INVESTMENT IN SOFTWARE AND IT SERVICES SECTOR

Liberta y Orden

OPPORTUNITIES IN THE LOCAL INDUSTRYThe financial sector has been one of the most dynamic sectors in mobile internet demand, based on a mass bancarization dynamic sought by the government to offer everyone the possibility to manage their finances using mobile devices. This trend has created many opportunities for the provision of back office and call center services in the country.

Due to the sustained expansion of the health sector and the growing demand of the population (47 million inhabitants), this sector requires increasing support in mobile telecommunication services for remote monitoring of patients (Telemedicine) and information consolidation (Data Entry).

Qualified human capital availability, its strategic and competitive geographical location with easy access to world markets, and location in the center of 5 time zones, sharing time zone with important business centers, have allowed Colombia to become a distribution regional hub for outsourcing, software, and IT services.

Colombian energy generation, transport and distribution companies, significant growth, and current regional expansion processes, increasingly demand more BPO and IT services

The Oil & Gas sectors demand more services related to mobile telecommunications as well as control and drilling, extraction, and oil transport processes for their daily activities increase.

The National Government is currently carrying out an ambitious plan, more than COP $90 trillion over the next years, for the development of road, port, railway, and airport infrastructure in the country, that will require accounting, finance, and logistics support services to control projects operation.

• In2011ITspendinginColombiaaddeduptoUSD6,119million:Hardware USD 3,568 (58%), ITservicesUSD1,851(30%),andsoftwareUSD698(11%).Households and communications & media industries, financial and government sectors, represent more than 50% of total IT spending in the country. IDC, 2012.

• TheITmarkethasgrownmorethan26%inthelast5years.Between2010and2011,salesshowed a significant increase of approximately44%.IDC,2012.

• ITServicesremainasthesecondtechnology market, keeping over 30%ofmarketshare.In2010-2011,salesincreasedmorethan16%.ITO,deploymentandsupportservices represent more than 65% of the total IT services market. IDC,2012.

• ITO:Industry’ssustainedgrowth in its different verticals is driving an increasing high demand for IT services.

• Verticals:Colombiaoffersa wide range of sectors that demand a high number ofoutsourcedservices:Companies investing in the country and local businesses mean potential demand for these services.

COLOMbIA – A MARkET IN CONSTANT DEVELOPMENT

41%

11%

26%

20%

Consulting

Integration and development

Deployment and support

Outsourcing

Education and entertainment

Source:IDC,2012.

IT SERVICES MARkET IN COLOMbIA – 2011SHARE PER IT SERVICE % OF SALES

30%

58%

11%

Hardware

Software

Services

IT MARkET IN COLOMbIA – 2011MARkET SHARE PER TECHNOLOgY MARkET % SALES

A gROWINg MARkET WITH HIgH CAPACITY OF SkILLED LAbOR

• AfterMexico,Colombiawith47.1millioninhabitantsisthesecondlargestSpanish-speaking country in the world. It has multiple areasofdevelopment:ninemetropolitanareaswithpopulationover500,000inhabitants.DANE,2012.

• Colombiaisthe28thlargesteconomyintheworldandoneofthelargestNon-OECDeconomies.

• Thecountryhasthesecondfastestgrowinglaborforceintheregion.IMD,2012.

• ColombiaisthethirdLatinAmericancountrywiththe highest number of graduates in the areas of BusinessandEngineering.Euromonitor,2012.

• Eachyearmorethan200,000peoplegraduatefromhighereducationinColombia:55% undergraduate and 30% in masters and specialization degrees. Observatorio Laboral-MinistryofNationalEducation,2012.

NUMbER OF gRADUATES IN ENgINEERINg FIELDS 2011

Systems Engineering

12,100

4,964

1,849

1,270 1,037

Electric Engineering

Telecomunication Engineering

Telematic Engineering

Electronic Engineering

Source:Observatorio Laboral–MinistryofEducation,2012.

• Primestrategiclocation:Locatedintheheartlandofthemaincommercial and financial centers in the hemisphere, it shares cultural affinity patterns, suitable to consolidate operations in the region.

• Infrastructurecapableofsupportworld-classoperations:5submarinecables (three in process) supplemented by an internal optical fiber ring thatwillconnect1,078municipalitiesin2014.MinTIC,(MinistryofInformationandCommunicationsTechnologies),2013.

INFRASTRUCTURE AND PRIVILEgED LOCATION

INNOVATION AND NEW MARkETS OPEN UPATTRACTIVE REgULATORY FRAMEWORk

TELECOMMUNICATIONS INFRASTRUCTURE SUbMARINE CAbLES

Availabletoolstoenableoperationsinareassuchasservicesexports(PlanVallejo),intellectualpropertyrights,StatutoryLawofHabeasData,ValueAddedTax(“VAT”)exemptionforservicesprovidedfromColombia,incometax exemption for software developed in the country, possibility of applying tothefreetradezonesregime,FirstJobLaw,andopportunitiestobenefitfrom Telework.

There is a worldwide trend that seeks to develop new processes to enter emerging markets, where the idea is to locate innovation centers to suit the requirements of target markets. In line with this trend, the National Government encourages the establishment of innovation centers in the country.

Continuous strengthening of commercial relations between Colombia and the world, opening a window of opportunities for investment in all business outsourcing services.

THE gOVERNMENT’S COMMITMENT TO THE SECTOR

VIVE DIgITAL

The Government is committed to support and provide aid through the Productive Transformation Program – PTP – a strategy aimed at promoting sector growth; in recent years the program has created a favorable environment to consolidate sector worldwide recognition. Program efforts develop throughout fourmainthemes:HumanCapitalandRegulatoryFramework, Consolidation, Promotion and Sector Innovation and Infrastructure and Sustainability.

Government plan aimed at generating economic growth based on the use and appropriation of ICT in Colombia and the development of a national digital ecosystem. ThePresidencyoftheRepublicandtheMinTIC(Ministryof Information Technologies and Communications) lead theplan.Intermsofconnectivity,by2014,itisexpectedtohave1,078municipalitiesonlineoutof1,100inthecountry.

PAN-AM

CFX - 1

SAM - 1MAYA - 1

Source:MinTIC,2011.

PCCS

GLOBENET

AMX - 1

IN PROCESS

COLOMbIA, A COUNTRY WITH MULTIPLE AREAS OF DEVELOPMENT• Outsourcing: ITServices:– Infrastructure –

Network&Desktop–ApplicationManagement–HostedApplicationManagement–HostedInfrastructure

Business: Business Outsourcing Services

• ITSupportandTraining: Support: – Hardware and Software

Implementation & Support• TrainingandEducation

• Outsourcing: ITServices: – Infrastructure –

Network&Desktop–ApplicationManagement–HostedApplicationManagement–HostedInfrastructure

Business: Business Outsourcing Services

• ITSupportandTraining: Support: – Hardware and Software

Implementation & Support• TrainingandEducation• DigitalAnimation• MobileAppDevelopment

bogota

Medellin

• Outsourcing: ITServices: – Network & Desktop

–ApplicationManagementandSupport

• ITSupportandTraining:• Support: – Hardware and Software

Implementation & Support• TrainingandEducation

Cali, barranquilla, and bucaramanga

• Outsourcing: ITServices: – Network & Desktop

–ApplicationManagementandSupport

• ITSupportandTraining:• Support: – Hardware and Software

Implementation & Support• TrainingandEducation

Coffee Triangle

MAJOR FOREIgN COMPANIES WHICH HAVE CHOSEN COLOMbIA AS AN INVESTMENT DESTINATION

• Globant,Argentina: This software, IT services, and maintenance outsourcing transnational corporation established a software development center in Bogota aimed at the international market.

• Indra,Spain: This consulting services and technological solutions company opened its second software laboratory in the country in Pereira in order to meet both domestic and international demands.

• Synapsis,Chile:This company purchased the Colombian operationsofLatinAmericanbroadband and IT services provider Diveo(investment:USD35million).

• Capgemini,France: This IT company opened a branch in Bogota to serve local and regional clients, establishing its regional headquarters in Colombia.(Jobscreated:400).

• Stefanini,Brazil: This Brazilian IT solutions firm purchased Colombian IT development company Informatica & Tecnologia, consolidating its presenceinLatinAmerica.

“Colombiaisakeycountryinourregionalexpansionstrategy;it’sacountryexperiencingstronggrowththathasaverycapableworkforceandaverycompetitivecoststructure.Forthatreasonwedecidedtoopenofficeshere.”

PeterKroll,SeniorVicepresident,CapgeminiNorthLatinAmerica.