{"id":19101,"date":"2024-07-26T14:36:00","date_gmt":"2024-07-26T17:36:00","guid":{"rendered":"http:\/\/fund.ar\/publicacion\/introduction-to-the-software-industry-series\/"},"modified":"2024-10-16T12:14:46","modified_gmt":"2024-10-16T15:14:46","slug":"introduction-to-the-software-industry-series","status":"publish","type":"publicacion","link":"https:\/\/fund.ar\/en\/publicacion\/introduction-to-the-software-industry-series\/","title":{"rendered":"Introduction to the software industry series"},"content":{"rendered":"\t\t
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Argentina is going through a long lost decade in terms of economic growth and exports. In this context, in which most public and private decision-makers emphasize the benefits of deepening the natural resources agenda, the software and IT services industry stands out within the Argentine productive framework in several key dimensions. This series of papers seeks to contribute to the debate to build a new policy agenda for the sector as a key part of promoting its dynamic development outwardly.\u00a0<\/strong><\/p>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Illustration: Micaela Nanni<\/a>.<\/p>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Why bet on the local software industry?<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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It makes intensive use of talent and generates employment in quantity and quality<\/strong>. In the last decade, the sector contributed to almost one-fifth of the jobs created. Today it provides formal employment to more than 140,000 people, surpassing the automotive, oil and mining sectors. At the same time, salaries are higher than the average of the economy and have increased faster than in other sectors. In 2011, they were 35% higher than the average and, by 2022, that difference would amount to 85%.<\/p>\n

It is dynamic and has an impact on the productivity of other sectors.<\/strong> In the last two decades, the sector’s sales have grown to such an extent that its share in national private employment has tripled. And between 2003 and 2023, sector exports grew 16 times. Currently, Argentina exports software for just over USD 2.4 billion per year, which represents 2.95% of exports of goods and services. This industry not only exports, but it is also surplus (with an average trade surplus of USD 696 million for the period 2014-2023) and therefore a net foreign exchange generator.<\/p>\n

Argentina is an interesting case in terms of the “birth rate” of unicorns<\/strong>. Companies such as Mercado Libre, Despegar, Globant, Olx, Ual\u00e1 or Tiendanube, with a market value of more than USD 1 billion. In 2022, the country had 11 unicorns in the sector, a number similar to that of Mexico -whose economy is twice the size of Argentina’s- and just below the number of Japanese firms of this type (13).<\/p>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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How did the software industry evolve in Argentina?<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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In the 1990s and early 2000s, Argentina entered the global software market early. <\/h5>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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It did so by taking advantage of the great availability of qualified human resources with internationally competitive salaries; the previous track record of institutions dedicated to research and education in computer science; and the existence of a local entrepreneurial ecosystem.<\/p>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Since 2004, the local software industry has been partially boosted by the implementation of a sectoral promotion regime. <\/h5>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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This allowed a reduction in costs and tax burden, provided predictability and promoted improvements in quality processes. In this context, and line with the growth of global demand, the sector took off rapidly, as evidenced by high rates of growth in employment and exports. This dynamism, together with the emergence of unicorns and “near-unicorns”, allowed the country to imagine itself as a player with potential in the global market.<\/span><\/p>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t

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In the last fifteen years, the era of \"easy\" growth seems to be over.<\/h5>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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We are entering a new phase marked by a slowdown in the growth of the sector at the domestic level, and an increasingly competitive global market, with a greater concentration of large players and greater competition from countries in the intermediate segment, in which Argentina is located. In addition, macroeconomic conditions and local exchange restrictions caused companies in the sector to seek to localize operations and grow from other countries; at the same time, others were acquired by global players.<\/p>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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What challenges are currently limiting the growth of the software industry?<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Nowadays, in a world where competition in software is increasingly stronger, Argentina has a specialization profile that, although oriented towards global markets, shows a level of value added per worker that is lower than the average of comparable countries.<\/p>\n

Leaping out of the “middle pack” will require moving towards another specialization profile in which the determinant of success will be the degree of innovation and scalability of developments, rather than the cost differential of human resources. Three elements limit this potential dynamism of the sector in Argentina (and prevent it from making this leap).<\/p>\n

First<\/strong>, the growth that characterized the sector in its beginnings lost power in a context of greater global competition.<\/p>\n

Second<\/strong>, the historical tightness of the human resources market has worsened. In addition to the deficit of 15,000 IT positions, there is a limited availability of specialized profiles. This restricts the growth of medium-sized local companies and the country’s capacity to attract projects and investments from global companies.<\/p>\n

Third<\/strong>, in recent years, the sector has given rise to product development-oriented companies, which now face the challenge of obtaining the financing and capabilities (managerial and international insertion) needed to leverage their growth and increase their links with the local production network.<\/p>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Where to go from here? Three papers to discuss the future of the local software industry<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Twenty years after the creation of the sectorial promotion regime -first under the Software Promotion Law (2004-2019) and then under the Knowledge Economy Law (2019-2029)- it is essential to rethink the policies for the sector. To this end, it is necessary to do so from a strategic perspective: to promote activities with greater added value and develop emerging comparative advantages.<\/span><\/p>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Document 1: Argentinean software in numbers: the end of the easy growth phase<\/a><\/h4>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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In the first paper<\/a>, we address the difficulties that the software industry has to be measured (both globally and in Argentina in particular). Then, we present an analysis of the evolution of the main economic variables of the sector at the local level (employment, sales, exports), putting it in the context of the evolution of the global market (and the challenges it presents for Argentina). Finally, we make a comparison of the evolution of the productivity of the domestic software sector with a set of countries with which Argentina competes.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Document 2: Who's Who in the Software Industry? Three universes of Argentinean companies<\/a><\/h4>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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In the second paper<\/a>, we focus on the evolution of the local entrepreneurial ecosystem. We identify the traits of three generations of software companies with different profiles and growth strategies. Then, we focus on those that emerged recently and seek to develop products for different specific sectors of the economy. Based on interviews with key players, the analysis focuses on the origin and specialization of this segment of companies, as well as on their financing, internationalization and recruitment strategies.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Document 3: Hitting the mark: proposals for the software industry of the future<\/a><\/h4>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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In the third paper<\/a>, we present the main challenges faced by Argentine software companies. Based on this, we point out, on the one hand, the need to rethink the current sectorial promotion regime. This should be done taking into consideration four aspects: improving the conditionalities for this productive policy; the direction of benefits; the development of investment funds, and transparency mechanisms. On the other hand, the implementation of complementary policies to the regime, concerning financing, internationalization, linkage with the productive framework and education and training.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"featured_media":18882,"template":"","meta":{"_acf_changed":false,"_links_to":"","_links_to_target":""},"tipo":[],"serie":[215],"desafios":[128],"agendas":[176],"class_list":["post-19101","publicacion","type-publicacion","status-publish","has-post-thumbnail","hentry","serie-anatomy-of-the-software-industry","desafios-desarrollo-productivo","agendas-politica-productiva-y-analisis-sectorial"],"acf":[],"yoast_head":"\nIntroduction to the software industry series · Fundar<\/title>\n<meta name=\"description\" content=\"Series of documents to contribute to build new policies for the software sector and promote its dynamic development outwards.\" 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