TechMarketView outlines Brazil IT opportunity

Posted by By at 8 July, at 15 : 03 PM Print

TechMarketView outlines Brazil IT opportunity

TechMarketView is one of the best-known IT analyst firms in the UK – with a heritage that connects them to many of the other leading analyst firms. IT Decisions recently enjoyed a dinner in São Paulo with their co-founder and managing partner, Anthony Miller, and called him on his return to the UK for some observations on his recent visit to Brazil.

First Miller outlined some of the recent market developments in the Brazilian IT market.

“There is still huge optimism about the IT services market in Brazil. What is not changing though is companies saying ‘we can’t get enough good staff.’ It’s one of the signs of a high-growth market, but attrition is even higher than the rates in India, so it’s a big challenge for the IT players to stand still – let alone keep growing,” he said.

“I was surprised to see that recently [Indian major] TCS has been declining in Brazil. Everyone else is talking about revenue growth and an increase in demand and headcount. TCS Brazil has gone backwards in revenue, gone into loss, and reduced headcount,” he added.

On the real opportunity in Brazil being access to the booming domestic market – IT demand in Brazil is more than in both India and China combined – Miller explained: “It became clear to me a long time ago that Brazil is all about the domestic market. There are some exports, but the tax regime doesn’t really make it a low-cost delivery centre. We are really talking about the difference between the 95 per cent of domestic activity and the 5 per cent of exports.”

Which seems unusual because I am forever being asked about the nearshore opportunities in Brazil. Even yesterday a business magazine called me asking if I could explain the relative merits of nearshoring to Brazil, compared to other countries in the Latin America region.

“These are the kind of people who have not spent any time in Brazil in the past 3 to 5 years and seen how the cost base has changed. It needs a reality check. I personally need to spread my net a bit wider, but if four or five companies are telling me that this is the way the market operates here then I believe that this is it – none of the IT companies in Brazil talk about it as an offshoring destination,” Miller explained.

I asked Miller if the booming market in Brazil means that there will be more foreign entrants, especially after the 2010 purchase of a majority stake in CPM Braxis by Capgemini. He said: ” We have already seen it recently with CSC purchasing Vixia. Though I’m sure that Vixia is relatively a small outfit and it won’t shape the market in the same way as the Capgemini purchase of CPM Braxis.”

“I’m not sure there is a huge opportunity for consolidation and M&A in Brazil, but I’m sure the savvy international players will realise that it’s a very different market and buying someone is easier than doing it organically.”

Click here for part one of the interview with Anthony Miller

Click here for part two of the interview with Anthony Miller

Photo by Fabio Panico licensed under Creative Commons

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