Chile Aims to Brand Itself as High-end IT Services Destination

Chile has an ambitious plan to become a key supplier of outsourced IT services to the U.S. The country has advantages: it's a near-shore destination that doesn't require flying to the other side of the world, it has a modern infrastructure, and it's close to the U.S. in terms of time zone, eliminating the kind of second- and third-shift work that India and the Philippines must engage in.

However, according to an article from IDG news today, the country must determine how to overcome its limitations first. The country, which has a population of only 16.6 million people, does not have the large number of trained people that would enable it to compete with the large software and services operations in India and the Philippines.

To remedy this, Chile aims to focus its efforts on high-value work and take steps to partner with other Latin American countries that have larger populations and skilled staff.

For software development and other kinds of similar work done in Asia for U.S. companies, Chile has little hope of competing. Carlos Bustos, global services director of NovaRed, a managed security services firm in Santiago, told IDG news, “You can't get the people required for that kind of work in probably the whole of Latin America.”

According to CORFO, Chile's economic development agency, Chile's global services revenue was about $840 million in 2008, and the industry employed about 20,000 people. However, according to the agency, more than half this revenue came from within Latin America, and only 21 percent of it was from U.S. projects, and a large part of the remaining revenue was from foreign companies operating within Chile, not Chilean companies. More than half of this global services revenue came from engineering services, application software development, and research and development (R&D) services.

The U.S. is an obvious target market for IT services, Juan Carlos Munoz, CEO of Chile-IT, told IDG news. Chile-IT is a trade organization of Chilean outsources, and organization has a goal of promoting Chile's services business in the U.S. But it first must find its “niche.”

IDG news spoke with Anand Ramesh, research director at Everest Research Institute. “Chile has a sophisticated talent pool with pockets of strength in IT applications, IT infrastructure and industry-specific IT implementations,” said Ramesh. “The country also has top-quality infrastructure like roads, telecommunications, and electricity, but it is among the more expensive locations in Latin America, so it is not the place a customer would choose to dramatically cut costs.”

Chile's niche, said Ramesh, would most likely be that of a small-scale location with a specialization on higher-value knowledge services or IT activities.