Telecoms & IT

Colombia’s IT and telecoms sector and the role of digitalization

IT and telcoms and the digital transformation in Colombia

Colombia's IT and Telecoms sector seems more investment-worthy in 2022 than in pre-pandemic days, after the sector rose to the occasion during social isolation.

Colombia’s IT and telecoms sector included, the COVID-19 pandemic put digital transformation to the test, if not ushering in a new chapter in digitalization. With the beginning of social distancing almost everywhere, businesses had to rely on digitalization to stay afloat. And digital technologies by-and-large proved to be useful: they kept the education system functional, enabled companies to do their business almost as usual, and helped keep the number of new cases in check. As such, the demand for IT and ICT services went up, especially business processes outsourcing (BPO), telecommunications services, and server, cloud, and hosting.

Colombia, as the Latam’s IT hub, was one of the battlegrounds where digital solutions put up a showdown. It was important for many to see how a nation with a robust IT infrastructure such as Colombia would fare in comparison to others in the region. As it turned out, not bad at all. The government and businesses used technology to mitigate the situation. Thanks to digital solutions, Colombia managed to cushion the blow in a manner comparable to developed economies, despite being a developing economy with some social inequality problems.

In terms of public services, the government introduced a database of citizens, Carpeta Ciudadana, which facilitated the collection of health data and tax data, among much else. Even much of the judicial activities in various courts of law went digital. As in most of the world, teleworking became the norm for over a year, and remained an option afterward. Colombia had had a distance working culture for almost a decade beforehand, but the acceptability of teleworking grew remarkably among employers, once everyone saw that remote working did no harm to the levels of productivity, while cutting down on operation costs.

It is notable that many trends originating with the pandemic are not dying away. It is as if the days of social isolation have acted as a catalyst for digitalization. Phenomena such as distance education, remote work, and e-government which had been just within our reach gained social acceptance during the lockdowns. Buzzwords such as e-commerce and digital citizenship previously existed, of course, but they were not anything more than, well, buzzwords. The pandemic, as a matter of necessity, forced many to step out of their comfort zones and embrace new ways of using technology on a daily basis. In short, an irreversible change happened in the adoption of technology in the world and in Colombia.

As digital transformation goes to the next level in Colombia, investment in the sector becomes a safer bet. This is supported by statistics from both pre-pandemic and post-pandemic days. According to the National Administrative Department of Statistics (DANE), the Colombian ICT sector enjoyed a sharp growth in terms of value-added between 2005 and 2017. The growth rate has remained steadily at 60% in over a decade, which is a welcome sign. The sector is bound to grow, if possible, at a faster pace in 2022 and the coming years, particularly as the country has started to diversify the ICT industry. In addition to telecommunications, Colombian and Colombia-based businesses are venturing into software development and AI-assisted consultancy services.

Business process outsourcing (BPO) accounted for a large part of the IT sector in Colombia in 2019, and with the current wave of digitalization in North America and Europe, BPOs will expand even further. While BPOs represent the traditional side of the IT sector which operates on solid contracts with overseas partners, there is also an ambitious and younger side: tech start-ups are experiencing a renaissance in the country. Although some of these start-ups will inevitably fail as it is in their nature, some of them will flourish and generate handsome returns on investment. An investment portfolio mixing the two sides of the industry will be optimal.

The government is supporting the growth through regulatory decisions while launching several initiatives to encourage North American companies to relocate their operations from distant locations to the nearby Colombia—a process which is often referred to as near-shoring. “Investments from companies choosing to nearshore in Colombia have exceeded USD1 billion in little over two years. That reportedly came in the wake of the current administration beginning to heavily promote nearshoring in Colombia,” according to a 2022 report published by Biz Latin Hub, a market leader in helping businesses expand into Colombia. In 1Q2022 alone, some 60 companies moved their operations to Colombia.

As the momentum caused by the pandemic continues to drive the sector in 2022, more businesses come to see digital transformation as a practical solution—and not an abstract buzzword anymore. By any standards, Colombia is a dependable hub of IT and ICT in the continent, mainly serving American and Canadian businesses in a win-win arrangement. While the costs of IT and ICT services in Colombia is highly competitive, the quality and diversity of products has been on the rise. In such a climate, both traditional and innovative IT businesses in the country are set up to expand and attract new investments and contracts.

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