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

DANIEL CHUDNOVSKY, ANDRÉS LÓPEZ

The New Economy in Development: ICT Challenges and Opportunities

Palgrave

Año: 2006; p. 137 - 160

The software and information services (SIS) sector has been rapidly growing in recent decades. Developed countries are both the main producers and consumers of SIS.  Nonetheless, there is room for firms from developing countries to enter and grow in this sector, as proven by the experience of India, Brazil, Singapore, Taiwan, Korea, Costa Rica, and others. SIS technologies, markets, products and business strategies are constantly evolving (see OECD, 2002, for an overview of the trends in the software sector). In this scenario, some firms from the “three I’s” countries (India, Israel, Ireland) have managed to compete in export markets through truly innovative products aimed at certain niches. However, most firms located in what Carmel (2003) defines as “new software exporting nations” compete via costs (low wages) selling information services. In fact, there are several strategies available for firms from developing countries in the SIS sector, each requiring specific endowments and capabilities and having different consequences for the dynamics of the sector (Heeks, 1999). The objective of this paper is to analyze the strengths, weaknesses and prospects of the Argentine SIS sector revealed in a survey conducted in 2000-01. The main interest of this case study is to learn about the impacts –“pros” and “cons”- derived from following an “inward oriented” strategy in the SIS sector (that is, selling almost exclusively in the domestic market), as that traditionally followed by Argentina’s SIS firms. The strengths and weaknesses of the SIS sector in Argentina will be examined in the light of the model proposed by Heeks (1999) to analyze the conditions that allow developing countries to have a successful performance in this industry. Although our analysis will emphasize on the shortcomings of the inward-oriented strategy, which are a sort of negative legacy that the sector has to overcome even in the new more favorable scenario[, the original motivation of our research was the conviction that there were potential competitive advantages that could allow for a successful penetration of Argentinean SIS firms in foreign markets. Our main argument is that the inward-oriented strategy adopted by SIS firms in Argentina has so far hampered their ability to profit from the advantages mentioned above. Since they enjoyed a sort of “natural protection” in Argentina’s market that allowed them to survive and expand by exploiting their knowledge about domestic legislation and business culture and their capability to adapt to changes in those areas, SIS firms have not paid enough attention to some key issues necessary for success in export markets. This lack of attention was aggravated by the absence of public support for the sector and a domestic environment that lacked cheap and easy access to investment and working capital and other key elements for competitiveness in SIS activities.