TUDLA Commentary

Technology Opportunities Abound in Latin America Despite the Economic Situation

March 3, 2003 – El Cajon, CA.- The tumultuous economy in Latin America has kept many technology providers at bay, however technology opportunities are alive and well in the region, and at TUDLA we have facts to support our position regarding this market. In 1999 we began a process of collecting market intelligence from IT Managers across the region. At that time the economic picture was better, but investment in better technology was not showing up. Each year since 1999, through our conversations with over 4,000 IT Decision-Makers each month, we have noted an increase in purchase activity; in particular, the move to branded products with legitimate software. Over 65% of IT Decision makers now mention Brand as a primary reason for purchasing a particular product. So, there are several factors driving technology investments.

First, the need to compete better in the worldwide economy coupled with the investments that are being made from the outside either via loans/grants or private industry are driving technology investments across the region.

Second, the IMF is extending loans to various countries in the region with a notation that a certain portion must be used for upgrading technology and infrastructure. Out of the $40 Billion loaned to Brazil alone, $6 Billion was earmarked to go to technology. Also, the availability of pay over time and/or lease arrangements so that the user does not have to come up with all the money upfront means that while money is still an obstacle it is not a show-stopper.

Third, the movement of labor-intensive industries to the region, in an effort to save on labor costs, is driving the need for better systems and network connections to support the labor savings. This, coupled with the fact that the average technology wage earner in the region makes 75% more then their manufacturing counterpart, is driving investments in technology training and developing a talent pool capable of implementing and supporting the new technologies.

A ripple effect is taking place as the very large enterprise affiliated businesses are introducing leading edge applications and require that those they purchase products and services from to have compatible systems. This past year we saw a significant increase in the mention of new applications and branded products from the mid-market companies. This year it is spreading to the smaller companies as well. The information TUDLA is gathering directly from IT Decision makers in Latin America shows that the number of legitimate software installations running on branded PC's and Servers is growing rapidly and so is the service industry to support these applications.

The movement toward legitimate licenses is good news for Microsoft and other application providers. It is obvious that businesses are becoming more dependent on CRM, SCM, ERP and data warehousing with full support from the providers. No longer can businesses live with low cost "white box" solutions that come with less then legitimate software licenses. Businesses cannot afford the hassles of trying to overcome the objections of the solutions providers who will no longer support unlicensed applications.

In a recent issue of Forbes Magazine there was an article regarding the problems that Microsoft and others are having in China. The loss of business due to pirated software to Microsoft alone is in the Billions of Dollars. The article noted that every time that Microsoft goes to court or attempts to address the problem they get a big black eye, so they are attempting to be much more creative in their approach to turning the situation around. Although not a lot has been said or published in this regard with respect to Latin America, all realize that it is a big problem there as well. In Mexico alone, Microsoft is losing over $500 million per year. So, the trend toward legitimate licensing will mean bigger profits for software providers in the region.

Fourth, the fact that more companies who sell direct, like Dell, have chosen to enter the market, bringing along with them better technology solutions at more affordable prices, is also a major factor.

The proof is in the numbers. Planned technology implementations over $100,000 are up 10% over the last 90 days from the same period a year ago. Also, there was a 50% increase in the mention of server class systems plans. The market is still growing and does not show any signs of slowing down.

Based on this growth it is easy to see why Dell jumped into the Latin America market with both feet 4 years ago using the TUDLA database and HotLeads programs. Many others are re-evaluating their commitment as well and looking at their channel strategy. What worked in the past may need an overhaul or at least some significant tweaking.

There are costs to being in any market and we, at TUDLA, feel that we can provide an important part of your cost-effective strategy for Latin America. Check us out on our web site and give us a call. We will be happy to provide you with the necessary information to assist you in making the decision to employ TUDLA as your Latin America Market Intelligence partner.

- Gary Gorton, Co-Founder, TUDLA