Cuba's pending tech revolution

If the government doesn't impede it, Cuba may see a lot of new technology

Postage stamp from Russia marking Cuban revolution
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Cuba is on the threshold of getting, potentially, a massive technology upgrade, thanks to a U.S. decision to ease economic sanctions. But this tiny island nation needs a lot of work.

Cuba's entry into the modern high-tech era will require improvements to its electrical grid, a buildout and upgrade of its wireless networks and IT workforce training. This will not be easy, and it may not happen swiftly.

Cuba has an educated population craving technology, but it has little income for new tech. The Cuban government wants to trade with the U.S., but is paranoid about the outside world and has limited Internet access to 5% to 10% of the population, at best.

"The government has been very reluctant to have open Internet access," said Harley Shaiken, chairman of the Center for Latin American Studies at the University of California, Berkeley. But "there is real hunger for technology," and with the easing of the embargo, the government "will be facing new pressures," he said.

The White House order on Thursday lifting economic sanctions against Cuba specifically singles out technology, from telecommunication networks to consumer tech.

Cuba has a population of about 11 million, about the same size as the Dominican Republic, which spends about $1 billion annually on technology and related services, said Jay Gumbiner, vice president of research for Latin America at IDC. There is no market data on Cuba's IT spending, but initially, there could be a high rate of growth as people buy their first PCs and mobile devices, he said.

Juan Chavez, director of Latin American Sales for NEC Display, which makes computer monitors, large displays and projectors, is interested in the Cuban market, and expects that business technology demand may come first from Cuba's tourism businesses. But it may take time for the country's technology market to develop because of its infrastructure problems.

"Markets like Cuba, which will require a wholesale construction of new infrastructure, don't come along often, if ever," said Todd Thibodeaux, president and CEO of CompTIA, a tech industry trade group. "The flood of companies lining up to get in should be quite substantial," he said, and he hopes the Cuban government doesn't meddle.

One of the first things Cuba needs is reliable sources of power, Thibodeaux said. Critical, as well, will be to build a 4G/LTE infrastructure to overcome the lack of wired networks. He expects Cisco Systems, Verizon, AT&T, Hewlett-Packard and other large systems vendors to move quickly.

When asked about the Cuban market, David Frink, a Dell spokesman said in an emailed statement, "we'll watch this carefully, see how the opportunity is shaped by the U.S. government in its discussions with Cuban authorities, and determine how and when we can best extend the capabilities inherent in Dell's end-to-end technology solutions."

Cuba may also develop as an outsourcing center, providing technology and business process outsourcing services to U.S. companies.

Kirk Laughlin, managing director of Nearshore Americas, a news, research and advisory group, said Cuba has potential as an outsourcing center.

It's larger than Central American nations that are being used for this purpose, it is dedicated to education, and it "doesn't have the baggage of drug wars and drug cartels." Being only 90 miles away from Florida, is another plus, he said. Laughlin said he estimates, based on government contacts and other sources, that there are about 6,000 to 10,000 IT professionals in Cuba, mostly in Havana. The University of Havana has a computer science program, and Laughlin expects the country's spending on education "is going to yield good things for IT."

But there is a lot to be learned about the state of IT skills in Cuba and the government's response to the new trade opportunities, Laughlin said.

For instance, will the Cuban government opt for monopoly controls on telecom services or a adopt Burma-type model, (officially known as Myanmar), and hold a telecom license auction? Laughlin said it's not clear yet what Cuba will do.

In a piece written for the Association for the Study of the Cuban Economy, Luis R. Luis, an independent consultant and economist, looked at the impact of the White House action on the Cuban economy, and estimates that it will bring a one-year growth of 0.5% to 0.6% to the Cuban gross domestic product with the second year being higher.

In regard to tech, Luis, in an email, said the IT market potential is constrained by lack of financing. Total capital goods imports last year in Cuba were estimated at $1.6 billion. "IT equipment import numbers are not available but may be at most $200 million," he said.

Copyright © 2015 IDG Communications, Inc.

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