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orward-thinking companies in the IT, software and telecommunications sectors know that clustering – locating in (or being closely connected to) geographic hotbeds of innovation with concentrations of other similar and related companies, skilled knowledge workers, universities and technology centers and advanced physical infrastructure – is a key way to gain competitive advantage. The regions around the world most successful in growing those industries promote clustering to support existing companies and attract new ones.
A number of factors drive Sweden’s telecom success: a strong supply of engineering expertise; an “Always Best Connected” philosophy, where different technologies complement one another; a strong IT consulting sector; new digital service developers; and enterprises dedicated to improving core and backbone networks.
Three regions have excelled in creating regional innovation complexes. In Telematics Valley, set to become one of the world’s premier locations for vehicular telematics, G?teborg has attracted research centers for companies such as the Ford Motor Group and HP. G?teborg, Sweden’s second largest city, is the headquarters of Volvo and SKF, among others.
The InternetBay cluster, encompassing the V?sterbotten and Norrbotten regions of Northern Sweden, focuses on distance-spanning technologies and mobile applications.
As the capital of “Mobile Valley” as well as the country, Stockholm is the natural center for much of Sweden’s ICT activities, from start-ups to large companies and research centers. The suburb of Stockholm/Kista has evolved into the world’s leading center for wireless technology development.
A 2003 report from computer consultancy Gartner Inc. says one out of 10 jobs in the U.S. computer services and software industry could move offshore by 2004. U.S. firms’ increasing reliance on outsourcing work to overseas suppliers has fueled development of IT clusters in Asia and Latin America.
In 1980, India’s IT industry barely created a blip in global markets with only $4 million in exports. Now, India has $12 billion in software and related services exports, up from $9.5 billion in 2002, according to the National Association of Software and Services Companies. India’s software exports are projected to top $50 billion by 2008.
Bangalore and other parts of India have been successful at attracting investment for three fundamental reasons: India’s low cost of labor, bilingual skills and intelligent workers.
Today, much of India’s software and telecom employment is dominated by large global players such as Oracle, Novell, Sun Microsystems, Lucent, and Sony. But Indian software companies like Infosys, Wipro, and the Bombay-based Tata Consultancy Services have entered a higher level of competition by offering an integrated range of services – product development, call centers, support services–and are now bidding more competitively on multimillion-dollar deals.
India’s investment attraction strategy for IT/Software/Telecom is based on the following characteristics: (1) All imports to Software Technology Parks (STPs) are free of tariffs and duties; (2) 100-percent foreign-owned investment is permitted in software companies; (3) five-year tax holidays; (4) re-export of capital goods is permitted; (5) more than 55 percent of exports are destined for the U.S.; and (6) domestic expenditures on IT are 0.8 percent of GNP.
Mexico has been successful at attracting the manufacturing branches of big international corporations. Now the design, research and software development branches of those firms analyze the country with new eyes.
Mexico’s software development industry now produces $520 million, employs nearly 20,000 people and is growing at 8 percent a year, according to PriceWaterhouseCoopers. A new development program, PROSOFT, is planning to expand Mexican software and IT services to $5 billion by 2010.
Mexico produces more than 110,000 engineers per year, with an increasing percentage in software, computer sciences and related fields.
While Monterrey, Guadalajara, and Mexico City continue to host most of the country’s IT/Software/Telecom employment, Chihuahua is emerging as a clustering “hot spot” in Mexico, having launched a major cluster-based economic strategy during the 1990s.
Five years ago in Ciudad Juarez, for example, GM/Delphi started up an R&D engineering design center for auto brake systems that has been enormously successful, employing more than 800 locally trained engineers. In Chihuahua City, Ford’s Visteon established an electronic systems design center in 2003 that will be fully staffed by Mexican engineers.
Monterrey, with its strong IT/software talent, is emerging as a software cluster, and has been benefiting from Mexico’s PROSOFT program. It has the advantages of a first-rate engineering university (the Tec de Monterrey), a large labor pool of well-trained engineers and a sophisticated industrial base. Guadalajara and Aguascalientes have been working aggressively to develop the needed specialized infrastructure for software development.
Up-and-Coming Hot Spots
Costa Rica is host to more than 130 software companies and boasts software exports of $70 million per year. The country has based its IT and software development on investment in social programs, mainly training of its work force. The mix of ecotourism and software development has also been a formula for success. And the lure of Costa Rica’s political stability and high quality of life have been important ingredients for attracting foreign companies. The siting of Intel‘s microprocessor plant in capital San Jose has given Costa Rica a whole new boost.
Panama is a relative newcomer in Latin America. As part of a major national clustering program, Compite Panama, the country launched an IT cluster last year, pulling together over 40 main players in IT/software/telcomunications and leveraging the impressive five major fiberoptic cables that pass through the Panama Canal. Dell has its Latin American technical support center in Panama.
