Peter Hoyer and his wife Francesca are the heads of SMaBiT, a family-owned tech company offering smart building technology and video security. Expanding from its bases in Berlin and Turin, SMaBiT has assembled an R&D center in Cuba and is just about to open its new offices at Parque Científico-Tecnológico (PCT), a science park in the heart of Cuba’s largest producer of IT graduates, Universidad de Ciencias Informáticas (UCI). Cuba Standard asked Mr. Hoyer what made him take his business to Cuba, about his insights in information technology in Cuba, and how recent political upheaval affects foreign investors.
Why did you pick Cuba as a location for IT development?
Our original decision was primarily economic. SMaBiT relies on the added value it can provide to its customers and the reliability of its products and services. As such it is very important for us to generate know-how and competencies internally, and to develop these competencies over time. The European labor market is very, very depleted. Programmers are scarce, and programmers who are enthusiastic about what they do are even rarer. Their expectations are correspondingly high. That’s why we shopped around for alternatives. Those that come to mind are China and India. Both have advantages if I am a large company and have work packages to outsource, if I have specifications that have to be worked off. I then get my package back, and that’s it. But the consultant is gone after that. What we needed were team members, people who think along with us. We then looked for something that was on our level in terms of mentality. Naturally, you look at Colombia and Mexico, but by chance – through a newspaper article – we were made aware of Cuba and then placed two job ads. Now we are in Cuba and happy about it.
What are your impressions of UCI and IT education, and training in Cuba in general?
In general, Cuba’s education system has a reputation of being well-functioning, that universities work well. As far as computer science is concerned, there is some truth to this. Of course, you can’t expect recent graduates – whether in Berlin or in Havana – to know about business applications and to have practical experiences. As far as the level of the university training is concerned, it is quite comparable in Europe and Cuba. What is particularly nice about UCI is this campus – unique from a European perspective – where only computer science is taught, and nothing else, and on a large scale. This campus concept, where students also live, where you live in a whole context with sports and other activities, is not bad for forming computer scientists who are full human beings who don’t live exclusively in their bits and bytes. There are lights and shadows everywhere, but in general the level of the degree is comparable to the European level. For us as a company, the overall UCI concept, which includes the Technology Park as a hands-on business branch of the university, is a welcome addition.
Apart from UCI, there are 15 computer science faculties in Cuba, which generate upwards of 1,000 degrees per year. And then there are computer engineering degrees as well. In my view, the quality of the latter is excellent. Thanks to the know-how and spirit of our team, we are just about to launch SMaWay, the first building automation gateway entirely developed in Cuba.
The hurdle to Internet and technology access in Cuba is described as particularly high. Is that true?
It always depends very much on what you are used to. When I ask Cubans, “How do you find your Internet?”, they answer “terrible,” “slow,” “expensive,” “doesn’t work” – all very bad. But when I think about my university years in Birmingham, England 20 years ago, or how I used to work with a copper wire attached to wooden poles in my first years on the job in Rome, I can say that the Internet in Cuba is better compared to that. I don’t want to sugarcoat everything, but before this experience in Cuba, we had a lot of China experience. In China the Internet is practically free, at least at a salary-irrelevant price, there are infinitely fast home connections, there’s everything you want, but there’s also the so-called Great Firewall. What outsiders always think of Cuba – total internet control and blockade, where no VPN will help either – that doesn’t exist in Cuba, but it does in China. I might have 100 or 200 Megabits of connectivity, but I can’t use that productively in China. Yes, Cuba can be challenging, but you can freely use the bandwidth you get, be it for work, social networks, or to obtain information from wherever you like. Mobile Internet usually allows for extensive video conferencing, and we are happy that the internet is free, as far as artificial restrictions to the outside world go. We have problems with U.S. sanctions when American providers deliberately exclude Cuban Internet addresses. This is very challenging when I think about Zoom, about WeTransfer, about Cisco, or about Apple – these are the four main candidates that are doing this with great passion and technical finesse. Our team does not have those problems, they use VPN in these cases. But in general, we try to work with companies that solve this more intelligently. European but also leading IT companies from the U.S. offer services based on a European cloud, which resolves all these issues without exposing themselves or their clients to legal challenges. In terms of Internet speed, the conditions are not ideal, but they are sufficient not to create a significant competitive disadvantage compared to other countries.
The other side of the coin is data security. Your company handles sensitive customer data. How do you manage this at your Cuban location?
The Cuba location by itself is not the main challenge; data security would certainly be critical if we had servers on Cuban territory that managed sensitive customer data. This would not be compliant with German or European legislation as far as data protection is concerned. If we work on systems that are located in Germany, and our employees – we pay attention to this – use dedicated computers for business purposes, and these computers operate at an appropriate level in terms of security standards – encrypted communication, security updates, and the like – then I don’t see this as problematic, either personally or legally. Is Cuba more critical than Costa Rica or any other country in terms of network surveillance? What the Cubans can do is equivalent to what would exist in any European country. There is no specific risk that the Cuban state would, comparable to China, tap our corporate secrets.
Tell us about the strengths and weaknesses of Cuban programmers.
Like everywhere else in the world, you need to find the right people. We have had a variety of experiences over the last three years – good, neutral, and rather negative. One of our key developers, for example, was almost sitting on packed suitcases when we met him. He had just finished his studies in computer science and was thinking about what to do with his life. He did not see any prospects in Cuba and had made up his mind to leave. By chance he saw our job ad and thought he would just have a look. He liked it, he is still with us today, and I think he is happy to be there. If you want to find a person who wants to achieve something, in Cuba you can find appropriate conditions and excellent people. The people who want something are hungry – not in the nutritional sense – they have a certain pride, and a will to achieve something. It really thrills them to know that their product is sold in outlets of major European telcos and to know that their software improves the safety of thousands of homes. You hardly find this spirit in Europe anymore. The other case – we had that too – is the opportunist, who, if he doesn’t find any tourists to rip off, tries it as a computer programmer. Of course, you don’t want them, and you can get rid of them very quickly, which is an advantage of the system. It’s not so easy to reach the right people. But when you find them, you then have a staff at a good level. Mentality is one of the strengths. Weaknesses include usually quite modest-level English, which can become an obstacle in communicating with customers and in obtaining information from international sources. Also, and that’s surprising, there is an absolute lack of app affinity. In most countries, you expect a programmer to be able to write a mobile app for a smartphone, and if he can do more – great. In Cuba, you find people with remarkable hardware skills; they can build you a complex circuit. But what we despair of here is, mobile apps are a very weak area, perhaps because of the Apple blockade or maybe mentality. For cell phone app development, I wouldn’t recommend Cuba for now.
Many young programmers and entrepreneurs are leaving the island. What could keep them in Cuba?
This is an important point for us, where we are in exchange with the university, and where we also try something in our own way. The problem is that Cuba does not offer visible perspectives. Young people grow up with the image that they have to get out if they want to achieve something, because there is nothing here. If they don’t want to achieve anything, then they can stay, because they’ll still get everything here somehow – classic socialism. It is complicated to reach out to people, showing them that there are opportunities within their country. Those who tend to leave are young people. You don’t find 50-year-olds who throw away their lives to start over in Uruguay. The 26- and 27-year-olds, on the other hand, leave quickly, and once they leave, they won’t come back. There is no national labor market of motivated people from which I can draw and where I can then compete with others. That’s why it would be extremely important to give prospects in the universities, which does not happen yet. For SMaBiT, that would mean going into the universities, not just UCI but others as well, and say, “Look, there are opportunities. Do an internship. Do something. At least look at it before you leave.” That’s Variant A. Variant B may sound a little absurd, but if you look at the concept of this technology park, there are definitely incentives for Cubans to create startups. Unlike a company like us, they don’t even have to pay anything. All they need is an idea, create a business plan, a concept that aims to create a commercially viable product. The concept is like a technology park in Italy. But there is a lack of awareness. It doesn’t occur to the average Cuban to consider that and say, look, my state has investment incentives for startups, let’s take advantage. That sounds like an out-of-this-world story to them. But it really does exist. There is good and trustful cooperation with the Technology Park’s management now, too. In the beginning, there was some skepticism and some have seen a necessary evil in us. In the meantime, they understand that we can achieve more together. We are now trying to go there together. We are going to build, hopefully in September when everything is ready, a Facebook channel for SMaBiT, where people who work with us tell about their daily life, what they do, why they do it, with the idea of doing national marketing and show that there are opportunities here.
You say you’re moving into the Technology Park in September. What are your first impressions?
Our offices are still empty; they were actually supposed to be occupied at the beginning of the year. There have been two main problems. This time, for a change, the Cuban shortage situation is not to blame. On the one hand, there is the COVID-19 problem – we were not scheduled to move into offices and produce crowds in the past few months – and on the other hand, there was a logistical problem that we had not anticipated. Our marketing department thought very carefully about what these offices should look like in terms of furniture, colors, and materials. In addition, as our customers are mostly relatively large companies with specific safety and ergonomics requirements, we have made sure our workstations will meet German standards, with two monitors, spacing, and so on. There is a lot of material that had to be shipped from Italy to Cuba. Unfortunately, the carrier has caused us a few months of delay, but this month we will get it done eventually.
As far as international investors are concerned, the technology park’s concept is sound. The goodwill is there. It’s just the know-how that still needs to develop. If I’m a company that needs developers, the technology park administrators offer to find staff, get furniture and computers, and put everything in place – full service. But that doesn’t work, because the personnel selection is done by the personnel office of the university. We tried it – you get underperformers of the worst kind there. If I were an external company going to Cuba and I wanted to invest there, there are two options: either I take time to go there myself and explore, find a competent local manager I trust to manage it, select personnel, coordinate projects. Or I go to an existing company – that could be us or the two or three Cuban companies which offer such services – and attach myself to an existing structure and build my own company in the meantime.
SMaBiT is expanding into a new marketing venture, called Comunica. How is Cuba involved, and how did this come about?
We are a rather small company, but still need the full program of any company. We need marketing, we need social media, web and related skills, we need industrial design capability, we need mechanical design capability. It was not easy to find the right people, and we built the appropriate structure in Cuba. We have two problems, and that’s how our marketing venture came about. First, we need very specific skills, but we can’t permanently utilize them with our own products. And secondly, if you have marketing people working exclusively on one theme, they eventually get bored. The creativity gets lost, it just doesn’t work anymore. That’s why employees in companies like advertising agencies change every few years, not because they’re bad, but to create that change. Then we asked ourselves how we could organize this intelligently and came to the conclusion to sell our marketing expertise externally. We can generate scale effects, and if our people write a brochure for a SMaBiT system in the morning and the menu of a restaurant at noon, then this creative exchange remains there, and that makes us more interesting as an employer in Cuba as we can offer that mix of stability and creativity. This is how the concept of Comunica came about: Offer marketing services without too much fuzzy packaging, focusing on the actual needs of businesses, and helping them write their story and to make it known.
Bottom line: Is it possible to do profitable IT business in Cuba?
That’s the question I’ve been looking forward to. There are two sides to it. The second, whether I can do business in Cuba as a market, I’ll fade that out for now, and I’ll look at the first case. In the beginning, we thought we’d just give it a try. We thought, we don’t necessarily have to market everything, so let’s just see. What we have observed with our customers in Germany, in Italy, in Israel and even in the USA, interestingly enough, is an openness towards Cuba. Cuba has a positive image as a country. People think less about political system differences with all its expressions, but they associate it with something positive – the Caribbean, sun, music. And then there is a classic questionnaire that plays out in the minds of almost all the people we deal with. The first question: Sun, beaches, rum — is that all sustainable, how does that work? First you have to dispel some of that: Cuba is not just a vacation island, but a relatively large state with everything that goes with it and therefore the most diverse professions, not all of which necessarily have to do with tourism. Point two, Internet: Can we work there at all, is there Internet? If you explain to people that there is an Internet, and that the Internet is unrestricted in a work context – then people make a move. Then come the happy chickens. Just like in the supermarket: I don’t want to buy eggs from battery farms. So people ask themselves, are these people being exploited? This is a humanly justified and very important aspect that most of our customers emphasize. That is why we have decided to be very proactive in our communication. If you go to our website, it says Berlin, Turin, and Havana. Our customers know exactly what we are doing in Cuba, which people are working there, and they are also in direct contact. This is very important to create trust. On the one hand, we can legally prove, and this is a very important advantage with large customers, that we have working conditions and contracts that correspond to German social and working standards. Going beyond the usual Cuban system, we have vacation days, sick days, dismissal notice periods for both, the company and the employee – whatever. It’s not a hire-and-fire system where you’re gone tomorrow. The human aspect is that our Cuban employees like to work with us. Basically, they are free people. Of course, freedom is a stretchy term — Chinese freedom is different from freedom in the U.S. When I talk to our employees now, it’s not like they’d tell me, “please don’t say anything”. Sometimes, when it’s convenient, we absolutely discuss politics. But politics doesn’t make up all a person’s life. A normal person wants to be satisfied privately, wants to have professional success, wants to have meaning, wants to have free time. That is also the case in Cuba, and it can be achieved there. Then you can also make a profit with it, because the salary level — while it isn’t infinitely low — is lower than in Europe, and the commitment is — if you find the right people — very high. In other words, productivity is comparable, if not higher, than in Europe, as calculated in Euros per programming unit. The whole thing is commercially viable. Yes, you can do business, yes you can make a profit, yes, it is a good investment. You just have to get the right people and communication right.
Have the recent protests in Cuba shifted the picture for investors?
From a purely economic point of view, it is understandable what has just happened in Cuba. Tourism has collapsed, things are not going well economically because a lot depends on tourism. On top of that, there is a dysfunctional system. In such a situation, discontent develops, and it is understandable that this dissatisfaction is unleashed. There is certainly a human rights issue, no question about that. There is certainly a democracy issue. But when I talk to Cubans, I often hear that this is not exactly the right moment for the revolution – that you’re breaking more than what you can build. Some of the people I talked to after that week were – let’s say – angry with the government, but not so much because it doesn’t give them enough freedom, but because they were afraid to go out on the streets, because there, apart from freedom-loving people, was an invitation to everything else that usually doesn’t dare to show up in broad sunlight. They were afraid for their security, afraid for their jobs, afraid for their future. It is a complicated relationship. But because of what’s coming across through international media, it’s now harder to invest in the country. If I were thinking about investing in Cuba right now, the news of the last few weeks and months don’t help.
Any ideas how Cuba could help potential investors?
Just as when I open Cubadebate and see only one side, I open [conservative daily] Die Welt in Germany and see only the other side of Cuba – starving masses, miserable health care, an education system that exists only for appearances, all quite terrible. To project itself abroad, Cuba relies a lot on campaigns like Cuba Si. They will show 10 outcasts who sit in front of the Capitol in Rome or the Brandenburg Gate in Berlin and express their solidarity with Cuba. A potential investor passing by and seeing those individuals, will not feel particularly attracted to exploring opportunities there. One may feel sorry for presumed victims of U.S. sanctions, but this does not create passion. I doubt that Cuba will ever get rid of the embargo by seeking solidarity, but if there are actual investment opportunities and sanctions become an obstacle to further growth in the context of those investments, pressure against these measures is likely to increase. This is why Cuba and China are measured in a completely different way, with Cuba being definitively on the brighter side in terms of individual rights, freedom of speech, and free access to information. Cuba needs to think how to position itself more efficiently, how to get out of the niche of self-satisfied propaganda, and communicate proactively instead. Of course, it will face criticism, but at least it can contribute to the opinion-building process instead of leaving the field at the full disposal of its opponents. If SMaBiT can demonstrate its customers that we are working with self-determined individuals who do deserve their chance on international markets, why can the state not do that on a large scale, attracting new investments and supporting those who have already invested in their county? The main marketing target for Cuba should be people thinking about whether Cuba could be a market for them. And, if anything, they should have learned from the pandemic that they need services. They need to sell something that doesn’t require raw materials. They do not have the means and the infrastructure to produce any goods. The alternative is to produce services, tapping into the education and motivation of their people. They need to get off crying mode and just do it.