In a year when traditional outsourcing markets of the US and Europe have resumed spending, emerging countries like Brazil offer opportunities beyond just a near shore destination for Tata Consultancy Services, Infosys and Wipro.
"We are clear that we do not want this to function as a near shore centre. We are addressing the local customer as well as the multinationals that are our customers and have a large presence here. For this, we have a local sales and marketing team, local leadership and everything," Sandeep Kalra, Vice-President, Emerging Geographies, HCL Technologies, said.
Brazil's demand for IT services is largely fuelled by the country's rapid growth; it saw its GDP rise over 7 per cent in the last calendar year. While some industry estimates peg the size of the domestic IT services market at $10 billion, IT firms say the size is closer to $15-16 billion, including BPO and application services.
According to Anthony Miller, an analyst at Tech Market View, this is larger than the domestic markets of both India and China worth $4.2 billion and $5.7 billion, respectively, and expected to grow at double-digit rates by 2014.
The financial services sector is the largest buyer of IT services, accounting for 20 per cent of the total spends, according to Brazilian industry body Brasscom. Large local banks such as Bradesco, Banco do Brazil and international banks like ABN Amro, Santander and HSBC have outsourced IT services to providers in Brazil.
Manufacturing, retail and e-governance also provide significant opportunity. The Brazilian government has leveraged IT for some large projects like the electronic voting system, internet-based tax filing and electronic procurement system.
"Brazilian companies are poised for tremendous growth in the next few years and they are gearing up to manage this demand. This also translates into significant opportunity for companies to be able provide business transformation solutions to help them gain a competitive edge," an Infosys spokesperson said.
Infosys Technologies set up a centre in Brazil in late 2009 and has 180 employees. Over 90 per cent of the centre's revenue is coming from servicing local companies.
HCL Technologies also established its Brazilian centre in 2009 and has 300 employees with plans to ramp up aggressively. The company counts large local players like electronics retailer Ricardo Eletro and fashion retailer Lojas Renner among clients and says that of the 14 clients that it services from this unit, 10 are local players.
Enterprise applications, IT infrastructure management, manufacturing and retail are some of the areas that are leading to increasing demand. Brazil also has a large pool of IT services professionals, from a total population of 200 million, almost 1.5 million people are engaged in IT services.
TCS has the largest presence amongst Indian companies in the Brazilian market with almost 1,000 employees and though the company saw some impact due to the recession it known to be emerging as one of the large players.
Business from the country though comes with its own set of challenges. The Brazilian government taxes import of IT services heavily, making them at least 40-50% more expensive to import than to do them locally. This takes away the advantage of shifting work to a cheaper location like India.
Indian players are also competing with well-established local players who already have a significant share of the market. IBM has the largest share of the local IT market in Brazil, followed by Accenture and HP.
Brazil also has local outsourcing firms that are well entrenched in the market like CPM Braxis, that was acquired by Capgemini last year. Indian companies say, "Local players lack the global knowledge and experience they bring therefore being able to give better solutions."
Source: Times of India
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