The purpose of this report is to provide an overview of the major developments in the information technology (IT) industry in Colombia. The report also makes special reference to certain business areas such as software sales, IT services, and Internet based services. These sectors have seen particularly high growth in recent years, with companies continually investing in new technologies and offering new services to clients.
The IT industry in general in Colombia has enjoyed rapid growth in recent years on the back of new technologies and value added services. Despite the economic downturn suffered in 2009, which affected developed economies and emerging markets such as Colombia, the IT sector has not suffered as much as other sectors of the economy. While GDP growth for the Colombian economy declined from 7.5% in 2007 to 2.5% in 2008, and 0.4% in 2009, the IT sector, maintained a healthy growth rate of 7.5 percent in 2009 (according to a report by Fedesoft), and is expected to present growth of 3.5% in 2010.
Overall investment in Information Technology and Communications (ICT) is expected to reach US$10,870.6 million in 2010, slightly up from US$10,521.7 million in 2009. It is estimated that this figure will reach US$11,119 million dollars in 2011.
In general, in recent years, the market has been moving towards increased competition and increased efficiency, which has resulted in price reductions to consumers. Indeed, the key to remaining competitive in this market is continual investment in infrastructure, new technologies and improved services.According to the World Economic Forum report on ICT, Colombia ranks above the world average in the connectivity index.
Colombia represents the third largest IT market in South America. The size of the IT sector (computers, software, components, and related services) in Colombia is estimated at USD $2,468 million, representing a small proportion of the global economy (currently less than 0.5% of GDP), but it is a sector which has been growing well above GDP rates in recent years.
Local production in the IT sector consists basically of computer hardware assembly and repair. Local computer assembly companies include: Compumax, Sure Computers, and PC Smart. Another company QBEX, which although it has its main office in Miami, actually does all its product assembly in a production facility located in a Free Trade Zone in Bogota, and from this site processes all its sales orders and makes shipment to different markets in Latin America.
There is also a growing software development industry in Colombia, and IT related services have grown significantly over the past two decades. These developments have helped the IT DE sector in Colombia become the second largest in Latin America, in proportion to GDP.
There are approximately 3,000 companies operating in the sector (mostly retailers, distributors, value added resellers and systems integrators), employing more than 32,000 people and generating
around USD $158 million in taxes. According to BMI, Colombian IT spending is projected to grow at 13% over the 2010-2014 period and per capita IT spending is projected to rise by 43% from US$48 in 2010 to US$74 by 2014. The retail PC market surged in 2010, with sales of computers up 34.6% in June 2010, based on data from Colombia's statistics bureau, compared with the same period of the previous year.
Regulatory measures can often drive production, investment and sales in the IT sector. In Colombia, the Government has declared the IT sector as a focus for policy initiatives and incentives. For example the Government has put incentives for the purchase of PCs by
excluding VAT on products whose value is less than US$1,000.
The IT services market is estimated at around US$500,000 million, and revenues are expected to double in five years. Seventy-five percent of the demand for services is accounted for by large companies. In the last two years, there has been a trend towards bigger managed
services and outsourcing deals, mainly in utilities, telecom and financial services. For SAP and Oracle, Colombia ranks as the 3rd largest market in the region after Brazil & Mexico. SAP is currently the leader for IT consulting services.
A notable trend in recent years is the formation of companies to cater specifically to the needs of companies or institutions with customized software and network solutions. For the supply of software, U.S. companies now have to compete not only with foreign competitors, but also with local software developers. Revenue for the software industry is estimated at US$885 million in 2009, and software sales are estimated to have been $452 million in the same year. However,
according to BSA, counterfeit products account for 55% of the market.
A weakness in this sector is in the size of firms, 92 percent of companies are small, seven percent are medium, and only one percent are large. However, this key weakness in local companies may represent an opportunity for foreign multinationals. The latter are better positioned in order to win government contracts and technology related business. These multinationals are better able to provide support and servicing for technology related services. In terms of employment, in 2009, 16,000 jobs were directly related to the IT industry while 18,100 jobs were indirectly related.