Nearshore Americas throws in the towel

Previously optimistic Nearshore Americas says Cuban offshore IT is a lost cause.

In an earlier post, I asked whether the nascent Cuban software community would thrive. The offshore IT firm Nearshore Americas seemed to think the answer was "yes." Two years ago, I described their report on Cuba’s Readiness for ICT Transformation, which spoke of barriers to success but also documented Cuba's talent pool and the government agenda for improving connectivity.

That was two years ago. Today, they have given up on Cuba. Kirk Laughlin, Nearshore Americas founder and managing director, has written a post stating that

For those who continue to hope that Cuba will turn the corner, stop hoping. It’s futile. We know it first hand, and in this piece, I’ll explain as plainly as I can that Cuba is a lost cause, a basket-case for global services and easily the biggest disappointment ever in the short history of Nearshore information technology and business process outsourcing.

He goes on to describe his frustrating interactions with stubborn, paranoid Cuban officials and diplomats during the ensuing two years. He came to realize that "an American pitching technology in Havana is like a Russian selling satellite equipment in Washington, D.C. – suspicions are instantly raised."

Hopefully, things will change in the future, but Trump's presidency is not likely to diminish Cuban official's fear of expressing opinions that contradict the party line and Díaz-Canel's policy is uncertain.

The following figures show results of Nearshore Americas' poll of Cuban IT workers two years ago.

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Update 9/5/2017

Inspired by the Nearshore Americas post, Cuban blogger and professor Armando Camacho has written a post on the failure of Cuban outsourcing (in Spanish). He speaks of Cuba's potential as an outsourcing hub, Nearshore Americas' optimism after President Obama's liberal Cuban policy announcement in December 2014 and their disappointment with Cuba's response. As Camacho puts it "nobody likes to get a zero on an exam," and that is the grade he is giving the Cuban government.

Cuba's self-employed computer programmers

The Cuban government has licensed more self-employed computer programmers than clowns and button coverers combined.

The other day I wrote a somewhat optimistic post pointing out that the Cuban government and government software companies are reaching out to self-employed programmers. One of the reasons for my optimism was a recent informatics and communication workshop, TICS 2017, billed as an exchange between state and non-state sectors working together for the society.

Cubadebate covered the workshop and wrote that about 5% of the roughly 900 self-employed programmers in Havana attended. An anonymous source told me there are 904 licensed programmers in Havana and provided the following license counts for three of the 201 occupations eligible for private employment.

Number of Cuban self-employment licenses

It is encouraging to see that the number of licensed programmers exceeds the number of clowns and button coverers combined. That being said, licensed programmers are more likely to be inactive and the opposite holds true for both clowns and button coverers.

Joking aside, we see another positive trend -- the number of active, self-employed programmers has grown steadily and the growth rate has increased every year:

Number of active programmer licenses each year

A couple of years ago, I wrote a post asking whether Cuba would allow software exports -- it seems the answer may be "yes."

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In August 2017, The Cuban government stopped issuing new self-employment licenses. Last July they said they would begin issuing new licenses -- with added restrictions. People complained and the restrictions were reduced somewhat before the government began issuing new licenses.

An anonymous source has told me that, as of this month, the number of self-employed programmer licenses is down to 1,137. That is a step in the wrong direction.

Exporting Cuban software and programming -- the times they are a changin'

TICS 2017 taglines: Intercambio entre los sectores estatal y no estatal and Juntos por la sociedad

I've been tracking the nascent Cuban software industry for some time and, after the US decided to allow the import of services provided by independent Cuban entrepreneurs, I wondered if the Cuban government would allow software exports.

I've been away for the last few weeks and, upon my return, discovered some positive signs. Foremost was the first Workshop on Informatics and Communication for the Society (TICS 2017), held in Havana on March 29-30. Fifteen projects were presented and the attendees "succeeded in identifying business opportunities in a collaborative and supportive environment." The workshop was notable because it brought together representatives of the government, state software companies, academia and the private sector and it included discussion of legal matters hindering the development of relations between the private and government sectors. About five percent of Cuba's self-employed programmers attended.

There is also indirect evidence that the outlook is improving. Consider the evolution of the government attitude toward Revolico, a Cuban version of Craigslist classified ads. The Cuban government blocked access to Revolico three months after it was founded at the end of 2007. Co-founder Hiram Centelles countered by frequently changing the IP address, but the site was illegal, and, fearing the authorities, Centelles left Cuba for Spain, where Revolico co-founder Carlos Peña lived.

They began distributing Revolico on El Paquete Semanal and it took off. Today, Centelles has traveled to Cuba, speaks publically of the history of Revolico and the site is posting over 10,000 ads per day. More important, Revolico has three competitors. (More on the history of Revolico here).

Revolico and its competitors

I also see that while I was away, Granma published a positive article on the popular restaurant-directory app AlaMesa, calling it "the first and most comprehensive directory of restaurants in the Greater Antilles."
607
I suspect these examples are the tip of an iceberg. I've been told that there are 607 registered, self-employed programmers in Cuba. It is an open secret that Cuban programmers are doing off-shore work and services like Cubaoutsource and Ninjacuba are facilitating freelance engagement. The wheels of government turn slowly -- slower than most in Cuba -- but it does seem that the times may be a changin'.

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Update 4/14/2017

In the first version of this post, I understated the number of Cuban computer programmers with self-employment licenses. My source corrected me, saying there are currently 3,097 licensed programmers, 1,432 of whom are active. That's more than clowns and button coverers combined.

Number of Cuban self-employment licenses

Trying to clarify the latest U. S. opening to Cuba -- and failing

One way to get clarification is to offer some Cuban software for sale and see what happens -- in the U. S. and in Cuba.

Last September, the Office of Foreign Assets Control (OFAC) eased restrictions on trade with Cuba. Restrictions were reduced in many areas -- travel, commercial and financial transactions, support for and remittances to people in Cuba, etc., but the one that caught my eye was an easing of restrictions on telecommunications and Internet-based services, including this statement:

Mobile applications. To further enhance the free flow of information to, from, and among the Cuban people, OFAC is adding a provision in section 515.578 to authorize the importation into the United States of Cuban-origin mobile applications. In addition, OFAC is authorizing the employment of Cuban nationals by persons subject to U.S. jurisdiction to develop such mobile applications.

It sounds like the US government will now allow Cuban programmers to sell mobile apps in the US. (Recall that computer programmer is one of the jobs authorized for self employment by the Cuban government).

Could a Cuban programmer now offer apps for sale in places like the Apple, Google, Amazon and Microsoft app stores?

The new rule leaves several things unclear, so I asked the Treasury department for clarification, as follows:

• Why is the regulation limited to "mobile" apps and how do they define "mobile" app since Microsoft (Windows 10) and Google (Android) are moving to software that can run on a phone, tablet, laptop or desktop PC -- it seems that mobility is a property of the device running the app, not the app itself.
• Can the application be developed for a U. S. business, as opposed to an individual?
• Does the Cuban programmer have to be a self-employed individual (a "cuentapropista") or could the app be developed by a Cooperative or a government enterprise?

Here are the answers:

• The application can be developed for a U. S. business.
• OFAC does not have a definition of "mobile" and, if an individual has a specific question as to whether certain software qualifies for the general license, they can contact OFAC.
• They have no comment on the reason for limiting the ruling to mobile apps.
• They have no comment on the question of dealing with cooperatives or Cuban government enterprises.

I also sent queries to Google, Amazon, Microsoft and Apple asking whether they had plans to offer paid Cuban apps in their online stores and none of them replied.

Cubans are allowed to offer free apps in the Google Play Store, but not paid apps.

During a recent, somewhat frustrating, trip to Cuba, U.S. Commerce Secretary Penny Pritzker stated that "There is much we in the United States do not fully understand about the Cuban economic system." While I would not want to suggest that U. S. regulations are as hard to understand as Cuba's, this one seems muddy.

One way to get clarification is to offer some Cuban software for sale and see what happens -- in both the U. S. and in Cuba.

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Update 10/17/2015

Reader Rodney Hernandez pointed out that there is at least one free Cuban app in the Google Play store, the AlaMesaCuba restaurant guide. The publisher says an iTunes version will be available soon. The FAQs on the Google Play site state that AlaMesaCuba "Has been created and developed by Cubans living in Cuba" and their domain name registrant has a Cuban address and phone number, so Cubans are working on the app.

But there is a US tie as well. The Web site says the app is "offered by" ISLA Management LLC and the "developer" address is that of Inca Investments, a Miami investment firm that specializes in Latin America.

One more thing -- I could not find the AlaMesaCuba app by searching on my Nexus phone, but I was able to install it from the Web site. When I first ran it, it downloaded the current database. I guess the database is maintained in Cuba and updated periodically.

I've never encountered an app that was listed online, but not on my phone before -- is that common? Does it have something to do with fuzzy regulations?

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Update 10/22/2015

I've got two Cuban apps on my phone now, AlaMesaCuba and KickRajoy. KickRajoy is written by a Cuban living out of the country and AlaMesaCuba is written by programmers living in Cuba, but distributed with the help of people in the US.

Both are free, but KickRajoy has ads at the bottom of the screen. I assume that the programmer gets a portion of that ad revenue. Does AlaMesaCuba generate revenue in fees for listings? Have their US partners paid the developers as an investment?

Are there other apps being sold in the US with payments going to Cuba? Note that Cubans are now allowed to write apps for companies and clients -- they do not have to be in Google's store or anyone Else's.

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Update 10/29/2015

There is a discussion of this post at Slashdot.

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Update 3/18/2016

Silicon Valley payments startup Stripe will make it possible to give Cuban entrepreneurs access to the US financial system. Cubans will be able to incorporate a US company, set up a US bank account, and start accepting payments from the US.

Stripe CEO Patrick Collison said the expansion into Cuba came together quickly after White House officials recently visited with aspiring Cuban entrepreneurs who requested such a service.

Well, I guess that puts the ball squarely in Cuba's court. Will they allow cuentapropistas or cooperatives to open those accounts?

When will we see a Cuban version of Stripe? Global Stripes?

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Update 3/19/2016

When I posted this note, officials I spoke with were not sure how to interpret the changes, but the administration is sending an unambiguous signal to US companies that payment to Cuba is authorized by inviting Stripe CEO Patrick Collison to join the White House delegation to Cuba. Stripe was valued at $5 billion before the trip -- I bet it will be a lot more after the trip.

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Update 3/11/2016

On March 15, 2016, the U.S. Department of the Treasury and the U.S. Department of Commerce issued new amendments to regulations governing travel, trade, and financial transactions with Cuba. They include the following changes:

• Cuban origin software is now authorized for importation into the United States.
• Non-immigrant Cuban nationals in the United States will be permitted to earn a salary or compensation consistent with their visa status. U.S. companies are now also authorized to sponsor or hire Cuban nationals to work or perform in the United States.

That should clear the way for Cuban apps in Google, Apple and Microsoft stores as well as outsourcing.

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Update 5/12/2016

While there may be some ambiguity with respect to software products like mobile apps, there is none with respect to software services, which I assume includes offshore programming. The State Department's Section 525.582 List of Goods and Services Eligible for Importation states that U. S. citizens may import services provided by independent Cuban entrepreneurs with licenses to be self-employed issued by the Cuban government.

I personally know a Cuban who has obtained a license as an independent computer programmer and I am confident that there are others. This document seems to make it clear that software written by my friend or other Cubans with computer programmer licenses could be leally imported into the U. S. It does not apply to programs written by employees of Cuban state software companies.

The same holds for "entities" that are not owned or controlled in whole or in part by the Cuban government. That would seem to allow a licensed computer programmer to hire employees for offshore programming or for a licensed Cuban cooperative to do offshore programming.

(Posts related to this topic)

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Update August 9, 2016

I have a belated followup to this post regarding the ambiguity of the US position with respect to software import from Cuba. Earlier they had authorized the import of mobile software, but they subsequently dropped the qualifier "mobile" in this release, which states that "The CACR currently authorizes the importation of Cuban-origin mobile applications. OFAC will expand this authorization to allow the importation of Cuban-origin software."

The rule change was announced last March, ahead of President Obama's trip to Cuba. I'm not a lawyer, but it sounds like offshore programming and application development by self-employed Cubans and Cooperatives is authorized. The ball is in Cuba's court -- will they allow it?