Nearshore Americas

South America Earns Recognition as Growing IT Hub


Ever heard of the Chilean town of Viña del Mar? Believe it or not, this little town on the coast of South America is the location of General Electric and UST Global’s next joint venture (JV) in outsourced software development.

The new centre is called Genshare and is being set up with an investment of $30 million. The centre will generate over 1,000 jobs over the next five years and work closely with UST Global’s other centers in India. The setup is expected to be an argument for Latin America’s greater participation in the IT industry, and help South America’s economic development.

According to sources in the company, the expansion into South America is taking advantage of the maturing of India’s software IT market and diversifying the talent pool to cover other geographies. The location is of importance as well, as the new centre will cover one more time zone to provide 24 hour service to UST’s global customers.

This is not the only instance of IT’s shifting focus to South America. Recent forecasts from IDC indicate that the continent is expected to generate 690,000 new jobs and create 6,000 more companies in the next five years. The strategy from the point of view of the global IT companies makes sense. Latin America has been one of the first places to recover from the recession, and a number of factors such as growing levels of education and economic stability favor companies setting up shop there. Coupled with the fact that China is yet to develop into a sizeable IT market due to language barriers and the growing saturation of the IT employment market in India, where salary levels are growing at levels that reduce if not negate the advantages of outsourcing, it is the best place for companies to target much needed manpower.

However, many are ambivalent about the opportunity size. South America has not been known for extended stability or a highly educated workforce. In fact, apart from tourism, the continent makes more money from the export of raw materials and minerals than any sophisticated technology or services. The key, experts say, lies in using each country’s strengths in the right way to leverage the overall advantage. For example, Panama could be ideal for IT services, given the relatively high level of education and low costs, while Uruguay could contribute to project development because of the presence of a critical mass of professionals. And Brazil, by far the largest and most stable of the Latin American nations, represents the largest opportunity.

What implications does this have for the Indian IT industry? Already the country’s voice-based call centers are seeing business move to places like the Philippines, which are cheaper and have a closer cultural affinity to the US. Now with technical support also moving to South America, whose work timings are similar to those of the US, the country’s large players in ITES will have to reconsider their strategy for the coming years. No doubt India offers better trained professionals, but the cost structure is no longer at levels that it used to be ten years ago, due to the increasing numbers of companies off-shoring their operations there.

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Companies here will have to move further up the value chain into knowledge process outsourcing and specialized areas such as legal, financial and engineering to continue generating business. These areas are niche and offer a better value proposition overall for the companies willing to deal in these services though the salary will also have to be correspondingly high. The coming decade will show how the ITES sector in India changes, hopefully for the better.

Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

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