Thursday, December 08, 2005

Cuba Fast Becomes a Hotbed for IT Outsourcing

Canadian companies tap into burgeoning tech culture in communist stronghold

Globeandmail.com

INFORMATION TECHNOLOGY

By DAVID PYE

Thursday, December 8, 2005 Page B13

Special to The Globe and Mail HAVANA -- Despite being one of the world's last standing communist regimes, Cuba has proved masterful at reinventing its economic priorities in troubled times.

The latest transformation is an IT revolution that is positioning the country as an attractive outsourcing option for Canadian companies, and as a natural gateway to the Latin American market.

Since 1991, Cuba's information technology sector has been developing at warp speed and now consists of about 45,000 highly skilled workers, 38 per cent of whom have specialized degrees. More than 85 per cent of the country's IT industry is concentrated in technical services and software development.

"We've been investing in this sector for the last 14 years and we now have highly skilled IT workers at every level," says Luis Marin, general manager of Avante, the marketing arm of Cuba's Ministry of Information Technology and Communications. "IT doesn't require a lot of investment . . . except in human resources." Canada is Cuba's third-largest trading partner and fourth-largest foreign investor, with more than $750-million tied up in the island nation. Cuban officials and the
Canadian Trade Commissioner Service won't say how much of that investment is tied directly to technology, but government authorities are actively seeking Canadian investment in the form of outsourcing projects and joint venture opportunities.

Cuba is particularly interested in joint ventures that will enhance the local infrastructure, while transferring skills to citizens. It wants to attract Western partners who can teach more about the standards and demands of the international market.

Cuba's Centresoft Corp. and Cimex Corp., for example, have partnered with Sentai Software Corp. of Edmonton and Indcom Trading Co. of Orleans, Ont., to create an international software consortium called CubaSoft Solutions Inc. CubaSoft is recruiting Cuban IT talent to work on projects for the Canadian companies and is also developing domestic IT projects.

"IT is among the main investment opportunities in Cuba for Canadian companies right now," says Raciel Proenza, economic counsellor with the Cuban embassy in Ottawa. "It's a high-priority sector because it also contributes to the development of our country."

The catalyst for bolstering the sector has been Cuba's commitment to education. An hour north of Havana, the University of Information Sciences boasts 6,000 students on a high-tech campus ringed by fibre optics. The institution produces 2,000 graduates annually who, along with computer science grads from the mathematics faculty of the University of Havana, are leading Cuba's IT revolution.

"These people are very well educated and offer an outsourcing option that I think we need to take a look at," one Canadian insider says. "I can go down there and say I want this done, here's the project and here's what we'll pay." He spoke on condition of anonymity out of fear of U.S. reprisals under the Helms-Burton Act and other pressures that prevent U.S. companies and affiliates from doing business with Cuba.

While baby steps are a necessary part of the learning process, industry insiders are confident that Cuba has what it takes to develop a critical mass and knowledge base that will position the island as an attractive option for IT outsourcing contracts -- particularly for software development in the medical, financial, biotech and education fields.

Cuba is also poised to become a gateway to the lucrative Latin American market by providing software adaptation and localization services, offering the added benefit of regional economic associations within the Caribbean and Latin American economies.

"Latin America is starting to roll and they won't be far behind in technology down the road," the Canadian insider says. "Cuba offers a front row seat to one of the world's fastest emerging markets, just a three hour flight from Canada."

As the fifth-largest buyer of Canadian goods in Latin America, Cuba's IT revolution is two-way. The country is also moving at a rapid pace to develop its own infrastructure, concentrating on networking all of its science and technology institutions the way the University of Havana has been.

The project eventually will link more than 6,000 primary and middle school libraries, 300 university libraries and more than 200 scientific institutions. Those numbers represent a significant opportunity for Canadian companies, based on Cuba's inability to buy U.S. goods and services. "It's a huge undertaking that will require hardware, software and everything in between," says Eduardo Orozco, director-general of the Institute for Scientific and Technological Information. "Canadian companies with good products at attractive price points have an excellent opportunity."

While sources admit that Cuba still needs experience at competing in a global business environment, they are encouraged by the direction that the country is taking.

"If they can bring their people up to speed in terms of international standards and regulations, they will be a serious contender in software outsourcing in the years to come," says one Canadian IT consultant who did not want to be named because of the Helms-Burton issue. "What I see is really encouraging, and we would be remiss not to take a look at what they are doing there."

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