Economic and political factors affecting global software outsourcing in five supplier countries

5 countries (other than the U.S.) that have notable circumstances that should be examined from an IT outsourcing potential.

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Portugal boasts a solid pool of technical talent with rates that are comparatively low because of the historically weak Portuguese economy. In contrast, Spain has similar rate structures to Portugal, but doesn’t have the established software outsourcing industry Portugal exhibits.

On the down side

Some are skeptical of Portugal’s rosy economic predictions, pointing out that Portugal’s rebound included a hefty bailout from the International Monetary Fund (IMF). Similarly, there are fears by some that Portugal’s political stability is tenuous, and “as goes the government – so goes the economy.”

Brazil

Brazil has been notably in the world spotlight in recent years – having hosted the World Cup in 2014, and the Summer Olympics in 2016. Brazil is the largest and most populous country in South America. Portuguese is the official language, and English proficiency on the whole is low. Brazil is physically closer to the United States than many other outsourcing destinations, and their time zone is two hours ahead of Eastern Standard Time.

On the economic front, Brazil’s GDP figures fell precipitously from mid-2013 to mid-2016. Since 2016 – the GDP has risen – and is forecasted to continue to climb back to pre-2015 figures over the next 2 years. Similarly, unemployment has been on the decline since mid-2016. In 2006, Goldman Sachs published a report projecting four emerging countries will dominate the world economy by 2050: Brazil, Russia, India and China – or BRIC.

Politically, Brazil’s economy seems to have been bolstered by market-friendly policies of Michel Temer in 2016. However, global watchdogs are eagerly awaiting the outcome of a November 2018 election, which could undo recent economic improvements.

Several large outsourcing vendors operate in Brazil, and there’s little doubt that a great deal of programming work is accomplished there for other Brazilian companies. But only a few small and medium-sized outsourcing vendors exist in Brazil focus on providing software development services for the U.S. and other Western countries. Most Brazilian IT outsourcing vendors focus on BPO and providing body-shop software development resources. Although outsourcing costs tend to be higher in Brazil than other outsourcing destinations, American companies are setting up operations and doing business there. Intellectual property rights in Brazil have been under review by the U.S. Trade Representative for several years, and where once IP rights were a concern in that country, their patent, copyright and trademark laws now correspond to those laws of other large outsourcing nations.

On the plus side

Brazil promises to be a good bargain for outsourcing if you can find a qualified vendor. A soft economy in recent years translated into favorable rates for U.S. companies seeking an outsourcing partner in Brazil. Companies that have a business interest in Brazil will likely benefit from outsourcing there. For instance, if you want to introduce software in the Brazilian market, setting up an operation in Brazil would make sense.

On the down side

Rising prices may be a deterrent for many businesses considering Brazil as a software outsourcing destination. As well, those businesses that require application programming will find limited resources. Finding programmers with a mastery of English may also be difficult, even with the predominance of English as the “language of international business.”

Copyright © 2018 IDG Communications, Inc.

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