IT Services Industry in Colombia

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IT Services Industry in Colombia
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• IT Services Industry in Colombia
• Competitive Operational Cost
• Human Resources
• Industry Maturity
• Infrastructure
• Business Environment
• 2. Services to investors

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• IT Services Industry in Colombia
• Competitive Operational Cost
• Human Resources
• Industry Maturity
• Infrastructure
• Business Environment
• 2. Services to investors

4
While Colombia IT Market will grow at a 12 rate,
the world pace will be only 7
Evolution of Latin Americas IT Market (US
Million)

• Global IT MarketUS750 billion. Expected growth
  7-8 in the next years.
• LATAM IT Market US47 Billion, expected grow
  12.6 in 2008
• Colombian IT Market US2,4 Billion expected
  growth 11,.
• Emerging economies are expected to be important
  players in the industry. IDC, Business Monitor.

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Evolution of Colombias IT Market (US Million)
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Source IDC

• Colombian IT market CAGR 2007 / 2012 11.
• Is projected to be one of the fastest growing IT
  markets in Latin America over the next few years,
  Business Monitor.

Source IDC
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Main Drivers Of the services industry
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Competitive Operational Costs The lowest in
Latin America
Average building rental costs at competitive
prices (US/m2)

• Savings up to 284 in Systems Engineers careers
• Savings up to 80 in Internet cost
• Savings up to 43 in average building cost

The most competitive salaries in Latin
AmericaUS 2007 (monthly wage)
Source Colliers InternationalA and A Buildings
Average competitive Internet cost per month for
1Mbps (megabytes per second)
Source Salary Expert - Human Capital
Source CISCO Barometer
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Competitive Operational Costs The longest
daytime working shift time in Latin America
The longest working daytime shift in Latin
America
Source Colombia Law 50 of 1990 and Law 789 of
2002. Mexico LeyFederal Law of Labour of 1969.
Costa Rica Law 2 of 1943. Ecuador Labour Code
2005. Argentina Law 11.544 of 1933 and 20.744 of
1976.
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15.53
Competitive Operational Costs 50 to 60 more
competitive than the United States
US/FTE/Hour

• Data

• Voice

• Knowledge

• 6.40

• 6.40

• Labor

• 24.4

• 9.90

• 9.90

• Facilities

• 3.1

• 2.9

• 3.7

• IT/Telecom

• 0.84

• 0.95

• 0.94

• 1.14

• 1.14

• SGA

• 3.2

• 1.53

• 1.53

• 11.48

• 11.40

• Total

• 32.3

• 15.53

• 15.30

• English

• Spanish

• 9.18

• India

• 10.70

• 19.31

• 32.90

• USA

• 33.01

• 57.37

Source Mckinsey Interviews
Compared with United States, Colombia is 50-60
more competitive
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Competitive Operational Costs The Lowest Labour
Costs
Costs for Call Center Agent - US (per month)
The lowest Labour Costs in LATAM
Source Manpower
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Competitive Operational Costs Broad band
Cost US/Year
Cost of E2 is one of the most competitive in the
region
Source Mckinsey
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Human Resource Available and Highly Qualified
Workers
The highest index in Latin America, according to
the IMD World Competitiveness Availability of
Qualified Labor (10Fully available qualified
work)
Colombia, leader in information technology
engineering and business careers graduates
Third place in number of university graduates in
the sector among the main countries in Latin
America in 2007
Source The World Competitiveness Yearbook 2008
Third place in number of universities registered,
among the major Latin America countries in 2007
Source Higher Education Secretariat, Brazil
labor observatory, Mexico labor observatory,
Colombia ministry of education, Argentina
ministry of education, Chile ministry of
education, Uruguay
Source Consejo Superior de Investigaciones
Científicas (CSIC), organization attached to the
Ministry of Science and Technology of Spain
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Human Resource over 676,000 technicians and
university graduates
Number of university graduates in Colombia (2001
- 2006)

• In 2006, up to 50 of the undergraduates obtained
  a bachelors degree in Business and Engineering
  careers
• Over 60 of the technicians who graduated in 2006
  belong to Engineering and Business programs

Number of university graduates in business
related careers (2001 - 2006)
Source Ministry of Education of Colombia
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Human Resources Multiple development centers
Colombia has multiple medium size cities with
available and qualified labor pool
Total population in large and medium cities
Source Mckinsey
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Industry Maturity A growing market
The Service Market in Colombia grew 39.5
between 2005 and 2007
Service Offshore Market Value in Colombia US
1,013 million in 2007
Source IDC
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Industry Maturity IT Services share in Colombia
is the highest in Latin America
IT Industry share in Latin America (2007)
Only Colombia and Brazil show a clear growing
trend in this sector in the region.
Source IDC
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Industry Maturity services grew by 15 in 2007
Colombian IT Services market share 2007
Source ACDCC Sector Business Idea Invest in
Bogota
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Industry Maturity Positive trends
The number of Employees increased by over 100
between 2005 and 2007 Thousands 2005-2008
Sector Income has doubled in less than two
years US Millions 2005-2007
Source ACDCC Sector Business Idea Invest in
Bogota
Source ACDCC Sector Business Idea Invest in
Bogota
Exports grew over 200 between 2005 and 2007 US
Millions 2005-2007
In only two years, income and employment have
doubled, while exports have tripled.
Source ACDCC Sector Business Idea Invest in
Bogota
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Industry Maturity Main Services companies
Source CCIT
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Infrastructure Major investor in Latin America
1.56 in Telecommunications investment, as a
percentage of the GDP (2008)

• US 4 billion, will be the investment in
  telecommunications in 2010. In FDI, Colombia has
  accumulated U 2.5 billion in the past six years.
  
• 6 submarine cables, which have enabled an outlet
  bandwidth of 220 Gbps. It will be upgraded to 7
  shortly with CANTV-ETB.
• 10 times more Internet users in the past seven
  years.

Third country in terms of Internet users Millions
(2007)
Submarine cables in Colombia
Source The World Competitiveness Yearbook 2008 -
Internet World Stats
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Infrastructure We doubled connections to broad
band
Growth in terms of total connections December
2005 - December 2006
Over 13 million broad band connections are
estimated to exist in Latin America
With a 114.1 increase, Colombia was the Latin
American country undergoing the highest increase
in the total number of connections between
December 2005 and December 2006. 3,500,000 is
the number of connections estimated by IDC for
Colombia in the year 2010.
Source Cisco Barometer
Broad Band Connections
The total growth of broad band connections in
Colombia has undergone a marked dynamism,
exceeding global and regional growth.
Source IDC
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Business Environment Reliability for Industry
Stability of the Regulatory Framework (higher
score greater consistency)
Colombia stands out for its achievements in
regulatory stability, being located among the
countries with the highest index of consistency
Data Protection (1 poor, 5 good)
Colombia maintains a good level in terms of data
protection, can be found at the same level of
countries like Mexico and India
Source Office of Mckinsey business technology
Spanish Agency for data protection WCY Address
government policy
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Business Environment Attractive investment
incentives
Competitive Free Trade Zone Regime

• 15 corporate tax tariff and allows sales to the
  local market
• No customs duties are levied or paid (VAT and
  TARIFF) on finished goods, supplies, and raw
  materials that enter through these zones, whether
  from the national customs territory or from other
  countries.
• Possibility of exporting services from the free
  trade zone, both to the national territory and to
  other countries.
• Exports from the free trade zone to other
  countries benefit from international agreements.

• In 50 years (1958 - 2007) only eleven free trade
  zones were created
• 2007 - 2008
• 37 new Free Trade Zones approved since April
  2007
• 7 Free Trade Zones being processed

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Income Tax Deduction of 125 over investments in
scientific and technological development
Business Environment Attractive investment
incentives

• Income Tax deduction of 125 of the amounts
  invested in scientific and technological
• development in the previous tax year, directly or
  through research Centers, Technological
• Development Centers (non for profit
  organizations) or research groups of Graduate
  Studies
• Institutions (approved by COLCIENCIAS).

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Business Environment Attractive investment
incentives
Special Import Export Mechanism

• This tax benefit allows the investor to import
  capital goods that will be used to export
  services, with complete or partial exemption of
  custom duties and postpone the payment of VAT.
• This tax benefit requires that the investor
  exports 150 of the FOB value of the productive
  assets imported under the Especial Import
  Export Mechanism.
• The investor must provide an insurance policy or
  global bank guaranty o 20 of the FOB value of
  the productive assets imported under the Plan.

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Special Import Export Mechanism
Business Environment Attractive investment
incentives

• The services related with research and technology
  that can apply to the tax benefit are the
  following
• Computer services and other related
• Research and development services
• Telecommunication Services
• The Division of Especial Programs will approve or
  reject the Especial Import Export Mechanism
  tax benefit program within 10 days from the
  filing of the application and will notify the
  applicant.
• Colombia through the Law 170 of 1994, adopted the
  Agreement that created the World Trade
  Organization WTO and with it the General
  Agreement on Trade in Services (GATS).

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VAT Exemption for Services provided abroad
Business Environment Attractive investment
incentives

• The service exports from Colombia can be exempt
  of the VAT if they meet the following
  requirements
• The service is provided from Colombia.
• The service is provided to a consumer (company)
  that has no type of operation within Colombia.
• Register the service provision agreement before
  the Colombian Industry, Commerce and Tourism
  Ministry.

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Business Environment Attractive investment
incentives
Investors can subscribe Legal Stability Contracts
with the Colombian Government
Guaranteeing the legislation and administrative
interpretation considered as a determining factor
for the investment project.
Objective

• Investments over USD 1,900.000
• Investor must pay a premium to the Government
  equivalent to 1 of the investment made.

Conditions
Period
From 3 to 20 years maximum.
Admission
Technical report
Evaluation and approval of
the application
Final evaluation
These contracts exclude rules regarding the
social security system, the obligation to report
and pay taxes levied by the government under a
state of emergency, indirect taxes (i.e., the VAT
or the tax on banking transactions), prudential
regulations of the financial system and the
utility rate system.
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Business Environment Attractive investment
incentives
Other tax benefits

• Tax deduction of 40 of the value of the Fixed
  Productive Assets acquired.
• Tax deduction of the 100 of the Industry and
  Commerce Tax and the Real State Tax, paid in the
  corresponding tax year and which have direct
  relation with the taxpayer.
• Tax deduction of the 25 of the financial
  operations tax withholding, regardless the
  economic activity of the taxpayer.

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Success Story CITIBANK
The talent, preparation and skills for customer
service that distinguishes Colombians, have been
fundamental for us to feel comfortable to move
our customer service and collection operations to
Colombia Sergio de Horna, Citibank President
Spain

• From Bogotá, Citibank shared services operation
  provides
• Outbound
• Collection
• Product sales
• Inbound
• Product support for clients
• Customer service
• Provides services to 12 different countries
• Overall Citibank's operation employees over 2.000
  people

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Success Story UNISONO - SANTANDER
"Colombia is one of the countries with big
potential due to its economic growth, labor cost
and government support to the sector. Now we have
an additional motivation We are special trade
zone Ana Isabel Iglesias, Unisono President
Colombia

• From Bogotá, Unisono provides services for Banco
  Santander (Spain) with more than 600 agents who
  attend corporative and customers from Spain.
• Outsourcing of sales and customer service
  operation

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Caso de exito UNISONO - SANTANDER
"Colombia es uno de los países con mayor
potencial por su crecimiento económico, y ese fue
el principal aval para invertir en el país.
También por el valor de su mano de obra y por el
impulso que el Gobierno quiere darle al sector. Y
ahora tenemos un aliciente adicional nos acaban
de reconocer como zona franca especial" Ana
Isabel Iglesias, Unisono President Colombia

• Desde Bogota provee servicios a clientes
  corporativos y personales de España del Banco
  Santander
• Servicio al cliente
• Venta de productos
• Mas de 600 agentes

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Key qualitative factors in IT Services

• Service oriented people
• Macroeconomic and political stability better than
  other countries in Latin America
• Neutral accent
• WHY COLOMBIA
• Cheaper than Mexico
• Better service attitude than Argentina
• Is not saturated as Costa Rica or Uruguay

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Value Proposal Colombia is the best option for
IT Services investors who are looking for an
attractive local market, service oriented labor
pool and a strategic location for services
supply to LATAM
The lowest labor cost in LATAM up to 284 for
System Engineering careers

• Competitive Operational Cost
• Human Resource
• Industry Maturity

One of the most qualified and service oriented
labor pools in LATAM An average of 27.000
graduates in business related careers and more
than 13.000 graduates in IT careers per year
Growing market of US 1 billion almost 42 in
the last three years
Second lowest E2 cost in LATAM US 35,000/year
Free Trade Zone regime, specially designed for IT
services companies 50 off Corporate Tax and
sales to the local market
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Value Proposal Colombia is the best option for
IT Services investors who are looking for an
attractive local market, service oriented labor
pool and a strategic location for services
supply to LATAM
Strategic Geographic Location
Time Zone
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• IT Services Industry in Colombia
• Competitive Operational Cost
• Human Resources
• Industry Maturity
• Infrastructure
• Business Environment
• 2. Services to investors

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Financial support for investors

• Bancoldex as Colombias EXIM Bank provides
  development multi-bank integral solutions.
• Working capital.
• Investment in fixed or deferred assets
• Substitution of debts (except liabilities with
  partners)
• Total or partial purchase of companies related to
  the foreign trade sector.
• Including creation of new companies, acquisition
  of shares or equity quotas.
• Amount Up to 100 of the investment, always
  provided if the amount requested does not exceed
  the total amount of exports and / or projected
  imports or invoicing during the credit term.
• Duff Phelps AAA.
• Standard Poors BB/stable

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Proexport Investment Promotion Agency offers
world class services to foreign investors

• Tailor made information request
• Contacts with public and private sectors
• Set up of agendas when investors decide to visit
  to Colombia
• Aftercare services for investors that are already
  established in the country
• Assessment and improvement of business climate

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Proxeports overseas offices
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