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(Last updated: 26 May 2008)
Trends and opportunities
The market
Argentina is embarked on a genuine development process regarding software and IT services. Nowadays the software and computer services industry in Argentina has approximately 40,000 qualified workers spread among 1000 companies that invoice around US$1,600 million and US$300 million due to exports. By the end of 2011 the industry is expected to employ nearly 70,000 workers and to raise its invoice to US$3,000 million and more than US$600 million for exports.
Argentina’s IT market – including hardware, software and services – reached US$2.6 billion in revenues, showing a 19 per cent increase in 2006 vis-à-vis 2005, according to BMI Research. The market in 2007 increased 21 per cent. The hardware segment accounted for the majority of the growth increasing 34 per cent in 2005 and 23 per cent in 2006. Hardware grew 26 per cent in 2007, led by PCs and notebooks. Total software market revenues increased 20 per cent in 2006, reaching approximately $400 million. The US is the largest exporter of software into Argentina.
Argentina's software and IT services sector ought to specialise in four strategic areas, namely agribusiness, digital content and Internet-related solutions, healthcare, and value added IT services. The country has a lot of potential for developing video gaming, e-learning, digital content and dynamic web pages. Argentina is currently exporting products like this. Within the health sector, the country could specialise in biotechnology while there are opportunities to develop solutions for the agricultural industry, due to the strong contribution this segment makes to the country's economy.
In terms of revenues, the hardware segment grew 15 per cent in 2006 and 2007 and is expected to continue growing at the same rate in 2008. In terms of units, the sale of PCs grew 41 per cent in 2005, 44 per cent in 2006 and 45 per cent in 2007. The sale of notebooks almost doubled in 2006 and it increased in 70 per cent in 2007. The driving force behind the increased demand for notebooks is mobility and connectivity. Sales of servers is also growing. Telecommunications, companies and banks have already made investments in IT for the upgrade of servers (units of over $200,000) in 2006 and 2007.
Four main factors will keep demand for IT hardware high:
- New investments in the country in a number of industries (eg. tourism, construction, retail, financial services)
- The majority of the systems installed need upgrading
- The growth of Internet access
- The increasing complexity and convergence of technologies
Argentina has the third largest population of Internet users in Latin America, with over 12 million, and it is growing at a 40 per cent annual rate. Broadband access doubled in 2006 and 2007. This factor, coupled with the expansion and upgrading of technology from the mid to large corporations and government, are the main drives of a forecasted sustained demand for IT hardware through 2008.
One of the most visible trends in the market since the devaluation in 2002 is the increased assembly of computers in Argentina. The devaluation made imported products three times more expensive for local buyers. Over the last three years, the largest IT distributors/resellers expanded their sales business to integration by assembling PCs locally using imported components. Hewlett Packard is the market leader in the import segment, followed by IBM/Le Novo.
International brands dominate the notebook market even though generic products begun appearing in the market in late 2005. The leading brands in the market are Hewlett Packard, IBM, Toshiba, Sony, Dell, Packard Bell, Fujitsu Siemens and Acer.
The sale of peripherals and consumables for PCs are growing at 35 per cent and 25 per cent respectively. Hewlett Packard, Lexmark and Epson lead the market for printers. They have subsidiaries in the country from which they manage the IT distribution. The best selling product is the multifunction printer or all-in-one printer that prints, scans, copies and prints photographs. This product grew 70 per cent in 2007.
Another trend is the reduction in contraband/the black market of IT products. This is possible due to government tax controls, and the continuous drop in IT prices. Hard drives, microprocessors and memory are the most typical items that are smuggled.
High-end accessories, interfaces, video digitalisation products and niche peripherals such as memory readers, hubs, Bluetooth/wireless cards/routers have great market potential.
Software industry
The software sector continues booming in Argentina. From 2004 to 2007, this sector accounted for the largest amount of new SMEs in Argentina. In regards of its human resources, at present the industry employs over 45,000 people and exports US$350 million in software.
Many large international IT companies are investing in software development and other IT services in Argentina. Intel, Motorola and EDS opened development centres in Cordoba city for their own R&D Divisions. Oracle, Accenture, Siemens, Tata, Neoris, IBM and Google expanded their operations and software divisions to develop software for their own needs and also for sale. There is a major tech corridor in the country – Cordoba IT cluster, Technological Pole in Rosario, Technological Poles in Tandil and Bahia Blanca and one in San Luis province.
The IPR legislation is very modern and aims to foster the sector’s growth.
The Argentine Government has taken some measures for this industry, which represents one per cent of Argentina‘s GDP. In June 2007, the Trade Association of Software Business and IT Services announced the Digital Plan, which is to take effect in 2010 and promotes the use of technology to support education, health and social services, economic competitiveness, electronic government, digital utilisation and security.
The software law grants large tax deductions to firms that engage in research and development or the export of software. More than 170 local firms have taken advantage of this Law and various provinces have passed laws to promote the creation of centres of technical development in their territories.
Opportunities
Opportunities include:
- Software for education
- Complete solutions for public administration (eg. government and public sector)
- IT security tools
- Software for agribusiness
- Industry solutions for environmental protection
- Healthcare and medical services
Competitive environment
International manufacturers, local assembly firms, wholesalers, resellers and retailers add competition to the market. Most of them are involved in local assembly of PCs. Some of them have also developed their own brands and tend to position them between the international brands and clones. Clones represents 80 per cent of the total PCs sold and branded products only 20 per cent. The value of clones is determined by the quality of the components, some of them are offering the latest technology available in world markets. |