The current environment in Peru is not conducive for huge IT investments
The IT revolution has encouraged people to look for opportunities in different countries, particularly the third world countries which have been successful in providing the basic amenities at a cost lesser when compared to developed nations. This study is an effort to rank Peru as a possible IT destination for businesses that are planning to expand into other countries
As the world is witnessing an unprecedented growth in technology and science, business managers are trying to find new avenues to apply their knowledge and experiences, which would eventually help their business. Among other things, the choice of a new destination is determined by a variety of factors. These may include technology preparedness and literacy of the local population, stability and policies of the government that is favorable to the industries and the infrastructure of that country. The most important factor that encourages business managers to look for new avenues to do business is the spiraling cost both in terms of infrastructure and manpower. In the IT sector it is accepted worldwide that in developed countries like USA, Germany and Britain, the cost involved in maintaining an IT team is far more that maintaining a similar team in a less developed country. This has been one of the prime reasons, which has encouraged companies to outsource a major chunk of their projects to third world workforce. This tendency has been most pronounced in the IT sector. The problem of setting up a new business is much more difficult for IT companies because unlike other industries, an IT venture cannot be started from scratch because it needs many supporting facilities and a computer literate population which the company can at least hope to deploy after adequate training. (Bracker, 1994) Since training in computers requires an above average education level as a prerequisite, the task is all the more difficult for IT managers to find a suitable place for setting up their industry.
IT History in Peru
The Republic of Peru is on the pacific coast of South America. Democracy was established in the country in 1980 and a new constitution was promulgated in 1993.
As far as the extent of information technology is concerned, it is still in its infancy in Peru with a lot more facilities yet to be implemented in the country although the government is making all out efforts to improve the IT infrastructure in the country. The real thrust to IT happened after 1990 when the government allowed private participation in its IT ventures. As a start, private telecommunication companies spruced up the telecommunication sector, which was poorly maintained in the urban areas and virtually nonexistent in the rural areas. The government has also reciprocated with enacting laws and regulations that have helped core IT requirements like data security laws, e-commerce safety and digital signature policies. Even though the hardware business is poor and does not show any encouraging trends, the software market is dynamic and has penetrated many business domains. (Abetti, 1986)
The telecommunication infrastructure is more developed in the capital although there is a decent presence of telecom facilities in the rural areas of Peru. In the year 2000, the teledensity of Peru was 6.3 and is rapidly increasing particularly in the rural areas. There is also an unprecedented growth of mobile phone users over the years (58,000%). Public telephone availability has increased by 562%. International companies take care of the installation and maintenance of the telephone lines. Peru has also seen an increase in the number of digital trunk lines, which in 2000 were more than 53,276. The service providers are increasingly opting for digital lines instead of analog trunk lines whose percentage has dropped to very low levels in the country. It is seen that analog lines are mostly restricted to the rural areas. There are 58 Internet service providers in Peru. [Bernstein, 2000]
In 1996 the government allowed private companies to establish, operate and develop satellite systems. Peru also has a satellite system in place called Sim n Bolivar Andean Satellite System. In addition it is expected that in 2003 another satellite sponsored by a consortium led by Alcatel would be in orbit
Telecom Companies in Peru
There are many private companies that operate in Peru like Reuters, IBM, Telef nica, Global One, DHL, Skytel, AT&T, Nextel etc. The operations of these companies have been made possible by the privatization and deregulation of the telecom sector. (Krugman, 1996) In 1994 the state owned telecommunication network was bought by a Spanish company and renamed as Telefonica, which is the leading service provider in the country. The government agency called Supervising Agency for Telecommunications Private Sector Investment (OSIPTEL) ensures that there is free competition in services as part of privatization. The local government also has its share in the competition in addition to Peruvian Scientific Network, which has a sizeable chunk of customers to its credit
Government initiatives in telecom reforms
The government of Peru has devised many reforms to help private entrepreneurs in the telecom sector. Although the government had imposed a five-year protection period for the Telefonica, in which the government had an interest, the telecom sector has been thrown open to the private sector. The OSIPTEL, which is a regulatory authority, involves itself in the pricing aspects of services only when the services are meant for the poorer section of the society. In 2000, Peru had 30 authorized long-distance carriers and five fixed-line operators. The government policies have made it easy for private companies to operate in Peru. The Internet communication in particular is fully liberalized while the government has some control over the other divisions in the telecom sector. The government also does not control the technology that is used by the ISP. In addition as part of the Andean community, Peru has taken measures to deregulate all telecommunication sectors by 2002 with the exception of radio and TV. [Bernstein, 2000]
As far as excise and import restrictions are concerned, Peru does not have discriminatory taxes against imported goods nor are there any additional taxes against foreign ventures.
The IT policies of the government are based on the need to improve the existing industrial atmosphere using IT rather than develop a separate IT sector. The Ministry of Industry, Tourism, Integration and International Commercial Negotiations, or the MITINCI dictates IT policies in this country. MITINCI along with other like-minded organizations in Peru, concentrate their efforts to provide technology enhancements to the productive sectors as well as the non-profit institutions in Peru. The programs of these institutions would revolve around developing infrastructure, education, technology transfer and research and development. [Bernstein, 2000]
The government has also initiated joint ventures between private and public institutions in various sectors. These bodies would work hand in hand to develop quality telecom, software and hardware solutions to customers.
The reach of the Internet in Peru
The Internet became accessible to the public only by about 1990 in Peru. By 2000 the total estimated Internet users were around 520,000, and it is estimated that 1.8% of the total population of Peru has access to the Internet or uses the Internet. The initiation and growth of Internet services in Peru was because of the effort of the Peruvian Scientific Network, which started off as a consortium of students and academicians. The cost of the Internet has also come down to 13.75$ per week which is lesser than many of the Latin American countries. There are 58 ISPs in Peru and the Peruvian Scientific Network, which has 56% of the Internet market share, is the main player in this segment. In 2000 the cost of Internet access was1$ / hour. [Bernstein, 2000]
E-commerce in Peru is just making its presence felt. It is estimated that the Peruvian online commerce is valued at $5 million and is expected to be $164 millions in 2005, which is not very impressive. Whereas in 1999 online shoppers in Peru was less than 100,000, it would be close to 600,000 in 2005 out of an estimated 2.4 million Internet users. Among other reasons, the traditional aversion to credit cards might be a reason that hinders the development of e-commerce as an alternative form of shopping.
An independent survey by McConnell International in 2000 reports that Peru needs improvement in its e-leadership, information security and e-business climate, while Peru's connectivity and human capital are rated as needing substantial improvement this suggests the large potential Peru holds in the IT sector. In layman's terms the e-business climate is just about ok in Peru but Peru's human capital and connectivity needs drastic improvements to be able to be at par with other nations. (Long, 1979)
The government has definitely chipped in with its efforts to facilitate better e-commerce facilities in the country. Commendable among them are measures like automation of government processes, extension of the IT into rural areas, enacting laws that makes digital signatures valid and its…