Earlier this month, Capgemini made a $298m investment in Brazilian IT firm CPM Braxis, giving Europe’s largest IT services company a 55 per cent controlling share in one of the rising stars of Latin America.
It’s a validation of what I have been saying for some time: Brazil is not only going to shine as a source of post-India-boom offshore IT suppliers, the country’s market itself has become interesting. I wrote a book about this back in 2007 and all that has changed since then is that the Brics – Brazil, Russia, India, China – has rapidly become the Bics.
Many IT companies are already in Brazil, including Capgemini with its own staff. IBM has its latest international R&D centre in São Paulo and Unisys, HP and Accenture all have substantial operations in Brazil.
In theory, Capgemini could have just expanded operations in Brazil without the need to acquire a local firm, but it is buying experience and relationships. CPM Braxis already services a large number of local firms, including the major bank Bradesco. It could take years for a foreign firm to build the relationships CPM Braxis has already established. Banking is a great example of a mature industry sector as IT was adopted as an integral part of the service many years ago. Back in the days of hyperinflation, Brazilians could not afford to wait days for money to be transferred from one account to another, so the banks improved their systems, meaning instant transfers are now normal. When are we getting that in the UK?
Though it is comparatively small, CPM Braxis is no minnow. With more than 5,500 staff and 200 clients, the company represents a very interesting acquisition for Capgemini – which will now be mining all those relationships and exploring how the expanded group can offer something new to existing clients. The reasons for the Capgemini deal are clear. Brazil is the giant of the Latin American IT services market, with a 47 per cent share of a $23bn market according to analyst company Gartner. The Brazilian economy has barely suffered from the global economic slowdown and is predicted to grow by more than seven per cent this year.
The booming economy and increased domestic consumption are driving the IT market even faster. Local trade body Brasscom expects the IT market to grow at over 10 per cent for at least the next four or five years.
This rapid growth has to be attractive to any firm watching its local economy limp out……of recession. In the UK, heavy public sector spending cuts on all non-essential projects are going to further depress the IT market.
Jose Luiz Rossi, CEO of CPM Braxis, said of the deal: “We will expand our client base by making our services available to Capgemini’s international clients present in Brazil, and will also be able to offer Capgemini’s global expertise to support our major Brazilian clients in their international development projects. Finally, joining Capgemini is a chance to give our employees more attractive career opportunities.”
Note that final line. The Brazilian firm wants to offer global career opportunities to its staff and the purchaser wants to access more Brazilian business. It’s symbiotic and an example of what we will see more often in coming years, but will immigration be a fly in the ointment for some of those expectations? British Business, innovation, and skills minister Vince Cable was in Brazil recently, talking of the need for more British firms to work with Brazilian partners. He emphasised the need for a strong two-way flow of trade that recognises the enhanced economic status of Brazil. But when questioned on government plans to restrict work visas for non-EU citizens, he floundered. Brazil is going to export more services to the world, but if the UK is not careful we may well lose out on valuable partnerships and business in new regions, all because of populist legislation that won’t preserve local jobs anyway.
This article was originally published in silicon.com on Sep 9, 2010