The small Latin American country of Uruguay is known for punching above its weight, the most recent example being its entry into this summer’s World Cup in Brazil. But the country of 3.5 million, tucked between Argentina and Brazil, excels at more than sports: one example is Uruguay’s Cámara Uruguaya de Tecnologías de la Información (CUTI), which represents the country’s Information Technology industry and is celebrating its 25th anniversary this year.
“When CUTI was established in 1989, Uruguay was one of the first country’s in the region to have laws in place that advantaged the technology industry,” says Pablo Salomón, CUTI’s president. “That gave us an advantage in the first decade, but less so now that other countries also haves similar policies.”
That means that CUTI must continually reinvent itself to help Uruguay maintain its competitive advantage. To do that, the organization has developed a simple affiliate program that offers a range of services. These include software registration, conferences, discounts, press releases and industry information, training courses and workshops, and opportunities for internationalization, among others.
“We have accomplished many things, but the biggest is having ourselves established as the reference organization for the technology industry in Uruguay,” says Salomón. “There is no other country in Latin America, and few in the world, that has our level of industry representation. In 2014 CUTI includes more than 350 companies representing between 80 and 90 percent of Uruguay’s software exports.”
“We cannot graduate software professionals fast enough to meet industry demand,”-Salomón
That’s impressive given that Uruguay’s population is less than Chicago’s. The country is also notable for its solid IT infrastructure, with the Latin Business Chronicle placing Uruguay first on its Latin America Technology Index, and the International Telecommunication Union assessing it as having the best Internet access in South America. This is a base from which CUTI can advance its agenda of developing human resources, capital formation, and internationalization.
“We do a lot of work developing human resources, and working with universities and other educational institutions to offer more training choices, or to foster entrepreneurship, which has been a big push in the past few years,” says Salomón. “Every year we have a mentorship program, and every year we have an event where angel investors can meet with entrepreneurs. We are also involved in developing the venture capital ecosystem.”
Success can be seen in the fact that 11 percent of Uruguayan university students are enrolled in engineering programs. These students graduate into an economy where technology firms have plenty of opportunity to grow at home and abroad, in part because any software made for export is not subject to either a tax on profits or VAT.
Growth in a fragmented market
Uruguay may be a small country, but its technological landscape is developed enough to exhibit the fragmentation that one might see in a larger economy. CUTI’s membership reflects this, in that it is not dominated by a few technologies or industries.
“Our technology industry, like others around the world, is quite fragmented – we have a lot of companies that do not compete with each other,” says Salomón. “We have video games, finance software, a lot of diversity within technologies and verticals.”
That said, Salomón says that CUTI’s member focus can be split into two distinct groups: firms providing outsourcing services; and domestic software development companies.
“For outsourcing services, Uruguay aligns well with the US market in terms of time zone, and it is also quite easy to work with us culturally,” says Salomón. “And on the software product side, globalization is a big part of the story – one of our game companies, IronHide, had a number-one seller globally on Apple’s App Store for a number of weeks.”
But globalization brings challenges as well as opportunities. Delivering technology services to Europe is a tough sell because engineering costs are low in Eastern Europe, and product penetration in Asia is not as strong as in other regions. Nonetheless, for CUTI the push is on and not about to stop, because globalization not only provides growth, it also protects from regional downturns.
“Look at Argentina,” says Salomón. “Twelve years ago they were our main export market, now they are 5th or 6th, and the US is number one, representing about 25 percent of exports. Brazil is still a big market for us – it is second to the US, at about 12 percent, but this kind of market diversity makes us more resilient to economic crises. In the past, if there was a crisis in Brazil or Argentina, it had a bigger impact.”
As it stands, Uruguay has a solid reputation for software development and service delivery within the Americas; however, CUTI is working to build more awareness in Europe and Asia.
“Our entrepreneurs are able to sell all over the world,” says Salomón. “Our challenges are more internal; in that we cannot graduate software professionals fast enough to meet industry demand. And being resource constrained, engineering costs have increased. This is great for engineers, but it makes us less competitive in selling services based on person hours. Where we can excel is when developing products where volume sales are not directly tied to human resources.”
CUTI’s drive for Uruguay’s IT sector to look at global opportunities has resulted in a 2012 commercial delegation to Silicon Valley in California and, last year, a mission to Israel.
“For outsourcing services, Uruguay aligns well with the US market in terms of time zone, and it is also quite easy to work with us culturally,”
“The Vice President and the Minister of Industry came with us to Israel,” says Salomón. “From these trips we can learn what other countries are doing well, and about the market. It’s an opportunity for our young companies to explore partnerships, too.”
Most recently, CUTI has invited the ambassador from Paraguay to speak at an international club in order to increase familiarization with regional market opportunities.
“These kinds of events, as well as our global start-up weekends, help our tech companies get traction,” says Salomón. “This is particularly helpful for those companies in the B2B sector, which might not be as well known.”
This all adds up to CUTI advancing opportunities for Uruguayan tech companies – probably well beyond the odds of the tiny Latin American nation winning the World Cup this year. Then again, Uruguay is a can-do country: it has won the World Cup twice, having beaten both its neighboring giants Argentina (1930) and Brazil (1950).