Latin America booming with IT skills, infrastructure problemsDecember 26, 1998
Web posted at: 7:29 a.m. EST (1229 GMT)
by Jeffery Zbar
(IDG) -- When Andre Vanyi-Robin launched Benevisual, a Caracas, Venezuela, division of his Miami-based Web site creation company, he couldn't have known that something as basic as the phone system would ultimately price him out of business.
In January 1996, Vanyi-Robin was paying $60 per month for an Internet connection for his 15 employees — slightly more than the cost of his Miami office connection. But he was also doling out 30 cents per minute to the telephone company every time he logged on. The total: more than $1,500 per month.
"The per-minute calls were more expensive in some cases than the long-distance phone calls," he says. What's worse, local laws forbid using voice lines for dedicated data service, and a 256K bit/sec. frame-relay network would have run $3,000 per month, which priced his company right out of the market. And Vanyi-Robin isn't alone. In Latin America, more than 70% of businesses are forced to pay high phone rates because they use dial-up connections — all as a way to avoid the even larger cost of a dedicated network.
Thwarted, Vanyi-Robin in January folded his Caracas operation into the Miami offices of Visualcom Inc., his Web site development company targeting Latin American divisions of Fortune 500 companies.
Corporations looking to expand into Latin America often experience both a blessing and a curse. The region's information technology market is blossoming with skilled talent, plentiful equipment and a growing awareness of IT's importance in emerging economies. But long-existing problems, such as an aging telecommunications infrastructure run by inflexible government or private monopolies; high per-minute phone charges, even for local calls; and corruption in utilities and the government, continue to dog the region.
Differences vary so widely among countries that a company's strategy needs to be country-specific, says Kenneth Richard, president of Latinrep Associates Inc., an Oakland, Calif., sales and marketing outsourcing firm that targets the Latin American IT industry.
Chile, whose government helps guide IT development, has an entirely digital phone system, making quality connections easy and inexpensive, Richard says. Other governments, such as those in Argentina, Uruguay and Peru, are less involved in guiding business and industry. With more than $1 billion invested in the Argentine phone system in recent years, connections are effective and timely, with setups taking just days or weeks. Also in that country, recent advances have been made in Internet affordability. Until recently, high per-minute costs have rendered Internet use off-limits to all but the upper class. But the local telephone duopoly has agreed to halve the cost of calls made to Internet service providers, according to Fernando Espuelas, CEO of StarMedia Network, a Spanish-language Internet content provider for Latin America.
In Mexico and Brazil, on the other hand, business and industry are emerging from years of protectionist policies that guaranteed jobs at good wages. Thus, corruption exists, and civil servants are apt to "intervene in productive sectors' daily lives," Richard says. Brazil is "by far the most complicated, frustrating and difficult" place to do business as its industries adapt to privatization, Richard says. For example, it can take months to get a high-speed data line in Brazil — if you contact the right people. "Your biggest issue will not be if you can get a good solid T1 line," Richard says. "You can, but it may take you a year unless you're willing to pay many thousands of dollars to fix it."
From an IT view, the region is well-served by a fast-learning employee base, Richard says. Low labor costs diminish the cost of installation and cabling, and the quality of technical support is higher than in the U.S. That's because until the past few years, the region was "ignored and abandoned" by both U.S. and Japanese manufacturers, he says, although many multinational hardware manufacturers provide in-country service and support today. Thus, entrepreneurs have learned systems themselves — and provide the service to locals.
"These guys have had to figure it out on their own," Richard says. "As a result, the level of sophistication in tech support often is higher."
Where sophistication lags is within some of the local companies themselves. Few have upgraded their systems to compete on a global level because of past laws protecting them from outside competition, says Amilcar Marques, an analyst at Gartner Group Inc. in Curitiba, Brazil.
Such laws are outdated today, but local companies still lag behind the global standard by upward of five years, Marques says, and about 80% of companies "use the old method of paper and a lot of memorandums."
Even connect speeds with local companies may be unrealistically slow. Large companies tend to take it upon themselves to help automate priority suppliers.
For some, the attitude is, "This is painful. It takes time and money. So why do it if you don't need it?" Marques says. "This is common, especially in the government."
As MIS director at Foote Cone & Belding Advertising in Latin America, Jaime Graterol has experienced the highs and lows of the region's IT capabilities. In the largest of 27 regional offices, such as those in Brazil, Argentina, Mexico, Puerto Rico and Venezuela, the company uses fractional T1 lines. Smaller offices pay the per-use dial-up fee. Though the cost is high, the options are few to keep the 550 terminals linked regionwide. "It kind of balances out," Graterol says. He acknowledges that some countries hum better than others. But from an IT perspective, Latin America has evolved into a sound market, he says. The learning curve has grown short, and skilled IT workers have become bountiful — more so than when Graterol joined the agency in 1983.
To newcomers, Graterol offers this advice: Realize the subtle differences among countries, expect delays in getting permits or hooking up telephony lines in some of the larger markets, and make friends among civil servants.
"Many of us, being from the region, know the problems you can have," the native Venezuelan says.
"To set up a shop, you need a lot of permits, and it's going to help you if you have contacts," he says. "What can I tell you? That's the reality."
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