While growth is firmly in the sights of Peru’s IT sector, there are challenges that must first be addressed – chief among them the need to minimize the talent shortage. The country needs an additional 10,000 programmers to meet demand and although initiatives are in place, more needs to be done in order to service sector needs.
The 2015 Talent Shortage Survey by Manpower Group found that 68% of employers in Peru had difficulty filling jobs. While this was not sector specific, it does emphasize the need to address talent needs.
David Edery, Coordinator of Export Department Services at the Commission for the Promotion of Peru for Exports and Tourism (PromPeru), said that, at the moment, contact centers remain the core of the industry, representing the fastest growing part of the sector with high levels of employment generation and export levels representing 42% of total turnover. Edery added that the development of business applications has also seen some growth, but not to the same extent.
In the nearly 12 years since Peru’s Ministry of Foreign Trade and Tourism (MINCETUR) implemented, together with PromPeru, the Program for Promotion of Exports of Services for the purpose of promoting ITO, BPO and KPO, the country’s sector has grown significantly. It now encompasses more than 300 companies and 45,000 programmers, who are working on solutions for vertical sectors such as banking and finance, retail, health, and tourism, as well as mobile application development. The program resulted in exports in this sector growing at an annual average rate of 11% and contributing more than half of Peru’s GDP, while also employing a significant proportion of the country’s working population.
In terms of BPO, companies in Peru not only offer the traditional services of contact centers but also specialize in preventive collection, help desk and shared services. There are 70 formal enterprises that generate employment to about 40,000 operators, of which 80% are young Peruvians.
Edery explained that in BPO, Peru is mainly directed towards vertical sectors such as financial, telecommunications, consumer products, retail, transport, and tourism, while in software development, the core areas are financial, retail, mining, telecommunications, tourism, pharmaceutical and public health.
“In both cases it responds to the experience of companies in the sector and because they are more willing to hire or buy solutions for their high degree of competitiveness,” he said. “The key differentiator for Peru in the case of software is the development of specialized applications in highly competitive verticals with different costs. In the case of contact centers, we also offer higher value services to competitive verticals with omnichannel functionality.”
Despite a solid track record of growth, Peru needs to focus on talent development to capitalize on this foundation. “We believe that we still have a long way to go. We still have a deficit of about 10,000 programmers,” Edery said. “Companies are starting to become global players, installing offices not only in Latin America but also in U.S.A”, which points to Peru’s potential, but talent is still the core challenge.
Part of PromPeru’s sector growth strategy has focused on setting up shop in other countries. The Peru Tech initiative has set up consortia in Panama’s City of Knowledge and in Sao Paulo, Brazil. The consortia aim to position Peru as a provider of technology solutions worldwide and to help improve the levels of competitiveness by reducing costs and improving efficiency of different companies in Panama and Brazil. “Soon we will extend this into Chile and the US,” Edery said.
“We must go deeper into the strengthening of human resources; while these programs are contributing, they are still not enough. The educational aspect is key.”
Edery emphasizes that the government has been generating spaces for the development of these sectors through the Digital Agenda, Innovation Programs that are funding innovation projects, the Free Trade Zones that are installing software companies and contact centers, and Beca 18, which finances studies at universities and high caliber educational institutions, all of which has contributed to a growing pool of talent. There is still a shortfall, though, and more needs to be done.
Another issue has been the cost of doing business in Peru, but this has now been addressed. Edery noted: “While our position in the World Economic Forum (WEF) in respect to IT investment is low, this situation will be addressed in view of the passing of Law 30309, which offers tax incentives for scientific research, technological development and innovation. The new legislation allows up to 175% in tax benefits to businesses. It is expected that this year this will be able to generate US$500 million technology investment.”
The law applies to projects started on or after 1 January 2016 and extends until the end of 2019. According to the EY Americas Tax Center, the additional 50% to 75% deduction allowed under this law cannot exceed 1,335 Tax Units annually (approximately US$1, 663, 349). “Also, regulations under the law will establish an annual maximum amount of total deductible expenses,” according to Ernst and Young.
The private sector has also played a role in developing the industry, by implementing quality standards and incorporating new technologies to develop new solutions not only for the domestic market but also for the international market. Edery points to the continued interest in Peru as an IT destination, citing the example of investments by companies like Telefónica and Entel, which have invested in Big Data initiatives valued at over US $100 million.
He believes that there is still room for growth, especially since most investments have traditionally been located in Lima and they are now seeing increasing interest in other locations in Peru. One example in particular is that of the Free Trade Zone of Tacna, where companies can enjoy tax exemptions.
“They were approved this year for US$250 million to boost innovation projects. This has enabled the creation of a cluster comprised of software developers and specialized companies to develop new innovative solutions,” he said.