As part of the our comment series on US president Barack Obama’s visit to Brazil at the end of this week, IT Decisions spoke to one of the most high profile IT analysts in the world, John McCarthy, vice president and principal analyst at Forrester Research.
McCarthy is a big fan of Brazil and has been visiting for over twenty years from his base in Cambridge, Massachusetts, but when asked why so much American IT work goes to India compared to Brazil, he was direct.
“There is more business going to India by a factor of a thousand, because all the IT resources in Brazil are focused on the local market,” he said.
“When you go to suppliers like Stefanini and CPM Braxis (now part of Capgemini), they will talk about their exports, but if you ask for the details then it is really just a few hundred people focused on the export market,” McCarthy added.
The analyst said that a major problem for Brazilian exports is the strength of its currency, the Real. When plotted against the US dollar over the past decade, it becomes clear that life has become much harder for exporters.
“I was in Brazil last June and I met one company head who said to me that he has just given up doing exports because they can’t compete – the currency has gone against them so much,” he said.
McCarthy emphasised the chequered Brazilian economic history.
“Brazil historically has always been a relatively closed economy, that’s why companies like IBM have been manufacturing there for years. It’s a vibrant market, but largely self-sufficient,” he added.
“Now there is strong growth and it’s likely that one of these local technology firms will become a global player, but to succeed they need to really focus and they can’t compete on just general purpose IT services, they need to build a platform.”
However, it’s not all doom and gloom. McCarthy mentioned one Brazilian technology firm that is getting noticed.
“CI&T is doing about 40% export work, but I don’t think anyone else in the market is in double digits – most of the other players are doing something like 4 or 5%,” he said.
“But every Tom, Dick, and Harry multinational is coming to Brazil – they are all trying to do business in the market, so the IT firms have a lot of local business just serving all this activity.”
IT Decisions says
McCarthy’s comments are direct and don’t swerve from the truth. Brazil cannot compete with lower-cost economies and to think that any Brazilian tech firm will succeed with an all-services-at-a-low-cost business model is just a dream.
But he does concede that the more innovative firms can export, and even the larger players are exporting some services, no matter how insignificant those exports are when compared to their local business.
His main point about Brazilian IT firms finding a niche platform should be heeded. There are several world-leading industries in Brazil with local technology players supporting those firms. To play the long game, those business-rich IT skills needed to be packaged as a product and exported to the world.
Click here to hear John McCarthy’s preview of the Obama visit to Brazil.
Photo by Chaval licensed under Creative Commons