By Andre Griffith
Last week we looked briefly at what is commonly referred to locally as the ICT sector. We noted that this sector may perhaps have been better referred as a sector for outsourced services, but nevertheless noted that Information and Communications Technologies were central and integral to its operations. Most importantly, we saw that some of our most often cited sources of advantage in this sector were either imitable as in the case of geographic location and English Language capability or transitory as in the case of low wages. We did not consider factors such as facilities and electricity, however there is an interesting study by Benjamin Eifert of UC Berkeley, which suggests that low-quality provision of public services such as electricity, telecommunications and (interestingly enough) security, slants the playing field against small firms. The security question is topical and I leave theorising on this question to the experts, however the limitations associated with telecommunications and electricity could be partially overcome by the provision of common facilities through the construction of the ICT parks that we have heard much of in recent years.
The ultimate question though, is of course, how to respond as our sources of competitive advantage are either matched or surpassed as time goes by.
The answer is to continually develop new capability as over time so that our competitors are always catching up with us. Unfortunately, at this time, we may be the ones doing the catching up. The first thing we need to do therefore is to achieve pole position on what we do today. Even with all of the constraints there is no reason why Guyana cannot be the number one location for outsourced services in the Caribbean region in about 3-5 years. Our efforts should be aimed at finding out what the other regions are doing and do those things better than them. Match and surpass!
Secondly, we need to continually reinvent ourselves and create new sources of value that are not easily overtaken. As I noted last week, the advantage of English as the dominant language in North American markets (our primary target) is not absolute, and will continue to decline. Anyone who has ever disembarked an aircraft at Miami International Airport should be able to appreciate the serious potential associated with our continental position which could be leveraged by a diligent effort at investing in Spanish language capability. To understand what is meant by making our competitors catch up, consider how long it would take for us to develop a serious foreign language capability in Guyana and how long it would take for others who start after us to develop that capability.
The above measures being as they are aimed at becoming the best in the outsourced services that we now attract are only initial steps, since these services are considered at the very bottom of the food chain so to speak. Services such as collections, direct marketing and even medical transcription are all relatively low skilled pursuits. Over time we need to move up the value chain, getting into services of a higher level such as accounting and legal services, software development and others. One word of caution is that in the IT field, computer programming is in this day and age more and more considered to be a commodity skill whereas the real value added skills are analysis – aimed at deriving maximum business benefit, project management (getting those multi-million dollar projects in within cost, scope and schedule) and the like.
In continuing to move up the chain one could reasonably ask where does it ever stop? I say that it never does. You go until you get to the top and you fight to stay there all the while looking out not only for those trying to get to the top, but looking at other chains that would make the one you are currently on irrelevant.
The history of the Indian outsourcing industry gives a compelling and inspirational view of evolution from firms that started out at the bottom of the food chain and worked themselves up. The capability of the workforce has multiplied and the evolution has occurred to the level where foreign firms now elect to locate high value added operations such as research and development in India. But even more striking, the most telling development that constitutes in my opinion, the “Holy Grail”, is the fact that Indian (and Chinese) firms have now progressed to the point where they are now sources of FDI in the very developed world markets that looked to them as nothing more than low-cost sweatshops for unskilled labour twenty odd years ago. That indeed is the pinnacle of competitiveness and it is there that we need to aim.
Meanwhile, back at the farm, we still have to deal with the reality of our environment. While we may have the fundamental pre-requisites to be able to grow our share of basic outsourced services, the longer term outlook for higher value added will require some attention, planning and execution and there are some measures that should be taken to create the right conditions for our takeoff.
The problem of education from primary right through to tertiary level has been spoken on by various commentators. In terms of Information Technology a special word is in order with respect to tertiary level education. Applied sciences such as information technology, engineering, medicine and others, require facilities in order to teach them effectively. Unlike the arts, access to facilities is critical and where these are absent both lecturer and student alike are at a disadvantage. More attention therefore needs to be paid to ensuring that our students have the required access to facilities in order to secure their potential for learning effectively.
Assuming a minimum human resource capability coming out of the education system, we need to ensure that we have opportunities for developing this capacity. A prime example that comes to mind is the implementation of systems for private firms and public sector agencies. In the public sector alone, there has been at least 1.5b expended in the last four years on systems implementations. Partnership with local IT firms should be a pre-requisite for foreign firms bidding to perform IT implementations in the public sector, while incentives should be considered for private sector firms that adopt a similar approach. Not only would we secure the long-term benefit of building up an information technology capability, but we would reap a more immediate benefit of better implementations since unfamiliarity (on the part of foreign firms) with our local conditions has in my experience tended to result in their implementing systems that are out of sync with our peculiar environment.
Our attitude towards intellectual property is another question that has to be dealt with in some manner.
While I realise that implementing relevant international agreements such as the WTO’s trade related aspects of intellectual property (TRIPS), affects sectors other than Information and Communications Technologies, we need to confront the issue and decide unequivocally which way we are going to stand. On the one hand, companies will not bring higher value operations such as research and development into an environment where intellectual property rights are not respected. On the other, there is the case of Brazil, India and South Africa who have liberally interpreted TRIPS to allow local manufacture of anti-retroviral drugs which are provided to their populations at a fraction of the cost they otherwise would if sourced from the US. The considerations then are not simple, but we can’t have it both ways and which way we go (for now) should be clear just in the interest of avoiding confusion.
Our IT firms must actively seek growth and opportunities outside of Guyana. We will for the foreseeable future always be too small to provide a sustainable market for these services. We must appreciate however, what we are considering is the development of a whole new economic sector to stand beside agriculture, mining and the other traditional giants. Obviously the full considerations exceed those that can be articulated in an opinion feature such as this column. What is needed therefore is a sustained rather than sporadic engagement amongst stakeholders over a sufficient period to develop and implement a coherent policy for the sector.
