With a population roughly the size of Costa Rica and a reputation for tech innovation, the Cali region in Colombia has emerged as a direct contender in the country’s bid for global services investment. Nearshore Americas visited Cali in March to assess the region’s prospects for future growth in the industry. For the moment, Cali remains largely a domestic (albeit significant) market player when it comes to IT & BPO. The workforce is well educated and has produced some impressive IT services firms with growing exports throughout Latin America. The contact center business already has proven viable for Colombian and other Spanish speaking markets and we will likely see Customer Relationship Management multinationals begin to scale sooner rather than later. This momentum, along with a vibrant economy, has left local investment groups optimistic that certain global IT services players will choose Cali over neighboring rival Medellin. However, local stakeholders including a recently elected pro-business mayor will have to take actions to demonstrate that Cali can push beyond the 1,200 or so IT services employees currently working in the region.
Economic Base on Solid Footing
Cali is Colombia’s third largest metropolitan area nestled in the foothills of the Andes Mountains, 150 kilometers from the Pacific Ocean. The city rests in the so-called Cauca Valley, peppered by other smaller population centers which in total support 4.4 million inhabitants. The region is a manufacturing and agricultural exports hub for Colombia with a growing logistics and commercial sector. Last week Dutch firm Van Oord Dredging & Marine Contractors initiated a large-scale infrastructure improvement project set to deepen the port in nearby city Buenaventura to accommodate next-generation container vessels.
As a bypass to the Panama Canal, the project’s longer term economic impacts for the region are palpable. High-profile Brazilian aerospace manufacturing giant Embraer is now looking seriously at Cali, given its strategic location and access to the Pacific.
We also note a vibrant services and commerce economy taking root in Cali. During our field visit, certain vendors complained about the lack of available office space in the city. However, to simply say “lacking in infrastructure” inadequately reflects the reality on the ground. Our initial impression is that Cali has a well-balanced urban layout – dotted with parks, rivers, boulevards, green spaces and other structural advantages that lend well to small and medium sized retailers, restaurants, hotels, and other amenities that improve overall quality of life and long-term competitiveness of the city.
Despite a solid urban fabric and scenic skyline, DirectTV decided to build out a new custom facility to accommodate its new Pan-American customer service center under the management of industry veteran Fabian Saavedra. The state-of-the art facility employs over 800 agents servicing clients throughout Colombia, Central America, and Venezuela. The longer-term vision laid out by investment promotion group Invest Pacific is for global services firms to concentrate in the south of the city next to the Universidad del Valle (30,000 students), the region’s main talent factory and in fact one of Colombia’s most reputable educational institutions.
Representatives from CompuNet and Open Systems go out of their way to recruit IT talent from outside Cali via various incentive programs.
Likewise, Uruguayan property development group Zona America has broken ground on a large business park within the vicinity to accommodate global services firms specifically, with Cauca-born Carvajal Technology and Services as one of their first committed tenants. The flagship Colombian IT incubator program ParqueSoft is also Cali-born and continues to host some promising start-ups. Efecto Studios is one of Colombia’s hottest gaming development firms which got its start in ParqueSoft. CEO Eivar Castro lived in Cali for five years working out of ParqueSoft and has since moved operations to Bogota to develop video games for major gaming consoles including PlayStation3 and Xbox360.
Growth in IT services has successfully taken root organically by firms serving the local market, and they have just recently begun expanding their global footprint. Carvajal Group, a newer arrival, is likely to help Cali’s ascendance. The firm’s work in application development and cloud-based solutions for health care, education, and retail demonstrates that Cali can deliver the talent needed for innovative technology projects. SAP implementation and consulting firm CompuNet (approximately 300 consultants across Latin America) has also demonstrated the viability of Cali as a high-value global services platform.
CompuNet leverages their vertical expertise in agriculture, oil, and transportation to augment IT staff for enterprises in Mexico, Chile and Argentina. Software solutions and IT services firm Open Systems (200 employees) is another mid-sized Cali-born firm with operations in Colombia, Ecuador, Argentina and a recently opened sales office in Miami, Florida.
Despite these milestones, concerns have been raised regarding Cali’s ability to scale operations in IT and its overall competitiveness relative to other markets in Colombia. Representatives from CompuNet and Open Systems go out of their way to recruit IT talent from outside Cali via various incentive programs. To bridge the talent gap for qualified programmers and systems engineers, Open Systems subsidizes housing and living expenses for new recruits. While contact center operators including DirecTV have seen great successes in staffing their operations at costs approximately 25 percent cheaper than Bogota or Medellin, Cali must take steps to ensure a steady stream of technical talent if it is to compete in the IT space. With that said, the region’s education and training institutions are refocusing their bandwidth to accommodate the growing demand for technical trainees.
Multinationals Eying Cali
Over the last five years a full-out arms race has escalated between countries, cities and regions in Latin America competing for global services investors. Markets in Mexico, Chile and Costa Rica have well-established track records in IT services and have generous attraction incentives and workforce development policies in place to help ensure sustained investment.
Cali has the added advantage of being tied to one of the strongest investment brands in the region, Colombia. With a strong local economy and ample affordable labor for Spanish market CRM and BPO operators, Cali will continue to swell within this segment of the business.
The question is whether local stakeholders will see their dream of becoming a global high-value IT and professional services destination realized. Sources indicate that IBM has shortlisted Cali for expanded operations. A green light by IBM would certainly be a boon to the region’s profile as a global services hub, but local officials and investment authorities must also take measures to ensure that local firms are not left out of the equation. Charting a path toward a sustainable IT/BPO outsourcing industry will require well-balanced coordination between local governments, investment promotion groups, and universities to produce the needed workforce talent and operating environment that will nurture, instead of cannibalize a promising sector in the region.