If you want to understand why the IT market in Brazil is so healthy, take a look at how business in general is doing – in short business is booming. Just browse the FT Tilt summary of Q1 in corporate Brazil here for proof.
Any modern organization needs strong support from IT. Retailers, bankers, telcos – none of them could function without strong IT to support their business, which is something that was unthinkable even a decade ago. IT has moved from playing a support role to being the enabler of new innovation and growth.
This is increasing the spotlight on IT in Brazil and with such strong growth across a diverse group of industries, it looks like the local IT sector has some interesting clients – and challenges – to manage. Just at some of the recently published Q1 2011 highlights:
- Retailer, Lojas Renner, was the top performing stock on the São Paulo stock exchange in April. Net income up 29%;
- Hering, an apparel retailer that in many ways resembles Gap, achieved net sales growth of 43%;
- Bradesco, Brazil’s second-largest bank, reported a 30 per cent increase in operating profit;
- Embraer, the aircraft manufacturer, posted income for the first quarter that was four times what was achieved in the same period during 2010;
- Vale, the mining company and largest global producer of iron ore, recorded an increase in earnings of 325.6% compared to the same period last year.
The strong growth continues across industry sectors as diverse as food production, drinks and beverages, and telecoms. Brazilian companies are seeing enormous growth and the IT service sector has not been slow to notice.
How does this compare to the economies of the US and Western Europe? Those economies were most battered by the global economic crash in 2008 and have barely recovered. These are the “zombie economies” where consumers are being asked to spend more to stimulate growth, but without job security, and with credit being harder to obtain, the days of free and easy spending are long gone.
The IT service players of the emerging markets, such as India, have all moved to Brazil, seeking business here. Over ninety per cent of the business undertaken by Indian technology giant Infosys in Brazil is for local clients. Capgemini moved into this market last year and bought a majority stake in CPM Braxis – entering the market quickly through acquisition.
When IT Decisions recently met the head of Brazilian IT trade body Brasscom, Antonio Gil, he said that foreign IT firms are often meeting with him asking for the best way to break into this market. He also said that he believes Brazil needs two or three of its own large players in the IT service sector – rather than being entirely foreign-owned IT firms servicing Brazilian clients.
Short of banning foreign investment and acquisition, how can this be achieved? The industrial growth-taking place in Brazil is too attractive for Americans and Europeans to ignore, as they find no takers for business in their home markets.
How long will it be before the next acquisition of a Brazilian IT services firm – and does it matter? The UK has no remaining major brand in IT services, yet millions of British people are employed by foreign companies in the IT service sector.
Will the same happen soon to Brazil?
Photo by Jordi Martorell licensed under Creative Commons