This paper analyzes the evolution, present situation, and prospects for the Argentine software and information services (SIS) sector. Argentina has some advantages to exploit in order to make significant inroads in this sector. It has a relative abundance of well-educated people, a sizeable domestic market, and a cultural influence in Spanish-speaking Latin America. The currency devaluation of 2002 dramatically reduced costs measured in U.S. dollars. Nonetheless, SIS firms in Argentina have focused primarily on the domestic accountancy and management market, where they enjoy advantages derived from the specific requirements of the domestic regulations and their knowledge of the business culture and the needs of their local clients. This concentration in the domestic market has caused SIS firms to pay insufficient attention to some key issues for competitiveness in this sector. Hence, it is no surprise to find that they lack marketing and management capabilities and that the diffusion of quality certifications is almost null. The domestic environment also poses some obstacles, since firms often have difficulties accessing investment and working capital. Business networking mechanisms are weak, both among SIS firms as well as between them and their customers, R&D institutions, etc. Increasing the competitiveness of this sector requires intelligent public policies and actions aimed at improving the SIS firms' capabilities and endowments. © 2005 Wiley Periodicals, Inc.