The software and information services sector in Argentina: Pros and cons of an inward-oriented development strategy

The software and information services (SIS) sector is at the heart of the New Economy and has been rapidly growing through the whole world during the last decades. This is also the case in Argentina where in the middle of a deep recession, the turnover of the sector augmented by 40 per cent and employment by 43 per cent between 1998 and 2000. The objective of this paper is to analyse the evolution, present situation and prospects for the Argentine SIS sector, relying on a detailed survey recently made to 100 firms operating in this developing country. Most of these firms are locally-owned and young SMEs supplying the domestic market but there are also a few large firms accounting for the lion’s share of that market. Exports are negligible in terms of the sector’s turnover. Argentina seems to have some advantages to exploit in order to make significant inroads in this sector: it has a relative abundance of high-skilled labour, a sizeable domestic market and a cultural influence in Spanish-speaking South America. SIS activities began in the 1970s and the sector has developed so far without any government support. None the less, SIS firms in Argentina have been basically tied to one particular segment of the domestic market—i.e., software for accountancy, management, etc.—where they enjoy advantages derived from the idiosyncratic feature of the domestic regulations and their knowledge about the business culture and the needs of their local clients. Firms experience problems in competing via costs, while, apart from some isolated exceptions, have never competed through innovation. Besides, they lack marketing capabilities as well as access to investment and working capital. Programming and analysis skills are available but they are relatively expensive in comparison to the situation in other developing and latecomer countries. Furthermore, management skills are imperfect. In turn, networking mechanisms are weak, both among SIS firms as well as with their customers, R&D institutions, etc. There is then a need both for action aimed at improving the SIS firms capabilities and endowments, as well as for intelligent public policies to foster this sector and dramatically increase its export capacity. The experiences of other developing and latecomer countries should help in finding ways to overcome the problems faced by this promising sector and significantly enhance its prospects.