From Commodity to Complexity: Argentina Bets On Complex Services Sector

"Argentina in the World 2016," a recent event in New York, highlighted why the IT services sector in Argentina is poised for growth as it moves towards more complex service offerings.

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There is much to be optimistic about when it comes to Argentina’s IT services sector. This was the message at a recent event in New York hosted by the Americas Society and Council of the Americas (AS/COA) in partnership with Argencon“Argentina in the World 2016: Successfully Serving Global Clients” highlighted the challenges Argentina faces to evolve its IT services sector from commodity to complexity, a process that is already quite mature.

In the opening of the event, Roberto Álvarez Roldán, president of Argencon, a private, member organization that works to develop Argentina’s export services industry, explained this move. “[The challenge is] how you move from just setting up a new ID for a new employee in HR to managing complex information, such as compensation policies, from an offshore location,” he said.

Automation Is Challenge and Opportunity

Roldán added that those lower-level tasks are no longer being outsourced to cheaper locations like India, but are now migrating to robotics and automation, and so the challenge is to evolve into those higher-end value services in meaningful ways.

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“Software makers in Argentina treat their work like artisans,” says Kirk Laughlin, managing director of Nearshore Americas.

Despite these concerns, Argentina is in a good space. Everest Group named Buenos Aires as best city in Latin America for services in terms of both cost and availability of talent, and the country also featured in the top five in the world for BPO and the top 10 in technology, according to Roldán.

The Argentinian difference is difficult to pinpoint as Nearshore Americas Managing Director Kirk Laughlin pointed out. But it is built on a deep-seated willingness to follow a less-travelled path and an awareness of its ability to offer something distinctive.

“Software makers in Argentina treat their work like artisans,” said Laughlin. “The craft of software development is elevated to a higher level and there is a very mature sensibility around blending software engineering with beautiful design. This has gotten the attention of global businesses, from online retailers to global technology brands, who are really seeking a distinctive way to stand out.”

Argentinian Distinctiveness

Laughlin highlighted that software development is ripe for expansion in Argentina. Nearshore America’s wage study found Argentina very competitive compared to other South American countries. The room to grow is still there, too.

“While Buenos Aires is growing fast, the underlying talent base can support further growth,” said Laughlin. The fully loaded cost — including what is referred to as the social tax — is still about half of that of Brazil, per Nearshore America’s research, making it an attractive option.

Laughlin defined the core factors of success in global services as cost, scalability of talent, macroeconomic factors, IP and security protections, personal safety, and language skills. All of these elements, he said, look very positive for Argentina.

He added that there is still a long road ahead and pointed to Costa Rica, which has invested extensively in its brand as a services location on a consistent basis.

Creative Industries Are the “Engine For Growth”

Horacio Rodríguez Larreta, mayor of Buenos Aires, echoed Laughlin’s assertion that the capital city can still support growth, stating that while only 9% of the city’s GDP currently comes from the creative industries (including IT), the goal is to reach 20% in the next decade, a target he said is feasible.

“We are sure that the engine for growth is the creative or talent-based industries, of which IT is a part,” said Larreta. He added that the competitive advantage in terms of talent was two-fold. The first is the city’s well-qualified talent base; the second is the fact that the city has great potential to attract talent from elsewhere. “We think there are 50,000 foreign students in Buenos Aires,” he said. “Most, but not all, are from Latin America.”

One of the highlights of the event was a panel by key players in Argentina’s global business services sector. All highlighted Argentina’s track record of excellence in the services sector and emphasized their optimism about the sector’s ability to face the challenges and evolve towards greater complexity.

For Martín Umarán, chief of staff at Argentina-born Globant, the drive towards complexity started at the beginning of the company’s journey. “With the availability of internet it was possible to deliver projects from different parts of the world,” said Umarán. “We thought, ‘Why not sell to the U.S.?’ We started Globant with that in mind.” At that time, Google hired Globant to deliver projects for them outside of the GooglePlex, and that is when “we started to understand that we could do something different — we could do more complex work.”

With clients such as FIFA and United Airlines, Globant specializes in digital transformation, focusing on how to extend the traditional brand experience. “Almost all interaction between brands and people are digital now,” he said.

Creating Frictionless Customer Experiences

Umarán cited the development of a magic band for a well-known entertainment experience as evidence of Argentina’s ability to handle complex work. The magic bands, which Globant developed, transform all the experience of the entertainment park into digital one, allowing guests to manage and plan everything from day one.

After a customer leaves, the magic band has collected information about them and their tastes, and that data is fed back into the company to help shape future guest experiences. “Instead of silos of information, they put it all together, developing a frictionless customer experience,” he said. This type of high-level development demonstrates the sector’s move towards more complex solutions and services.

The panel showcased the range of services available in Argentina, from engineering services to media and digital design. Manuel Aguirre, Latin America Managing Director at CH2M Hill, which offers engineering services, is confident of the value added by Argentina. He emphasized that nobody decides on an engineer by cost; the most important factor is the engineering solution that you provide. “We have a pool of talent that is very creative and offers solution to the problems we face,” said Aguirre, adding that he believes the talent pool in engineering services is sustainable.

Aguirre said that it is imperative that private and public sector, as well as universities, work together. In Argentina, this is already happening. “Argentina needs lots of engineers to be produced for the local market because of new infrastructure projects, and that is good for the international market because it increases the overall talent base,” he said.

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Onlookers listen to the discussion of the nation’s future at the Americas Society event, “Argentina in the World 2016: Successfully Serving Global Clients.”

Competing on the World Stage

Juan Waehner, president of Telefe Argentina, a television station and production company, said that the company is investing heavily in creating the studio of the future. “We want to become a hub production center for rest of the world and one of the most important multi-platform content producers in the world,” said Waehner. “We are doing this by co-creating and co-sharing ideas with major players such as Sony and Warner Bros. Our goal is at least one worldwide hit by 2020, our own The Killing, MasterChef or Big Brother.”

Waehner said that trends in the media are complex but unpredictable. Telefe does not believe that broadcast TV is going way but knows it is changing. “We underwent a radical transformation in our company and treated digital like no other,” he said. “We are about to launch our first ‘transmedia’ production.”

Telefe have created a multi-channel network, which offers opportunity to video creators or young people who produce at home, where they help these producers to get as many views as possible on YouTube or Facebook. “In this way we have managed to recover these younger audience, these millennials,” he said.

Echoing other members of the panel and previous speakers, Mariano Dolhare, president of Hewlett-Packard Argentina, emphasized Argentina’s readiness for the international market and its commitment to what he described as the most important aspect of such services: customer satisfaction.

“What is core to the client are those parts of the process that are managed by IT that are merged with the business and when you fail, the business fails,” he said. “It’s about the talent we can provide to an external service to a client that never lets a customer down, that offers real high value and complex services to the world.”

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Dolhare cited the example of a client that has 1.6 million visits a day, sells $45 million a day, has a fleet of 1500 planes and is one of the largest airplane companies in the world. “When we fail, they fail,” he said. “We are committed to them in the same way they are committed to their own customers.”

Argentina Is Ready

Martín Lousteau, Argentina’s ambassador to the United States, said that all the examples mentioned prove that this sector prospers in a very tough environment. “This sector thinks globally from the very beginning,” he said. “You are thinking globally. In such a context, the local environment is important but not so important if you have the natural global outlook.”

For him, some of the core advantages of Argentina are its educated population, which has been a long-standing tradition, and its ability to manage English as a second language with proficiency. Tis is not always the case in the countries Argentina that competes with. “Our native language is growing fastest in the world,” he said.

Lousteau noted the influential positions in which Argentinians find themselves in the United States. “Every day I have found an Argentinian in the U.S. that is in a decision making position in large companies in the U.S. and very influential — and that is important for being able to increase this business,” he said. “This sector is not only positioned to increase business but also to contribute a lot to the country’s growth strategy.”

Another advantage is that Argentina’s IT sector is automatically integrated with the world. “There are no trade barriers as in other sectors,” he said. “The U.S. is the largest source of FDI in Argentina. Entry barriers are very low.”

Argentina has the ability to “reach high value added, bypassing the traditional route,” he said. “You have an ecosystem that is exactly what you need to help the sector grow.”

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