CITY PROFILE: Medellín’s Innovation Initiatives Drive Interest in IT Services Outsourcing

The city of Medellín, in the Aburrá Valley of the Andes Mountains, is positioning itself as a hub of innovation for IT services and Knowledge Process Outsourcing. Elkin …

Ruta N's building is a landmark in Medellín.

The city of Medellín, in the Aburrá Valley of the Andes Mountains, is positioning itself as a hub of innovation for IT services and Knowledge Process Outsourcing. Elkin Echeverri, a director at Ruta N, a corporation created by the city of Medellín, UNE and EPM to promote the development of innovative technology-based businesses, describes Medellín’s ITO/ KPO sector as “vibrant, with wide perspectives but at an early stage.”

Camilo Gomez, Managing Director at Medellín Smart Services, noted that in 2013, Medellín experienced economic growth that was above cities like Ciudad de Mexico, Buenos Aires and Montevideo. He added that the city has received various awards such as City of The Year from The Wall Street Journal 2013, Peoples Choice Award from the World Wildlife Foundation in 2014, it was ranked 17th in Tholons Top 100 in 2014 for service providers in BPO and ITO.

Gomez said: “IT and BPO companies in Medellín are delivering high quality solutions throughout the world with international standards such as CMMI, ISO 9001 ISO 27001 among others.”

Stimulating Growth

Several initiatives aim to stimulate growth of the sector. “A great example of the IT dynamic in the city is Medellín Smart Services, a private initiative that connects 14 ITO, BPO and KPO companies and focuses on developing new business opportunities in the Healthcare, Energy and Construction segments by leveraging the capabilities of all its members,” Gomez said.

Medellín has a Cluster Community with six active Clusters supported by the Mayor’s Office and the Chamber of Commerce, Gomez explained. One of those Clusters is the ICT Cluster, which started in 2011 and currently has more than 2,780 companies connected to it.

Medellín Smart Services was born as one of the three strategic segments of the ICT Cluster in the city. “Since its creation a year ago, it has helped mature the level of trust and increase the work dynamic of its members. This is competition at its best, since many of its members are normally competing for customers, in this arena, they actually cooperate and work together to create and mature new businesses where they can leverage their unique strengths and capabilities. The initiative is focused on created new added value services for the health, energy and construction sectors,” Gomez said.

He went on to say: “As the group and companies in it mature, new and more sophisticated services can be offered which helps to move Medellín from basic BPO and ITO services to added value services and more knowledge demanding businesses.”

Echeverri explained: “Ruta N is the city leader toward innovation as the main economic engine of the city, innovation as a new source of socio-economic change. This transformation is about obtaining knowledge and high value services economy in our region.”

Ruta N is developing a technological district in the local neighbourhood of Sevilla. According to Ruta N, “this district will provide the basis for economic development in this area, attracting companies engaged in topics related to science, technology, and innovation, especially in the areas of health, energy and STI.”

The significance and importance of the Ruta N Corporation building, located in the new Northern area of Medellín, has put a physical stamp on the city. “This complex is one of the most important urban projects of the last years, not only because its new and innovative, but also because it is emblematic, especially thanks to the area in which it is located, which includes important spaces such as the University of Antioquia, The Explora Park, the Planetarium and the Botanical Garden.” As of June 2014, the facility housed 32 companies from 12 countries and had over 900 employees.

Ruta N’s project hopes to consolidate an innovation and technology district in the Sevilla neighborhood, drawing on the international examples of [email protected] Barcelona, the MaRS Discovery District in Toronto or the one built in the state of Nuevlo Leon in Mexico.

Echeverri said that the main objective is to “generate the supply of innovation capacity and ‘services technologies’ for this segment of our local economy.”

Echeverri explained that Medellín is emerging as a specialist in:

  • Life sciences: clinical trials, CRO and high level medical treatments such as Clinlogix
  • Energy: Engineering Services
  • Construction: Design Services
  • Some legal services
  • Software testing and security testing: Companies such as SQASA, Choucair Software Testing and Fluid work in this field.
  • Design and build of specialized software such as Ceiba Software.
  • ITO advanced services

Medellín is also becoming a site for consulting in innovation services, where other cities and companies from other regions and countries buy consulting services from companies in Medellín.

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Growing Attractiveness

Medellín’s attractiveness as an ITO/ KPO destination is centered on its sophisticated ecosystem and innovation Environment, as well as the availability of high-level human resources, according to Echeverri. “It offers good local market perspectives and [is the] best point of ingress into Latin America for new business in ITO/KPO, because of its geographical position and stable economy,” he said.

Echeverri also suggests that the general attractiveness of Medellín is a potential promoter of this business segment. He said that Medellín’s attractiveness in terms of international human talent and monetary capital, centers on the good quality of life and the innovation capacity of the city. The city also benefits from good ICT infrastructure and advanced public and private partnerships.

“Today, the currency devaluation (the Peso in relation to the US dollar), has increased the competitiveness of the country and of the city enormously for international ITO/KPO services. This situation possibly will remain the same for many years in the future,” he said.

Despite these positives, Medellín is facing challenges, including the level of bilingual-multilingual capabilities. Building skills capacity is high on Medellín’s agenda, including stimulating English fluency. “The city has a bilingual policy with a budget of US$23 Million focused on certifying 1,500 teachers and 15,000 in B1 English,” Gomez said.

Other challenges include the levels of skills for exportation services and the need for massive generation of ICT high-level human resources.

Echeverri remains optimistic about the Medellín positioning in this space. “ITO/KPO is one of the most important areas in Medellín’s future; it is a key area,” he said.

The Facts

  • Population: 3.5 million
  • According to the IEEE Smart Cities Initiative, five of the 15 largest companies in Colombia are located there, with an operating income of US$20.8 billion, including multinational companies.
  • The IEEE Smart Cities Initiative also noted that Medellín has 80 higher education institutions, and has produced 13 percent of all graduates in Colombia in the last 10 years.
  • Medellín’s ICT cluster houses 2,780 companies.
  • There are approximately 200 ITO/BPO companies, generating US$ 700 millions per year in revenue, according to Echeverri.
  • Between 14,000 and 15,000 employees are employed in the sector.
  • The main objective of this segment in the city is to generate revenue of US$3 billion in 2020 with 65,000 employees, Echeverri noted.
  • The city’s sector needs to reach CAGR of 20 to 25 percent per year between 2014 to 2020, according to Echeverri.
  • Medellín Smart Services connects 14 ITO, BPO and KPO companies.
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