By Silvia
Rosa for Near shore Americas
Among the
largest exporters of software and IT services, Indian companies have
increased their investments in Brazil, aiming to benefit from the growth
potential of the domestic market and expansion of their operations in Latin
America. The largest Indian IT companies, such as Tech Mahindra, Tata
Consultancy Services (TCS), Wipro, and HCL have recently
started operations in Brazil to both serve the local market and provide
services for global clients.
This is the
case for Infosys, the second largest Indian IT company, which opened a
development center in Brazil in Nova Lima, in the state of Minas Gerais, in
2009. “Initially the aim was to provide services for some multinational
customers based in Brazil,” said Claudio Elsas, Infosys’ CEO in Brazil.
In 2012,
Infosys acquired Lodestone, which specialized in the SAP system. Currently the
company offers several lines of IT services in Brazil, including management
consulting focused on SAP and Oracle’s enterprise resource planning (ERP)
systems, development of IT solutions and business process outsourcing (BPO).
The company
has about 1,000 employees in Brazil in addition to maintaining local operations
in Mexico, Argentina, and Costa Rica. “The advantage of being a global company
is that we can bring the latest IT solutions to the local market faster,” said
Elsas.
TCS is
the largest IT Indian company, and Brazil accounted for 20% of its
turnover in Latin America in 2013. The company’s goal is to raise its revenues
in the region to US$1 billion by 2016, reaching 4% of global turnover.
In Brazil,
TCS has a development center in Tambore in the state of São Paulo,
and it has focused on services related to mobile Internet, cloud computing, big
data, and high-performance computing. The local presence is essential for
growing in Brazil. “Besides the language barrier, there is the high cost of
importing services in Brazil,” said Elsas.
The main
factor that has attracted these multinationals to Brazil is the size of the
nation’s IT market. As the seventh largest in the world, it reached US$60
billion in 2014, an increase of 6.7% over the prior year, and with an
investment growth of 4.04% last year, it was above the global average.
“The main factor that has attracted multinationals to Brazil is the growth
potential of the domestic IT market,” said Jorge Sukarie, CEO of theBrazilian
Association of Software Companies (ABES). “The country is among the 10
fastest-growing IT markets and may overtake France over the next five years.”
France
placed fifth in the investment ranking in 2014, and the Brazilian domestic
market is already larger than that of India (eighth), whose investments in the
IT sector totaled US$40 billion in 2014. Brazil also dominates its region,
representing 46% of the IT market in Latin America. Considering just software
and services, growth was 9.7% in 2014, totaling US$25.2 billion — double the
Indian market and its $12 billion.
Another
advantage of the Brazilian market is that it is located in the same time zone
as North America, which makes working on projects involving a global team
easier.
However,
since most parts of the Indian IT market are focused on export, the
international market in Brazil accounts for only 1.93% of the IT sector.
Foreign
companies have a large market share in the software segment in Brazil. In 2014,
the programs developed abroad accounted for 75.5% of this sector. On the other
hand, domestic developments represent 85.9% of the service market.
In order to
grow in the Brazilian IT service market, Tech Mahindra has chosen to make some
strategic acquisitions. The company, which is part of the one of largest global
IT services providers, the Mahindra Group, acquired a 51% stake in the
Brazilian SAP consulting company, IT Complex, in 2013 and it is considering new
acquisitions or joint ventures with local partners in order to increase its
service portfolio in Brazil, especially in cloud computing and BPO.
In February,
the company signed an agreement with IBM to develop a cloud application
platform. Tech Mahindra also signed a partnership with Equinix at the beginning
of the year to use its data center platforms, aiming to expand its business in
Brazil and in the Latin American region in the outsourcing and cloud computer
segments, providing services such as network operational center (NOC),
host operational center (HOC), and security operational center (SOC), as well
as support to critical applications and infrastructure services.
Having
maintained local operations in Brazil for around five years, Tech Mahindra
offers IT services in consulting, enterprise business solutions, BPO and IT
infrastructure. Besides this, the group has two companies, Comviva and Canvas,
that offer mobile solutions.
In an
interview with Nearshore Americas in February, Alberto Tosatti, CEO
of Tech Mahindra at that time, said that the company showed a 30% increase in
turnover in 2014, and the forecast for this year is to grow 25% in dollar terms
in Brazil.
The
Brazilian subsidiary accounts for 2% of total revenue and the goal for Latin
America is to achieve 10% of revenues by 2018, with Brazil representing half of
that.
Some Indian
companies also use the infrastructure in Brazil to export IT services to other
countries or work on global projects. Currently about 20% of Tech Mahindra
revenues in Brazil come from services to countries such as the United States,
Canada, and Europe.
The Indian
giant of IT services and outsourcing, Wipro, also has a global delivery center
in Curitiba, in the state of Parana, which is integrated with the company’s
mega centers in India and provides a wide range of IT services for both local
and global customers, such as development and maintenance applications (Oracle
and SAP), IT infrastructure management, big data and analytics, cloud
computing, and outsourcing.
The company
began its operations in Brazil in 2007 with the acquisition of the retail
consulting firm, Enable, from the Portuguese group, Sonae.
Despite the
devaluation of the Brazilian real, the high cost of doing business in Brazil
makes the Brazilian exports less competitive in comparison with other emerging
markets like India.
Sukarie
explained that the bureaucracy, the tax burden, and the high labor costs
are among the main obstacles to operate in the domestic market. In addition,
companies have difficulty in finding qualified workforce and staff fluent in
other languages, especially English.
Some
companies, like Infosys, have sent Brazilian employees to be trained in India
or have brought Indian technicians to train the local staff.