This is the second article in a 3-part series that focuses on Uruguay as a hub of foreign investment.
Where Tradition Meets Technology
A month ago, President-elect Tabare Vazquez rode to the inauguration ceremony in the back of a restored 1951 Fordson delivery truck. Meanwhile Jose ‘Pepe’ Mujica, the avuncular outgoing president, drove his 1987 VW Beetle to the ceremony. It was a heartwarming image—Here’s a country where the leading politicians care little for the trappings of power. But the symbolism extends beyond the men at the top.
Uruguay is a country where social values foster cohesion, so that the past is cherished even while the future is embraced. This is evident in education—97% of Uruguayans are literate—where the government is prioritizing Internet access to children through the distribution of netbooks and the creation of public spaces with Internet access.
The degree of tech savvy can even surprise jetsetters. After Uruguay hosted the first regional open data conference for Latin America in 2013, a World Bank staffer marveled at how Montevideo was “an amazing combination of old world architecture gems, as if transported from 19th century Paris or Barcelona, sprinkled with sleek modern surprises.” “Similarly,” she went on, “the country itself, while steeped in tradition, is an information technology leader in Latin America.”
This translates into the business sphere as well. Operations are fluid, from the managers to experts, and between firms.
Playing to Its Strengths
In the early 2000s, Uruguay had already witnessed the gains of a liberalizing economy, by dent of its numerous free trade zones and foreign investment related to Mercosur, which at the time represented the third-largest trade bloc in the world. But the country was just emerging on the scene as a host of IT outsourcing operations. In those days, India was the universal model of IT outsourcing, and its formula for success was straightforward: Offer English-speaking staff, perform rote functions such as answering inquiries at a call center, and do the work for 25% of what it would cost in the United States.
Over a period of years, Uruguay established itself as more of an alternative to India rather than a replicator. Given that the country did not have a large population, drawing workers with rock bottom wages would never work in Uruguay. Instead, the country had to be competitive in terms of costs, while offering superior value through a combination of other factors. Uruguay offered transparency and easy access. Moreover, operations located there were predictable. “There are no surprises,” says Mario Tucci, Founding Partner at MVD Consulting in Montevideo. MVD specializes in helping firms position for access to the Latin American market.
Uruguay carved out its reputation on this basis of stability, providing “boutique services” where cost represented just one factor among many. If anything, the country’s stability has proven even more of a draw in recent years, as the business environment in nearby countries has become less reliable. For instance, after Buenos Aires began tightening regulations on international bank in Argentina, financial services firms like Credit Suisse and Merrill Lynch opted to leave the country and build up their operations in Montevideo. At the end of the day, firms still want access to the South American market, and Uruguay offers them a way to do that without the hassle.
Excelling in the Present, Prepared for the Future
The early 2000’s model of IT outsourcing is nearing an end, but it isn’t dead yet. According to a recent study by McKinsey, companies must learn, “To balance the two speeds at which IT organizations must operate—integrating slowly changing legacy transactional back ends with more dynamic customer-facing front-end systems and applications.” This digital transformation requires both greater versatility—operations need to take on a wider range of tasks—and it means cost is less of a deal maker than before. The McKinsey study notes: “Having cheaper technologies is much less valuable than having the right talent behind them. Companies must factor into their digital transformations greater investments in talent despite the potential increase in overall IT costs.”
Such a diverse and maturing IT environment bodes well for outfits in Uruguay. “Tech has moved from IT users to the end-user,” declares Mario Tucci. “Now people don’t speak bits, but Spanish, French. So, cultural difference needs to be taken into account.” Parsing the differences and catering to specific needs is an area where Uruguay’s IT services excel.
The same sentiment can help explain why the country’s politicians remained so upbeat during the inauguration. The economic slowdown in Argentina and Brazil is bound to present challenges for President Vazquez, but the basic agenda in Montevideo remains the same. In this sense, the approach to technology is really a manifestation of the country’s harmony. “It’s synchronized,” says Tucci. Be it at church, university, or in the work place, he says, “Everyone sings the same song.”