by Stephanie Overby

Brazil Sambas onto Offshore Outsourcing Stage

Jul 03, 20074 mins

Areas around Rio, Su00e3o Paulo emerge as alternative to India, other destinations, for applications work.

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.


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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.

Companies who have outsourced IT work to Brazil include JPMorgan, Estee Lauder, and offshore first-moved General Electric. Some companies, including Citigroup, Motorola, Dell and Oracle, have set up captive (company-owned and operated) development centers.

Unlike some of its global competition, there is no real business process outsourcing, or BPO, business for Brazil. “English skills are available from a well-educated subset of the population,” says Kublanov. “[There] is far less than in countries such as Eastern Europe, giving Brazil limited capacity to jump deeply into the businesses such as call centers.” The best English speakers go to work for multinationals, Kublanov adds.

More growth predicted

Some analysts predict growth in Brazil’s IT services sector, currently valued at $1.1 billion by Frost & Sullivan and predicted to triple by 2012. But not everything is working in Brazil’s favor. “Brazil is an anomaly in the global market,” says Kublanov. On one hand, there’s great potential to service the United States and European market due to location and cultural affinity. On the other hand, employee costs are high and personal security concerns plaguing São Paolo and Rio de Janeiro make it a challenging work environment, says Kublanov. As one of the strongest economies in Latin America, Brazil’s own companies are now a target market for other countries like India providing cheaper offshore services.

Ribeiro, more focused on the international business, is concerned that not enough U.S. companies are familiar with the IT services options in Brazil. He’d like to see the Brazilian government do a better job of branding and marketing the country’s IT resources.

The country already has an industry association in place: BRASSCOM, the Brazilian Association of Software and Service Export Companies, Brazil’s version of India’s NASSCOM (National Association of Software and Services Companies).