Report: Latin American E-Biz Transforming IT Landscape

Businesses in Latin America are beginning to tap theire-commerce potential, according to data released Wednesday by the Yankee Group.

The report, “Latin America’sE-Builders,” found that corporations throughout the region are investing an average US$1.2 millionper project for Web development and online business ventures.

The spending is helping to transform some local Web site developers andInternet technology service providers, or “e-builders,” into “pan-regionalpowerhouses,” said Yankee. Similarly, local players are also benefiting fromthe influx of capital, gaining enough market strength to be able to compete”head-to-head” with top consultants and integrators, the firm said.

“Many e-builders have regionally-based but highly mobile project teams thatwork closely with corporate clients to strategize and build next-generationWeb sites and e-commerce infrastructure,” said Yankee Group analyst AndresBroner. “The e-builders’ lower cost structures mean they can underbid thecompetition while providing high-quality design and implementation.”

Weak Links

Despite these expenditures, Yankee concluded that industry-wide adoption ofe-business initiatives has not been consistent.

Among the heaviest users of Latin American e-builder services are financial,telecommunications and manufacturing companies.

Although corporate firms inthese sectors often have a high demand for payment and logisticsapplications, Yankee said that e-builders surveyed for the study pinpointedpayment and goods shipment as the “weakest links” of e-business projects in Latin America.

While demand for buying side software, multilanguage management tools andhosting services is also high, Yankee noted that the majority of equipmentand service provider communications currently in use are “far fromeffective.”

Growing E-Government

Yankee also said that demand among wholesale, government and health-careverticals is growing in part because of extended purchase cycles. In fact,the study forecasts that online government services will account for roughly16 percent of total e-builder revenue by 2003.

“The demand for market-specific, highly customized applications, as well asgovernment impetus to steer projects toward firms perceived as ‘local,’ aregood news for e-builders,” said Yankee.

Hurdles Remain

The research firm’s findings dovetail with other recent reports that assessed thedifficulties in establishing a viable e-commerce force in Latin America.

For instance, a study released earlier this year by eMarketer concluded thatlow rates of Internet penetration, limited personal computer ownership and alow level of credit card usage are hinderingefforts to get Latin American consumers to shop via the Web. For the region as a whole, Internet penetration is only 2.7 percent, compared with 40 percent in the United States.

Other analysts have cited unreliableinfrastructure, high connection charges, poor shipping reliability andcostly delivery fees as stumbling blocks to growth of e-business in Latin America.

Play or Pay?

Meanwhile, research released last month by IDC said that less thanthree-quarters of local and regional portals provided consumers withonline payment processing capabilities.

Furthermore, IDC warned that thefailure of portals to beef up their online shopping features — and meetsurging consumer demand — will have a chilling effect on the overall growthof e-commerce in Latin America.

Crucial Force

Despite these barriers, Internet business in the region remains crucial toU.S. interests. Speaking before a group of Latin American trade ministerslast week, U.S. Commerce Secretary Don Evans said that e-commerce initiatives continueto serve as a driving forcein the open marketplace and must play a key role in the creation of anyWestern Hemisphere free trade agreements.

Additionally, Evans forecast that business-to-business (B2B) andbusiness-to-consumer (B2C) e-commerce in Latin America is set to reach roughly $7 trillion by 2004.

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