Transcript Diapositiva 1

Can Mexico set up in the Software and IT
Global Value Chains as a high value
added player?
Flor Brown Grossman and Lilia Domínguez Villalobos
Deslocalización de servicios y cadenas globales de valor: ¿Nuevos factores de cambios
estructurales en América Latina y el Caribe?
Cepal, Santiago de Chile
Objectives
 The process by which firms venture into these GVC´s and
the obstacles faced by them once they have been immersed in
it.
 analyze the role of institutions in the GVC´s
In partiular:
 The linkages between firms
 the achievements and limitations of governmental policies
Software production can be classified
into the following four categories
Software and IT services have become increasingly interrelated. IT
services include planning, integration, implantation, operation,
support and maintenance of computing and telecommunication
systems.
 Software as a product, that is the shrink-wrapped software
programs developed for the use in the massive market
 Embedded software which is 'built in' to the electronics of
products.
 Customized software solutions. Applications on enterprise
resource planning (ERP) and customer relationship management
(CRM)
 Cloud software. Also known as cloud computing is the delivery of
software as a service rather than a product
Inter-firm linkages in the software
market
 Operation traditionally rested in the systems departments of
firms, but increasingly is carried out by outsourcing companies or
by cloud computing utilities
 Modular design is an essential characteristic of software as a
product which is standarized and codified. More functions can be
added to the original software. Ex: SAP and ERP and CRM.This
gave rise to software factories. A software factory systematically
captures knowledge of how to produce the units of a specific
product family.
 Customized software, on the other hand, is not modular, since
producers elaborate software according to the needs of customers,
thus it is not standardized.
The software and IT market in Mexico
Software market
(millions dollars)
Software as
product
Customized
sft.solutions
Total software
IT services
without
customized sft.
solutions
Total IT
services*
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
Growth
rates
606
602
671
665
719
816
1036
1215
1328
1205
1376
1590
9.2
148
147
161
116
180
202
239
289
296
273
346
406
9.6
754
749
832
781
898
1018
1275
1504
1624
1478
1722
1996
9.3
8.2
1625
1679
1768
1908
2007
2152
2416
2927
2989
2759
3296
3868
1774
1827
1928
2024
2187
2354
2655
3216
3285
3032
3642
4274
Source: Select Estrategia, SC 2011
8.3
Market structure
 In 2010 there were 2785 firms with around 500.000 employees
 Most of these firms are SMEs, (50 to 150 employees) and
extremely young, in some cases less than 15 years old.
global firms like Microsoft, Oracle, Sap, HP, IBM, Accenture, CapGemini
and EDS, which sell to the domestic market and operate offshore
facilities
foreign firms constituted by Indian firms led by the giants, TCS,
Infosys, and Wipro, which are expanding their global footprint to
better compete with the developing nations service firms.
independent Mexican large IT companies such as Softtek, Neoris, and
Hildebrando.
GOVERNMENT PROGRAMS AND REGULATIONS
ON THE INDUSTRY
 Government actions and horizontal programs
 Sme´s funding programs for the initial phases: consultancy and certifications,
especial mention to TECHBA´s and UNDP supplier program´s role.
 Combined with support programs at the federal states level and the presence of
MNC´s and good universities have resulted in clusters in Jalisco, Monterrey and
Baja California.
 The PROSOFT initiative was launched in October 2002 as a part of a general
policy of shifting from labor intensive assembling into high value added
services.It provides funding for education and development of human
resources. Most important funding is available for projects geared towards the
certification of companies.
 PROSOFT developed an ad hoc norm for certification which may be very useful
for small firms which usually do not have the resources (MOProsoft).
Case studies
Softtek (near shore services)
 India is by far the world’s provider of IT services among the
emergent countries, Softtek illustrates that there are different
formulas and options that have allowed the entry of emerging
countries into the IT services GVC
 Softtek is now a global provider of process-driven IT services
with 6,400 associates across 30 offices in North America,
Latin America, Europe and Asia.
 Export´s account for 75% of reported revenues of the firm
Softek´s advantages
 Geographic proximity with US for customers in need of
swift solutions to business problems
 A more compatible corporate culture.
 Everything from easier travel to being in the same time zone
substantially improves communication.
 The benefits of NAFTA’s short term visas and the security
granted by the Mexican government’s commitment to WIPO’s
TRIPS agreements were deemed paramount.
Product strategy: diversification
 The activities of the firm moved from software development for
large and middle sized Mexican firms to applications
development, software testing, application management and
application security services and SAP and Business intelligence
software licencing (SAP, Informatica, IBM Cognos).
 Softtek's Software Development Process (SSDP®), a phase-
milestone methodology underlying foundation of their application
development services (Inc Close-Up Media 2011).
 Their new ventures include embedded software and near future
provision of services on the cloud
Corporate identity: Near shore
 Refers to carrying out services by an adjacent or near
delivery center.
 Nine Global Delivery Centers in Mexico, China, Brazil,
Argentina and Spain
 GE is their flagship customer. GE’s initial contract was small
however, operations slowly increased both in sales and in the
variety of services rendered
Capabilities development
 1800 engineers with certifications in specific technologies
and methodology.
 Softtek academy where employees are hired for six months to
be trained also offering scholarships to students in the last
years of college.
 Team Software Process (TSP) which enables to improve
project performance, the speed of product offerings with
higher quality as well as improving the work-life balance for
its own employees.
 Self-directed teams.
Industry´s challenges
 Scalability as one of the most relevant limitations that Softek
shares with other large IT firms in Mexico.
 The lack of qualified staff in fluent English
 Absence of necessary financing in order to compete in the
global market. This is particularly problematic for IT services
and software entrepreneurs as they can only provide
intangible guaranties (human capital and knowledge) and
traditional investors and banks are prone to reject financing
petitions.
SCIO (software services in the cloud)
 Is a Mexican small firm with no more than 50 associates which
services American, Canadian and English software companies.
 2003:The company was incorporated in Morelia, Michoacan
providing several IT services.
 2005: enrollment in TECHBA consultancy program in Silicon
Valley
 2006: change in product strategy. They identified the changing
trends in the industry and decided to reduce their multi-service
efforts and focus on software as a service in the internet also
known as cloud computing.
Services and customers
 Innovative advisory that helps companies build a strategy
(technical solutions) to go to the cloud and understand all the
concomitant changes in business paradigms
 Develop software for solutions and applications via cloud
computing.
 Flagship customer:Microsoft
 Only 5% of SCIO´s customers are in Mexico Mexican firms
in general cannot afford Scio’s services
Qualtop (software best practices)
 Qualtop started with 3 engineers oriented to software
applications. They have more than a hundred now.
 The competitive edge of this company lies in being one of the first
to understand this need and get all certifications needed.
 Their start-up business model soon changed as they identified
opportunities in specialization in software optimization processes
and CMM certifications and left software applications aside.
 The firm is in Guadalajara where policy support is particularly
efficient. They also have an office in Mexico City where most of
their corporate clients are based.
Industry´s challenges (SCIO and
Qualtop)
1.
Mexico is not yet recongnized as a household name in the
field of IT services.
2.
Financing seriously limits the potential growth of
companies.
3.
Prosoft´s performance is uneven among states.
4.
Lack of an English proficient workforce with programming
capabilities.
Can Mexico set up in the Software and IT Global
Value Chains as a high value added player?
On the side of firms
 We found an increasing presence of entrepreneurial talent, willing to
risk and invest.
 Firms in the software industry are very young. We believe that these
firms must invest in their human capital at a greater rate.
 In order scale up the value added chain companies must invest
continually in capability building, certifications and have ambitious goals
to get international clients and find new niches.
 The prevalence of very small firms in the software industry makes us
wonder if Mexican entrepreneurial idiosyncrasy has become an
insurmountable obstacle. Imperative: to achieve strategic alliances and
mergers among small firms in order to achieve growth.
Adequate support from governmental institutions?
Positive aspects:
 FDI attraction policy
 Sme´s funding programs for the initial phases: consultancy and certifications, especial
mention to TECHBA´s and UNDP supplier program´s role.
 Special support program for the software sector: PROSOFT and Moprosoft standard for
small firms with limited resources
Negative aspects:
 Insufficiencies in technical education and investment in human capital
 The CONACYT’S innovation initiatives did not seemed to perform well for software firms
 Bank credit is not competitive
 Lack of long term financing initiatives.
 Ambitious goals require more programs oriented to the specific needs of GVC´s:
horizontal policies seem insufficient.
Challenges:
 fostering of high impact projects that provide
physical infrastructure;
ii) ii) improve logistics and communications conditions;
iii) most importantly that foster innovation and learning
capabilities among the pioneers of the new chains.
i)