Stubborn and Paranoid: Cuba’s Determined Effort to Never Emerge as a Nearshore Hub

Kirk Laughlin explains why Cuba has become a lost cause and easily the biggest disappointment ever in the short history of Nearshore IT/BPO.

cuba sunset
The sun has finally set on Cuba's potential as a Nearshore IT/BPO hub

For those who continue to hope that Cuba will turn the corner, stop hoping. It’s futile. We know it first hand, and in this piece I’ll explain as plainly as I can that Cuba is a lost cause, a basket-case for global services and easily the biggest disappointment ever in the short history of Nearshore IT/BPO.

If your firm is seeking the next ‘big thing’ in Nearshore outsourcing, look to places like Haiti and other rising Caribbean nations, select locations in Central America, second- and third-tier cities in Mexico, the newly reborn Argentina, Colombia, or even Bolivia.

Cuba? Don’t waste your time.

kirk laughlin in cuba
Kirk Laughlin: “Cuba is a lost cause, a basket-case for global services and easily the biggest disappointment ever in the short history of Nearshore IT/BPO.”

I share this perspective, admittedly, having absorbed my own dose of disappointment trying repeatedly to convince Cuban authorities that Nearshore engagement is a brilliant way to attract capital, tap into the rich IT talent of the country, and limit the destructive societal consequences of brain-drain.

Our group got very excited by the prospects of Cuba outsourcing when the door to the country was pried open by President Barack Obama nearly three years ago, and we followed up by committing to fresh research and analysis projects. We were a part of the applauding chorus, expecting many twists and turns but ultimately witnessing movement out of isolation and into real, durable engagement with the USA.

In the popular press, the narrative of “Cuba Rising” became the template for literally hundreds of news articles. Cuba was ready for a major transformation – it became fashionable to worry about the island getting overrun with American chain restaurants, millions of first-time visitors, and new waves of hoteliers.

Awaiting the Transformation

In terms of business, the country would no longer have the excuse of a harsh US embargo to limit doing business with US interests. The shackles were coming off, and nearly everyone we knew – even Cubans themselves – expected the Castros and other government leaders to have some grasp around the massive opportunity this would be, rocketing out of decades of economic malaise and into the rich, first-world dynamism of 21st century global commerce.

Through a series of meetings with Cuban diplomats in New York City and correspondence with the Cuban Embassy in Washington, D.C., it became increasingly clear, however, that the Cuban government itself was not bought into the transformation narrative, especially when it came to the internet and technology. Hardly.

Instead of trying to investigate the economic opportunities of Nearshoring, officials were more suspicious of the motivation of myself and Nearshore Americas. I personally became aware – on a visceral level – of how distrusting the Cuban leadership is of Americans, and especially American politicians. The paranoia, in my view, is not exactly unjustified. Take for instance the secret campaign the US government initiated in 2014 to use Twitter as a means to stir civil unrest.

To make it really simple: Cuba was not ready. In fact, my key diplomatic contact declared, on a few occasions, that “Americans are always trying to push, push, push,” as he implored my team to be patient (we had been pitching the government on seeking its authorization to hold a Nearshore IT Summit in Havana back in 2015).

Technology’s Low-priority Status

In meeting with Cuban officials, you also become aware that an American pitching technology in Havana is like a Russian selling satellite equipment in Washington, D.C. – suspicions are instantly raised. And that’s where the tragedy really lies.

The unfortunate fact is, Cuba’s potential as a Nearshore IT hub is enormous, as we reported on multiple occasions. The talent pool, largely in software, is deep and hungry. Couple that with the some of the lowest hourly rates for programmers anywhere in the world, and it’s understandable why potential business partners started to get ahead of themselves.

The tragedy lies in the fact that the entrepreneurial energy is there. Cuban software professionals want the chance to prove their mettle. They are doing all the right things – stepping up their training, traveling into the US in an attempt to build more business ties, and patiently biding their time in the hopes that the dark edges of a watchdog regime don’t continue to interfere so deeply in their lives. Yet, you have to search hard to find evidence that the current government really wants to see these young businesspeople succeed.

The other thing about Cubans is they are very used to workarounds and constantly adapting to adverse circumstances. Conversations about internet connectivity that might take three or four minutes in Mexico will take 30 minutes in Cuba — there are exceptions on top of expected changes layered over special conditions. When it comes to IT partnerships, you can get connected the officially sanctioned way (and pay up to 50% tax to the government) or seek a back-channel framework that runs the risk of sudden shutdown by the authorities.

If you’re thinking that this is no way to run a credible Nearshore operation, you’re exactly right (I need to make that point because there are small operations and minor successes in Havana today, but all are far from enterprise-grade).

The Hammer Falls

One of the most concrete examples of the Cuban authorities showing zero tolerance for entrepreneurial endeavors came during the first week of August, 2016. Organizers of the second Startup Weekend Havana were making final preparations for the launch of the event on August 5th when a phone call was made to the Four Points Hotel in Havana, ordering cancellation of the event, reportedly by a senior government official.

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The hammer had fallen. For Cubans, it was not entirely unexpected; for foreigners, many of them were getting their first taste of Big Brother acting with swift, absolute impunity.

cuba event shut down
Twitter explodes when the news broke that the Startup Weekend was cancelled in Havana

What’s particularly troubling in the wake of such developments is that the press has a very difficult time putting Cuba’s uncharacteristic journey into proper context. Across countless media outlets the driving storyline has been consistently the same over the last three years: “Cuba is booming, and you better not miss out on this once in a lifetime opportunity” (In fact, my comments in this BBC article seem to contradict the central, upbeat story hook).

Reporters have generally failed to distinguish the comparatively decent results in investment in locations like the free-zone area of Mariel port, to the trickle of improvements made to the core ICT infrastructure, which are reflective of the trepidation the government has around internet-dependent services. One of the most under-reported stories, in fact, is the increased repression of entrepreneurs who take their free-market dreams “too far”.

Google: An Accidental Accomplice

And what about Google, and its attempts to bring internet connections to more Cubans? Some critics argue that Google’s well-meaning efforts have fallen right into the hands of the authoritarian leaders.

According to a commentary in Monday’s Wall Street Journal, columnist Mary Anastasia O’Grady writes that Google visited Cuba two years ago pushing a proposal to build an island-wide digital infrastructure. “The government reportedly rejected the proposal and warned of internet imperialists seeking to “destroy the Revolution,” she writes. Instead, Google sealed a less ambitious deal to place Google servers on the island; however, the move is not assuring unfettered internet access to citizens (estimates are that less than 5% of Cubans have internet access at home). And some websites – including a controversial “Cuba Decide” website proposing a vote on whether to hold free elections in Cuba – have been blocked inside the country.

Finally, it’s the news unfolding over the last month that has really struck a chord of terror in the spines of many internationalists, especially those in foreign diplomatic corps traveling to or living in Havana.

A group of U.S. State Department workers have sustained various ailments, including possible brain damage, due to being exposed to high-frequency sonic emissions, apparently blasted at them while in Havana last year. As of yet it’s not clear if the Russian or Cuban government perpetrated the attacks – but shrewd observers have noted that in a police state like Cuba, very little happens without being known and intercepted by the watchful eyes of the Castro government.

Cuba remains a complicated place, and, to be clear, we are not here to arbitrate the condition of civil society or the quality of justice in Cuba – our primary role is to evaluate its readiness as a Nearshore IT/BPO location. On that score, Cuba registers a zero. As a vacation destination, the place still is spectacular. But aside for the wonderful people and the great experience of being in Cuba, the government itself is one huge, problematic impediment.

For Nearshore locations, look elsewhere – there are far too many better options.

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9 comments

  1.    Reply

    Thanks friends and colleagues for taking the time to comment. Our disappointment is real.

  2.    Reply

    Cuban distrusting the USA goverment because fuck-up cubans and world to many times, like Trump is now doing again!

  3.    Reply

    You are 100% right, and that isjust the point of the iceberg. Living in Cuba is like dying of thirst surrounded by water.
    I am a Cuban and live in Cuba.

  4.    Reply

    We like Colombia. ProColombia has been super.

  5.    Reply

    Quite a sobering article indeed, thank you for the update Kirk, as always very interesting reading.
    I haven’t been able to make much headway there either…

  6.    Reply

    Thanks for the update on Cuba Kirk, disappointing as it may be.
    I met a Cuban entrepreneur at your Nearshore Nexus event this Spring who started a software outsourcing company in Cuba. I was excited about him adding his company to our online platform of software outsourcing companies around the world… until he admitted to only having a dial-up connection to the Internet from the state-run telecom organization in Cuba! It’s really not possible to offer software outsourcing services over dial-up.

  7.    Reply

    Compelling, if tragic story, Kirk. Fascinating — thanks for the “on the ground” insights.

  8.    Reply

    Good article.. and helpful. Thanks Kirk!

  9.    Reply

    Outstanding article. This is very sad for me, I was one of the people with high hopes and high expectations. But reality bites. Well done Kirk, and probably they do not care about the ZERO rating they are getting. That government is completely clueless. One day ( not soon) Cuba will emerge – the Cubans are smart and resourceful.