OBG talks to Ankur Prakash, Executive Vice-President, TCS Latam

Interview: Ankur Prakash

How big is the potential of the information technology (IT) services market?

ANKUR PRAKASH: Mexico, unlike Brazil, has a dynamic market with 90% of the industry domestic, and it exports only 10% of its total value, which is around $4.5bn. There is still remarkable room for growth, particularly for exports of business process outsourcing services. For instance, India is the world’s largest IT services exporter, with a total industry value of $100bn, 95% of which comes from international clients. With Spanish forecast to be one of the four main languages globally by mid-century, Mexico is well-positioned to become a leader in this sector. We expect the market to follow the 12% growth seen in 2012 and continue growing at a rate above 10% throughout 2013. A consistent 10% growth rate over seven years means the market value will double. Thus, for this presidential administration a growth of more than 80% towards a market value of $8bn is an attainable number.

What role will the private sector and IT clusters play in supporting sector development?

PRAKASH: The clusterisation of the sector should be a priority. Some small private sector initiatives in this field are now developing such as the Instituto Jaliscense de Tecnologías de la Información, the Clúster de Integradores de Alta Tecnología in Jalisco as well as the Clúster de Tecnologías de la Información de Querétaro in Querétaro. The next step is to develop nationwide initiatives and promote stakeholder participation so the industry can grow aligned with competitive global markets. These initiatives, often led by private companies, are particularly important because they do not only benefit the private sector. They also increase productivity and support the economy. The faster workers become productive, the more the GDP will grow.

However, significant improvements will not occur unless all stakeholders, including the government, are involved from the very beginning. If Mexico wants to compete with well-established technological industries like those of India or the Philippines, it must make serious investments in human capital. More than fiscal or economic incentives, the government must focus on other intangible spurs. For instance, curricula must be adjusted so that students can be hired right after graduation. This is common in mature industries, and others are catching on, such as in China and Uruguay, where universities have open dialogues with IT companies and align their programmes with industry needs. Mexico should follow this path, particularly in light of the aforementioned expected sector growth.

What are the benefits and drawbacks of injecting significant private capital into IT infrastructure?

PRAKASH: The allocation in the 2013-18 National Infrastructure Programme of MXN$700bn ($53.7bn) must buttress the sector through increased investments from local and foreign companies. For Mexico to become a much more competitive and attractive country, businesses must be reassured that they will have adequate physical and information infrastructure.

The telecoms infrastructure budget is imperative for growth in Mexico, as in any emerging economy. The government has expressed its desire to have private companies contribute 90% of the total investments in telecommunications infrastructure, providing significant opportunities for private companies in all IT infrastructure-related industries, such as network coverage expansion or the development of fibre-based broadband services throughout the country, to mention a few.

This budget should support internet and technology penetration, which Mexico still lacks. Around 40-50% of the population resides outside of city centres and technology must reach them. The private sector is taking the initiative in the expansion of connectivity, but some companies are deterred in these investments, as in the short term rural expansion may not seem financially viable. However, in the medium to long term, it certainly is, as these rural populations will naturally create yields as they consume and require services.