Nearshore Americas

COMMENTARY: Cuba, Outsourcing and the Intriguing Upside of a Very Raw Market

In the bright light of traditional outsourcing analysis, there are certain hard-core truths that separate viable destinations from also-rans. When the scrutiny gets placed on Cuba, the classification is not hard to make: Cuba has a slim set of qualities that, cumulatively, will severely limit the country of 11.5 million citizens from making a genuine run after global-ready IT and BPO services. At least in the near-term.

But keep in mind that Cuba is also not your typical Nearshore sourcing destination and yesterday’s announcement, halting years of acrimony between the United States and Cuba is no ordinary diplomatic rapprochement. This news is a big deal – especially for those of us who are engaged in the Nearshore outsourcing market.  Taking on the ‘upside’ argument for a minute, the assets the island brings to the table are formidable:

  •  Proximity: The closeness of Cuba to the southern shores of Florida (90 miles) is a very significant feature. Convenience matters. For most business travelers, the time to get to Havana will ‘feel’ the same as flying to other US destinations. It won’t be markedly different (unlike flying to Costa Rica, Guatemala or other destinations further South and East). For example, for a New York City executive, flying to Havana will take about half the time it would take to fly to some of Central America’s most popular hubs.
  • Educated Citizens: Bert Quintana, CEO of Sitel who actually was born in Cuba and emigrated to the US as a child, told me once: “Cuba is the kind of place where taxi drivers will suddenly start talking to you about artists like Vincent Van Gogh.” The worldliness  – albeit academically oriented – of Cuba citizens, having been exposed and educated in humanities, the arts, history and of course medical and technology fields will have positive influences, on many levels, when inter-relating to professional  counterparts from other countries. “According to the United Nations, the government spent 13.4% of GDP in education between 2005 and 2011, which is quite high when compared to other countries in the region such Mexico, with 4.4% and 6.6% in Costa Rica,” reports Susana Martinez is this excellent analysis of Cuba in Nearshore Americas is July, 2013.
  • Aura and Intrigue: Let’s face it, the outsourcing industry is rife with exceptions and intangibles when it comes to decisions around setting up delivery centers in specific countries. Site selection decision-makers often have some type of personal affinity for a destination, which – when all other requirements are met – can be the critical difference in one market beating out another market. In the case of Cuba, this is a place not just steeped in history but a country now making history.  The country has tremendous allure for United States citizens particularly who seem to want to be part of a ‘rekindling’ of a long-lost friendship between nations. Further, Few Latin America countries offer the kind of concoction of raucous nightlife and musical, architectural and leisure attractions (including largely unspoiled ecology) that Cuba possesses – all without the specter of major crime and cartels.
  • Trained IT professionals: Nearshore Americas has spent an increasing amount of time studying the Cuban IT market over the last year (and then some), anticipating the arrival of diplomatic breakthrough.  (For close followers of Nearshore Americas, you are well aware of our consistent coverage of Cuba going back to our earliest days. Peter Ryan, senior outsourcing analyst at Ovum, has contributed steady opinion for us on the topic and I was fortunate to have met some Cuban officials back in 2009, beginning to make the argument.) A key finding so far is that Cuba does in fact have a relatively active IT marketplace, where software programmers, project managers, testers and designers are engaged in largely domestic-related projects. Estimates range from 6,000 to 10,000 professionals working in IT currently – with strong demand for software engineers. The presence of a true IT sector, albeit modest, is perhaps the most compelling asset of all – as there will be a natural evolution of that market to build its readiness for global IT commerce. It is worth noting also that Cuba represents the first major Latin America destination to arrive on the outsourcing ‘scene’, already equipped with IT readiness – a striking contrast to many other established Nearshore markets that still struggle to build a case for attracting ITO.
  • Enablement by Government – US and Cuba: The United States Government will almost certainly be keen to show that the decision to reconcile with Cuba will ultimately lead to meaningful business benefits. While the embargo does remain in place, there are already clear indications that the end-game for engaging Cuba is about commerce, and forcing a shift away from the previously overriding influence of Russia and Venezuela. Meanwhile, earlier this year the Cuban government re-wrote the rules for foreign investment and also set up a new office for  investment attraction, positioned to – you guessed it – engage and welcome foreign investors. (Let’s hope some our region’s  A-list investment agencies like CINDE of Costa Rica can find a way to provide some mentoring to this new agency).

On balance, the case may begin to sound pretty strong when gathering up the ‘pros’ in the Cuba outsourcing equation. However, Cuba remains a complicated and vexing nation – and is vastly different from regional neighbors. The country brings with it a lot of baggage and those examining the country should carry with them a healthy dose of skepticism.

Cause for Caution

That skepticism most certainly should be pointed at the decrepit communications infrastructure, which has been one of the detrimental aspects of the cultural lock-down imposed by the Cuban government – attempting to both disrupt Internet access by citizens and also simultaneously ignoring the very real benefits of Internet commerce that would create huge pathways of opportunity for entrepreneurs in a wide range of industries – from health and medicine to travel, tourism, retail and manufacturing.

A Cuba examination would of course include careful review of the level of English competency, which is likely to produce pretty disappointing results. The fact is there has been no compelling, consistent drive for Cubans to study English, and certainly the Government has done little to encourage this ability. Previous generations of course spoke English fluently on the island – how quickly those capabilities can be restored is one of many critically unanswered questions.

Without question, those sourcing executives at the larger-volume (headcounts of hundreds and into the thousands) level are not going to have a significant justification to set up in Cuba for at least a few years – and certainly not until labor and legal protections are fully established post the removal of the embargo. That goes for both IT and BPO/ call centers.

For those with small headcount requirements, that’s where it could get interesting. There are bound to be some intrepid outsourcers who are willing to tolerate all manner of obstacles to be among the initial wave of ‘first movers.” God bless them.

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I would in fact argue that it will be Latin America-born entrepreneurs who have the best shot of setting up in Cuba and opening viable  IT export operations. These are the men and women who have a built-in level of acceptance that things in Latin America are sometimes frustratingly slow, but also seem to have the endurance and craftiness necessary to overcome those barriers.

Getting Cubans to adapt and skillfully engage with a world that moves very fast will clearly take a lot of mentoring and guidance. The spirit is there, certainly. And in time, the Cuban ‘style’ will likely become one of its most valuable differentiators. We are already getting a clear indication from our contacts in Cuba that they are hungry to be recognized for their IT acumen and not for the bad-taste associated with an antiquated Communist regime. These IT folks need encouragement from beyond their own shores.

Nearshore Americas will continue to evolve its analysis of Cuba – starting with creation of a new Linkedin Group, on-the-ground reporting from the island and spearheading creation of an advisory network of senior executives exploring investment in Cuba. Finally, our Nexus 2015 conference – April 30th – will feature timely discussion on Cuba, featuring a high-level representative from the US Government – an announcement will be made in January regarding this development.

Nothing is going to be ‘typical’ with Cuba – that is one thing we as an industry will become acutely aware of in the coming months and years.

 

 

 

Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

2 comments

  • I find the upcoming events after the reestablishment of relationships between Cuba and the US very intriguing, but in my humble opinion, this will definitely bring us lots of opportunities as a growing or barely-born IT market.
    One thing I’d like to remark is that most of us (IT related people, Computer Sciences students which is my case) have full professional proficiency in English or at least enough communicative skills to be able to understand and being understood.
    With that said, all I’ve got left to say is that we’re all eagerly waiting for good changes in communications, infrastructure, IT and every other field that is likely to be affected by this “new friendship” between the two nations.
    Regards, Eduardo Campver, senior student of Computer Sciences at University of Havana.

  • I also think English isn’t going to be a problem, specially for those involved in the IT domain. Its not really very accurate the fact that:

    “… there has been no compelling, consistent drive for Cubans to study English, and certainly the Government has done little to encourage this ability”.

    Its an idea I really dissagree with. Besides that, very nice article.

    Guillermo López.
    Software engineer.