Brazil Sambas onto Offshore Outsourcing Stage

Areas around Rio, São Paulo emerge as alternative to India, other destinations, for applications work.

By Stephanie Overby
Tue, July 03, 2007

CIO — Offshore outsourcing managers used to traveling back and forth to Bangalore may be trading in those frequent flier miles for tickets to São Paulo or Rio. And not for any much-needed R&R.

Some IT organizations experienced in offshoring are looking to Brazil as an emerging option for software development and maintenance services. In most cases, the move is part of a diversification strategy as demand continues to put upward pressure on wages in India.

In addition, some companies may be looking for a way to bring offshore work a bit closer to home in the Western hemisphere. “There are instances where [Brazil] is used instead of India because of its closer proximity and similar time zones to the U.S.,” says Eugene M. Kublanov, COO and managing director for offshoring outsourcing advisor NeoIT.

Brazilian IT services companies are eager for the international business. The domestic market for IT work is growing at a decent 17 percent a year, according to Jair Ribeiro, president of São Paulo–based CPM Braxis, Brazil’s largest IT services company with $500 million in annual revenue. But CPM Braxis and other local market leaders, such as Brasilia-based Politec and Rio de Janeiro–based DBA, are ravenous for a piece of the offshore outsourcing market, which is growing at more than twice that rate.

These companies are contending with some much larger competitors. Most multinational outsourcers, including IBM, EDS, HP, Unisys and Accenture, have set up shop in Brazil. IBM, for example, is using Brazil as a hub for infrastructure management, employing more than 9,000 people in Campinas, 90 minutes outside of São Paolo, says Kublanov. Tier-1 Indian players, including TCS, Satyam, Infosys and Wipro, and larger Mexican IT services companies including Neoris and Softek, have moved in as well.

Financial services key client for Brazil
The biggest market for companies like CPM Braxis is the financial services industry, thanks to that company’s experience building robust software to cope with the country’s financial crises in the 1980s and '90s. Financial services business makes up half of the revenues at CPM Braxis.

The second major source of revenues is ERP work. Brazil boasts one of the largest concentrations of SAP consultants in the world outside of Germany. Due to a large population of German descent, SAP has been operating in Brazil for years, and local corporations and divisions of multinationals have aggressively installed the ERP systems, says Kublanov. To be fair, Ribeiro says he also does a decent amount of Oracle business. Experience in Cobol and other legacy languages are also one of CPM Braxis’s selling points.

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