The rapid development experienced by the Colombian economy has been matched by the progressive adoption of IT by firms and end users.
Although the reduction in oil export earnings is causing budgetary constraints, authorities continue to invest in improving access to IT and telecoms services for Colombians, as well as supporting digitalisation efforts across economic sectors. The ongoing implementation of the Vive Digital plan has revamped the IT ecosystem. Training programmes for Colombians wanting to join the sector have been strengthened, and with better appropriation of IT by businesses the sector has become an important tool for job creation. Improving the way IT is used by domestic firms, especially smaller companies, has been a cornerstone of the government’s strategy.
Moreover, the sector’s development has opened opportunities for more efficient and transparent government, as the rollout of an e-government strategy is simplifying links between Colombians and the state.
Since its launch in 2010, the central axis of the government’s policy for the IT sector has been the Vive Digital plan, which has based its programmes on the expansion of IT, especially internet access, as a way to bridge development gaps that have held some regions of Colombia back for decades.
Furthermore, the underlying principles of the governmental strategy have put a sharp focus on the role that a stronger IT sector can have in employment creation and entrepreneurship in the country.
Ongoing implementation of the programme has produced some palpable results. The number of internet connections reached 15.9m in the fourth quarter of 2016, up from 4.4m in 2010, according to the Ministry of Information and Communications Technology (Ministerio de Tecnologías de la Información y las Comunicaciones, MINTIC). Mobile phone connections have also grown exponentially, reaching 58.7m in the fourth quarter of 2016. Rising IT adoption levels among businesses and individual Colombians alike have allowed for the incorporation of digital tools in everything from public administration to education and health care provision, as well as expansion and development of small and medium-sized enterprises (SMEs).
Furthermore, efforts to expand broadband access have increased connectivity. The COP1.2trn ($360m) project that set up 20,000 km of fibre-optics has facilitated broadband internet access for all of the country’s 1102 municipalities, compared to the 200 that were linked in 2010, according to MINTIC.
The second phase of the Vive Digital plan, which covers 2014-18, is designed to facilitate IT adoption in different segments of the population, supported by the infrastructure gains made during the first stage of the programme.
A key aspect of the plan is to support the development of mobile applications that deal with social issues, such as poverty reduction, but also promote agricultural development and health provision. Reducing cost barriers to ensure that users can access hardware is also a stated objective, with the government aiming to equip 350,000 teachers with free computers, and Colombian students with tablets.
E-government has also been underlined as an important component, centred on public service provision across the whole of the Colombian administration, with a principal focus on key areas such as justice and health care, where an overall digitalisation programme is under way. In the case of health care provision, the authorities also expect to increase use of the internet to surpass Colombia’s challenging geography and provide remote health care support.
The current IT programme is also investing heavily to raise the amount of free internet areas in urban centres and the number of free access IT learning centres for skills training. Setting up the infrastructure to improve nationwide accessibility was the main point of the first phase of the Vive Digital plan. As of early 2017, 639 cities and urban centres had 4G internet coverage, according to MINTIC. Since 2010 internet access for Colombians has been secured through the construction of 872 Vive Digital branches in over 530 municipal areas and 6885 Vive Digital kiosks. These entry points were established for local populations to access computers with internet connections, allowing for study or research activities and access to online government services. The deployment of this infrastructure has secured internet access for Colombian urban centres and towns of more than 100 people.
Despite the continued implementation of Vive Digital, the sector’s expansion will likely be affected by current economic conditions. With a large part of the budget for innovation coming from royalties paid by companies exploring non-renewable resources, some programmes targeting IT innovation might take longer to implement. However, the authorities maintain that the development of the IT sector should remain a national priority.
Encompassing both investment and running expenses, public expenditure on the sector is set to reach COP1.62trn ($486m) in 2017 and increase to as much as COP1.67trn ($501m) in 2019, according to MINTIC. Annual overall investment in technology in Colombia as a percentage of GDP rose from 1.2% in 2010 to 2.3% in 2015, according to the Index for Innovation in Society 2016, a study carried out by US-based telecoms equipment firm Qualcomm and US-based International Data Corporation.
The Colombian IT market is currently worth around COP15trn ($4.5bn), of which 60% is made up of the software segment, according to the Colombian Federation for the Software Industry and Related IT (Federación Colombiana de la Industria del Software y Tecnologías Informáticas Relacionadas, FEDESOFT).
Rising internet connections have allowed a growing number of Colombians to become regular users, pushed by a combination of government policy to increase adoption and tight competition between telecoms operators.
Broadband internet connections in Colombia grew from 12.4m in the fourth quarter of 2015 to 15.3m in the fourth quarter of 2016, according to MINTIC. The rapid growth of internet access is being driven by rising smartphone penetration. According to a survey by think tank Fedesarrollo, 17% of people said they accessed the internet using their mobile phones in 2013, compared to 56% in 2015. According to MINTIC, the number of mobile internet subscriptions had increased by 36.3% by the end of the fourth quarter of 2016, compared to a 6.9% rise in fixed internet subscriptions, signalling that expansion happens hand in hand with the spread and development of mobile services. Quarter on quarter, mobile internet subscriptions rose by 7.3% in the same period, while fixed internet grew by less than 1%.
Smartphone usage in particular has galvanised the mobile application segment. A study by US-based research firms comScore and Internet Media Services published in late 2016 found that Colombian smartphone users have an average of 19 phone applications, and that the number is rising by 8% annually. Estimates by the Colombian Chamber for Electronic Commerce (Cámara Colombiana de Comercio Electrónico, CCCE) put the annual value of the mobile application business at COP150bn ($45m) in 2015.
Along with the rising volume of people with internet access, the average quality of connections has also been improving, with the number of 4G subscriptions reaching 4.89m over the fourth quarter of 2016, compared to 2.65m in the same period of 2015, according to MINTIC’s fourth-quarter report. Expansion of 4G is also being stimulated by private telecoms operators and the Commission for the Regulation of Communications, which are both encouraging the upwards migration of 2G and 3G users.
Improvements in internet accessibility are helping to support expansion of digital activity and the volumes of trade moving online. E-commerce transactions reached $16.33bn in Colombia in 2015, according to the CCCE, a 64% increase from 2014 and an amount representing 4.08% of GDP. The chamber also found that 76% of internet users in Colombia had acquired a product or a service through the internet over the previous 12 months, a major increase from 24% in 2013, according to a study published in mid-2016. An assembly of international and domestic platforms are pushing for the expansion of e-commerce sales, and although the convenience factor is attracting a growing number of Colombians, the traditional barriers such as security concerns and delivery logistics continue to prevent faster uptake (see analysis). Thus far, the online transactions segment has mainly focused on certain products: however, the opportunities for online shopping are promising given the number of retailers and platforms strengthening their internet presence. The growth in data consumption also means that telecoms operators are competing to offer more at lower prices.
Even with the progressive adoption of online transactions from a consumer perspective, standardised use of digital payment platforms is taking more time to reach businesses, specifically SMEs. A study by MINTIC published in October 2016 found that only 8% of domestic SMEs had made sales over the internet. However, some 26% of them now buy products, inputs and services online.
Other government programmes to increase IT adoption by Colombian businesses have been successful. By focusing resources on micro firms and SMEs, authorities have been pushing domestic businesses to adapt to the internationalisation of the Colombian economy through deeper IT involvement.
This has been carried out via several initiatives under the Micro, Small and Medium-sized Enterprises (MSME) Vive Digital, which has channelled government funds towards IT adoption and training in Colombian firms since 2010. The impact of these policies has been incremental. MINTIC estimates that 75% of the country’s MSMEs have internet access and that 36% have established a website.
For the 2016-18 period, the government is allocating COP47bn ($14.1m) to support further digitalisation initiatives among Colombian MSMEs under the MSME Vive Digital programme. Launched in late 2016 to cover the remaining term of President Juan Manuel Santos, the scheme aims to support 130,000 Colombian firms, focusing activities in five major areas. The majority of the programme’s investment, COP33bn ($9.9m), will go towards encouraging e-commerce activities, by focusing on both business-to-business and business-to-consumer transactions.
Equally important will be a COP3.5bn ($1.1m) training programme, directed at 100,000 business owners. It will offer access to online learning courses related to IT, lasting between two and five hours, with the option to enrol in longer programmes lasting 40 hours and focusing on different areas of IT.
Ensuring that Colombians can access the necessary equipment to take advantage of the country’s IT potential has been a priority for both editions of the Vive Digital programme. Specifically, sector authorities have established partnerships and co-financing schemes in order to channel IT equipment towards the education system.
The stated goal is to have a ratio of one computer for every two schoolchildren by 2018. Distribution and funding structures for the programme are under the Computers to Educate initiative, which was jointly established between the Office of the Presidency, MINTIC, the ICT Fund, the Ministry of National Education and Colombia’s National Learning Service, the main provider of public technical education. The initiative has focused the deployment of equipment for the country’s more isolated schools. In 2016 the programme was able to distribute 259,000 computers and tablets to Colombian schools.
In 2017 Computers to Educate aims to provide training for 30,000 teachers and 50,000 parents in IT skills, and distribute another 100,000 computers to schools and other educational institutions. In January 2017 a co-financing deal between the central government and various regional authorities was announced that will facilitate the distribution of 110,000 tablets to schools in more than 230 locations, with an investment of $70bn. The schools that will benefit from the programme represent 84% of institutions in the public education system.
These measures have had a significant impact on available equipment for learning. The number of computers in Colombian public schools has gone from one per 24 students in 2010 to one per five students in 2016, according to figures from MINTIC.
With little if any hardware production taking place in Colombia, the IT sector is largely driven by software development and associated services, which reached sales of COP9.6trn ($2.9bn) in 2015, a 7% increase from 2014, according to FEDESOFT.
Although this growth is representative of the sector’s dynamism, it also reflects a slowdown effect. Lower oil prices have had an impact on the confidence of both consumers and businesses. Recent years saw much more expansive growth, with sales for software and associated services increasing by 24% in 2012 to COP4.2trn ($1.3bn), by 40% in 2013 to COP5.9trn ($1.8bn) and by 52% in 2014 to COP8.98trn ($2.7bn), according to the IT Observatory, which was established by MINTIC in conjunction with FEDESOFT to compile statistics on the sector. Colombia’s software industry consists of more than 5450 companies, 70% of which are micro firms, according to FEDESOFT.
The sector has benefitted from government attention, especially in support for Colombian IT firms aiming for international markets. ProColombia and MINTIC joined forces to set up the Colombia Bring IT On campaign, which was launched in 2014 to promote software and associated services firms, as well as digital content producers. The campaign has linked a growing number of Colombian firms with international markets and clients, through access to international sector events.
The main exports are software solutions for the health care, finance, commerce, telecoms and public services sectors, as well as business intelligence and digital market solutions. According to MINTIC, software exports totalled $360m from 2012-16. The US, Dominican Republic, Costa Rica, Mexico, Peru, Spain and Germany are the sector’s main markets.
“One big challenge is to take the companies to a higher level of competitiveness by helping them to follow market trends,” Ximena Duque, director for competitive firms at FEDESOFT, told OBG. “You see a lot of these companies that have been selling tailor-made software. It might be helpful for Colombian firms to become more specialised in certain areas of software development with high international demand. However, we also have important companies selling their products all over the world, with high standards and specialised offers. We have been working closely with them in a strategy, created by MINTIC in alliance with FEDESOFT, named Team Colombia.”
One challenge for the software segment – and for the IT industry as a whole – is the pressing need for a larger workforce. Duque estimates that the sector employs 90,000 people, but up to 2018 an extra 53,000 professionals will be required to support its growth, according to MINTIC. Government efforts to expand available human resources have centred on promotion of IT education.
The gap remains significant, but continues to be addressed by the authorities via the allocation of loans and scholarships through the government’s IT Talent programme. The scheme covers 90-100% of education costs for students in IT degrees at both public and private universities. Those who successfully complete their studies may have their loans forgiven. A total of 9235 loans were disbursed between 2014 and 2015. In 2016 MINTIC allocated 2230 scholarship credits and in the first quarter of 2017 it disbursed another COP36bn ($10.8m), benefitting 823 students. According to MINTIC surveys, the areas most in need of IT professionals are digital content production, software development, telecoms, and infrastructure and hardware.
In 2016 Spain’s ticjob.com, an employment platform targeted at employers and jobseekers in the ICT sector, began offering its services in Colombia. Local press reported that by August 2016 the firm already had more than 100 job listings and over 1000 subscribers. The portal divides job listings into three categories – development, systems and management applications – to provide personalised service.
Better internet connections, especially across Colombia’s less-accessible regions, has eased interaction between citizens and the state. The number of people using government online services increased from 30% in 2009 to 65% in 2014, according to MINTIC’s Office for Online Government Strategy. Over the same period, the percentage of businesses using online platforms to interact with government bodies rose from 24% to 81%.
The UN E-Government Survey 2016 ranked Colombia 57th out of 193 countries for its policies and implementation of digital government, and ninth out of the top 10 e-government performers in Latin America. The 2014 report had ranked Colombia 50th overall, and the country had reached 31st out of 192 – and first place in Latin America – in 2010, showing both that there are still improvements that need to be made in terms of e-government rollout in the country, and the importance that e-government programmes have attained on a global scale.
The government has made changes to improve interactions with citizens. All government bodies now have an online presence, and several programmes currently under implementation are aiming to increase e-government usage by both the general public and Colombian public administration workers.
One example of this has been the rising weight of online payment activities. Of the $16.33bn that was moved through electronic transactions in Colombia in 2015, approximately 18%, totalling $2.94bn, was accounted for by payments to the government for things such as taxes, state services and other transfers. The other top two segments were financial services, at 17% and $2.65bn, and technology and communications, with 15% and $2.38bn.
Fiscal incentives have had an impact in promoting IT development. In 2002 the authorities implemented special tax breaks under Law No. 788 in order to encourage the domestic software sector, relieving firms from paying tax on revenues from sales of products that are deemed to be innovative. To meet the requirement for the tax benefit the software’s intellectual property had to be protected, it had to be based on a “high concentration” of research, and it had to be granted certification by the Administrative Department of Science, Technology and Innovation (Departamento Administrativo de Ciencia, Tecnología e Innovación, Colciencias).
Initially scheduled to last for 10 years, the measure was granted a five-year extension in 2012. However, the government’s most recent tax reform, which was introduced in 2017, did not include a special tax for software producers, and the existing measure is set to expire at the end of 2017.
“There are other tax benefits that do not apply directly to software, but to innovation in general,” Duque told OBG. “So we are working with Colciencias, a government agency that supports fundamental and applied research in Colombia, to see how the software sector can benefit from these programmes.” The new reform also includes a broad reference to tax breaks for digital content production.
The promotion of IT usage across Colombia, along with the deployment of the necessary infrastructure over several years, have created an environment in which the permeation of IT across business and society is well established, and is set to continue. As such, domestic conditions bode well for the continued expansion of the IT industry in the country over the medium term.
Although the sector will likely have to adjust for slower growth rates, as long as the country’s economy continues to absorb lower commodity prices, government policy and an increasingly competitive private sector will continue to drive expansion. Moreover, Improved and expanded internet connections, especially across the country’s hard to reach rural areas regions, are facilitating better interaction between citizens and the state.
Enlarging the pool of available employees will be essential to support future sector development. Public investment in IT education and training will therefore be an important determining factor in how well Colombia’s IT firms can compete internationally.
You have reached the limit of premium articles you can view for free.
Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.
If you have already purchased this Report or have a website subscription, please login to continue.