is still growth in the sector and a renewed interest in entrepreneurship in the tech industry.
Diego Miguel Meneses, Director Comercial of Grupo Provedatos, one of the first software development companies in Ecuador, founded more than 30 years ago, described software development in Quito as a very high quality end product. “It is growing with a few firms that are pioneers and best at software development and utilizing different technologies,” he said, adding that Quito is the core site for the ITO/ BPO sectors because of the great talent there is, the great know-how from firms, and also the cheaper cost of labor in comparison to other locations.
Small But Growing
A 2014 study by the Software Association of Ecuador (AESOFT), 65% of software sales are to the private sector, with 32% of software firms surveyed indicating that they export. The industry has an export rough estimate of $36 million. According to AESOFT, there are 144 software companies registered as members of the software association, of which 111 are based in Quito. By comparison, there are just 20 members in Guayaquil.
This is an industry that moves $540 million nationally and one in which professionals are relatively well paid, but still offer significant value for the money.
Leslie Jarrin Torres, Managing Director of ThoughtWorks Ecuador and a former software entrepreneur, has seen growth in the software development business in Quito in the last few years especially in terms of outsourcing. “In the past we could see few middle size companies offering specific domain software. Now, we can see many companies, small companies, offering and doing IT outsourcing. I can see also that the local market has accepted the outsourced model but the majority of these companies are selling outside Ecuador,” she said.
For a few years, Quito has seen the mushrooming of exciting new small software development companies, but Meneses said that this has slowed over the last year. Smaller firms still make up the majority of those surveyed by AESOFT, with 81% indicating that they have less than 30 employees.
Jarrin said that Quito is still the center for software development in Ecuador, largely because historically one of the biggest buyers of this type of services has been the government and Quito is the city of the central government. The infrastructure that the city has helps to create technology. “Besides Guayaquil I don’t think any other city has the access to this kind of infrastructure (for example bandwidth),” she said.
Jarrin added that Quito also has many good universities that offer Computer Science careers.
Starting A Start-Up Culture
Entrepreneurship is key to the emerging small software development segment. “I started my own company 10 years ago and at that moment we talked a lot about having a ‘Silicon Valley’ in Quito,” Jarrin said. “Now there is even bigger support for start ups on technology. The government and many organizations encourage technologists to start their own businesses.”
According to the Latin American Trade and Investment Association, Ecuador offers “more than 20 tax and non-tax incentives (cumulative), income tax exemption and deductions as well as exemptions from advance payment of taxes.”
She added that another reason could be that most of these entrepreneurs were the employees of the last generation companies (that are still working) and they wanted to do the things in a different way. “They wanted to work on more modern companies so they created by themselves,” she said.
Despite increasing support for investment, there are still challenges to the development of the industry. For Meneses, the biggest challenge is still selling services to other regions or countries. “There are still some Ecuadorian firms that are not capable of maintaining the necessary quality of service the clients demand,” but he added that there are many highly capable people in Quito
Jarrin said that the biggest challenge is “to push the University and the education system in general to teach the students what the market needs. We have good universities but they are not moving fast enough as the technology is changing.” She stressed that there is still work to do in the middle school as there are not enough students that want to study or learn about software development.
“We have really talented people, they just need to have good guidance,” she said, adding that it is also important to work also on the management skills. “Our industry is still learning how to provide a better management of software development project support for their clients.”
Although Jarrin has found good quality talent in Quito, she said that they do not necessarily have the knowledge the market needs. “I think we have good quality but not enough people, at least in Quito,” she said.