Ecuador's digital information sector is now a regulated one that, in the case of fintech, has generated roughly 30 local players with footprints both local and remote. To this, we may add the lucrative business process outsourcing (BPO) industry. Both are ultimately powered by software.
A Commercial Imperative
Ecuador’s software industry is not a new proposition, its economic potential highlighted in 2007 when the national software industry association, AESOFT, worked on a draft bill to support it, featuring the familiar tax breaks for innovators. Not surprisingly, key local software users were identified in the mining and telecommunications sectors as well as in management and operations functions. In 2013 AESOFT organized the IT and Productivity Forum for SMEs promoted by the ministry of industries and productivity hosting software users from Ecuador’s productive sectors. The objective was to encourage SMEs to raise their competitive game through digitalization and automated processes as vital sectors unfolded in the years to come. Note that in 2017 services accounted for at 52.11% of GDP.
The Local Market
Regional growth of the local software and broader IT industry has led to the affectionate term “Silicon Vallecitos.” A 2014 AESOFT study identified 65% of local software sales being made to the private sector, while 32% of software firms surveyed exported, with a value at the time of around USD36 million. Characteristically, 81% of firms employed fewer than 30 people. According to GMS Seguridad, around a decade ago Ecuador witnessed higher demand for licensed security services including anti-virus and firewalls, a reflection of cybercrime keeping pace with technological innovation. The firm offers the market a comprehensive package going beyond “endpoint protection,” developing its own services, such as “incident response, forensic analysis, and a security operation center,” in the words of General Manager Xavier Almeida. Tagging onto the rising star of e-government, the firm has established the National Telecommunications Company of Ecuador (CNT).
Quito’s Plum Spot
Quito has become associated with the emergence of software-developer SMEs and IT outsourcing. As of 2014, 144 software companies were registered AESOFT members, with 111 based in Quito and only 20 in Guayaquil. As such, it has become home to the information technology outsourcing – business process outsourcing sectors (ITO-BPO), having pooled technical talent available at a relatively competitive cost of labor. In Ecuador, nearshore demand is notable from the US and Canada, and a true economic contributor. Nationwide today, those sectors are inching their way inexorably toward the USD1-billion revenue mark. Naturally enough, too, being the seat of government, Quito has in particular seen local software sector growth. Quito’s IT sector has also been the beneficiary of IT infrastructure rollout. Its universities also turn out a steady stream of future computer science professionals. An early bird of the local software sector is Provedatos, established in 1983. The firm develops software to facilitate business management, writing the source code “to provide an integral service of personalization of the specific services for each client,” in the words of President Diego Meneses E., who adds that the firm is looking to open in Bolivia and Spain with its wide range of payroll and electronic billing software.
One challenge Almeida notes is the brain drain. To that may be added the perceived legal vulnerability of the software sector, anathema to investment. Elsewhere, according to William Moss, President and CEO of Cobis Systems Corporation (Cobiscorp), financial institutions in Ecuador apparently still show reluctance towards cloud uptake. The firm has needed to become “more modular” in operation, having, more recently, “taken that componentization and further developed it so that we can use it on cloud architecture.” Seemingly, too, he feels, the country has “missed an opportunity to create a cluster around that, a center of expertise in financial technology.” And, despite historically slender government-business collaboration to support the software arena, “there are now certain initiatives with the new government, which is like a breath of fresh air.” The Latin American Trade and Investment Association indicates that Ecuador currently boasts over 20 tax and non-tax incentives. Ecuador, then, produces the graduates to fuel a growing software sector. Paradoxically perhaps, their competitive pricing is tempting some to pursue careers elsewhere.
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