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Because of the high growth potential of global services, Chile has made it a priority. As a result, the country is now one on the world’s most attractive destinations for this type of investment.
Chile is one of the world’s most attractive destinations for investment in global services, which is one of the world’s most dynamic industries.
Comprised of four sectors — Information Technology Outsourcing (ITO), Innovation Processing Outsourcing (IPO), Knowledge Process Outsourcing (KPO), and Business Process Outsourcing (BPO) – the global services industry is worth $280 billion worldwide is expanding at a rate of 10% a year..
In the case of Chile, the industry grew from $200 million in 2006 to more than $700 million in 2010, generating approximately 30,000 skilled jobs. The US management consultants A.T. Kearney ranked Chile 8th out of 50 countries internationally in its 2009 Global Services Location Index. It indentified Chile as the most attractive country for these services in Latin America because of its political stability and favorable business environment.
“Its main strengths are in the high-value-added area, which has boosted IT service companies such as Oracle and TCS, and knowledge processing outsourcing (KPO) activities in IT and biotech,” the report stated.
Chile’s IT market is one of the most developed in Latin America, according to the Chile Information Technology Report Q3 2010″ by Business Monitor International. The report stated Chile’s IT sector is projected to grow at a compound annual growth rate of 11% from 2010 to 2014. Chile posted IT sales of $2.3 billion in 2010 and these are expected to grow to around $3.4 billion by 2014.
“Chile retains some strong IT market fundamentals, including consumer affluence and a relatively favorable business environment,” the report states. “Chile’s development as an offshoring location will attract more investment in IT services, with sectors like retail, distribution, financial services, telecoms and healthcare all offering opportunities.”
In 2009, the Chilean government in association with the Chilean Association of Information Technology Enterprises (ACTI) created Chile-IT, a not-for-profit organization committed to fostering the national IT industry. Chile-IT acts as a bridge between the local providers and its potential foreign partners.
“In the last year, the IT industry in Chile had a turnover of $3 billion,” says Gordana Stojkovich, Executive Director of Chile-IT. “The sector is growing so fast because Chile has many of the attributes that outsourcers are looking for. We have a large pool of some of the most highly educated computer engineers in the region, yet their wages are highly competitive especially when you compare them to wages in the United States or Europe. Moreover we have the most state-of-the-art infrastructure in Latin America. And of course there is a lot of government support for developing new technologies and for attracting international investors.”
Currently more than 60 international companies operate in Chile in the different areas of the global services industry. Among others, these include JP Morgan, Citigroup, Accenture, Sandvik, Yahoo and Bayer. McAffe Labs decided to establish its first Latin American engineering centre in Santiago in 2010.
“After three years of research, we reached the conclusion that Chile was top of the list because it fulfilled all of McAfee Labs’ needs,” says Hiep Dong, Director of Operations. “There are three issues that are key for us – the availability of talent, economic and political stability, and infrastructure. Chile was well evaluated on all these points.”
The main markets for Chile’s global services exports are South America (Peru, Colombia, Argentina), followed by the U.S. and Europe. Export revenues for the global services industry in 2009 topped $840 million and employed 20,000 people, according to a report by the IDC consulting company.
Chile is well-positioned to continue expanding into new markets. A 2010 survey by ACTI (Chile-IT) and Diego Portales University found over half of Chile’s ICT companies are exporting their services, especially to South America (67%) and Central America (18%). ACTI Expects to rise to export value over $1.5 billion in 2015.
Opportunities abound for global services investors in Chile across the industry. The main areas are in application development and administration, systems integration, ITO consultancy, customer services, BPO and KPO.
Engineering services are the area of KPO that generates the most revenues. With exports of $276 million, it represents 73% of the sector’s revenues and more than a third of the total export revenues. ●
For more information:
Chilean Association of Information Technology
An excellent business environment
Evalueserve is a Knowledge Process Outsourcing firm that produces specialized research for the U.S. and Europe. It opened in Chile in 2006 adding to its operations in India, where it was founded in 2000, China and Romania.
Evalueserve opened its Latin American operations center in Chile’s port city of Valparaíso with an initial investment of $2 million. With more than 200 employees, the company’s most important clients are in banking, healthcare, telecommunications, construction and transport. Evalueserve aims to provide outsourcing services to clients in North America, Europe and Asia.
What were your selection criteria?
We studied six locations – Sao Paolo, Mexico City, San José in Costa Rica, Buenos Aires, Santiago, and Waterloo in Canada. We evaluated the talent pool, business environment, and the cost of doing business. Evalueserve decided to open the center in Chile primarily because its clients in the Western hemisphere did not want to work with the time difference with India. It is now able to offer a global reach and an offshore model also for customers in Spain and Portugal.
What did you see as Chile’s main advantage?
In the three aspects that we analyzed Chile came out well in comparison to the other countries in the region. It offers global services companies and excellent business environment and has urban infrastructure that is by far the best in Latin America. Chile is an example, in the region and worldwide, or appropriate economic policies and political stability. Corruption is non-existent and the crime rate is low. In addition, the country is home to some of Latin America’s best universities.
What has your experience in Chile been like?
Very good. In addition to talent, Chileans have good work habits and are innovative. I would also like to stress the support provided by CORFO which offers a very attractive subsidy package to foreign investors. This demonstrates the intention of developing string and clear policies to transform Chile into a South American Silicon Valley.
What are your plans in Chile?
We want to stay in the country and continue growing. For 2014 we would like to have 500 employees working there. We plan to incorporate new services and sooner or later to install anther office in the country.