2008-2009 BRAZIL IT-BPO BRAZIL IT-BPO BOOK BOOK...SUMMARY message from the PresiDents p. 7 global...

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BRAZIL IT-BPO BOOK 2008-2009

Transcript of 2008-2009 BRAZIL IT-BPO BRAZIL IT-BPO BOOK BOOK...SUMMARY message from the PresiDents p. 7 global...

Page 1: 2008-2009 BRAZIL IT-BPO BRAZIL IT-BPO BOOK BOOK...SUMMARY message from the PresiDents p. 7 global it-bPo trenDs p. 8 brazil goes global p. 24 the brazilian it-bPo sector p. 20 brazil’s

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BRAZIL IT-BPO BOOK2008-2009

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BRAZIL IT-BPO BOOK2008-2009

brazilian association of information technology and communication companies – Brasscom

President of the boardRogério Oliveira

PresidentAntônio Gil

directorsEdmundo OliveiraNelson WortsmanRicardo AsseSérgio Sgobbi

BraZil it-Bpo Book 2008-2009

coordinationRicardo Asse Daniella Koncz

technical suPPort teamThaís TrappSergio Pessoa

sPonsorshiPApex-BrasilBrasscom membersAccentureBRQCastCPM BraxisIBM BrazilItautecStefaniniTivit

acknowledgementsAlessandro TeixeiraMauricio Borges André LimpMauro PeresAntonio AlmeidaDaniel CunhaArgemiro LeiteJosé C. LabateCássio DreyfussMembers of Brasscom’s Marketing Work Group

brasscomRua Funchal, 263, conjunto 151 04551-060, São Paulo, SP, BrazilPhone 55 11 3053-9100Fax 55 11 3053-9115www.brasscom.org.br

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SUMMARY

message from the PresiDents p. 7

global it-bPo trenDs p. 8

brazil goes global p. 24

the brazilian it-bPo sectorp. 20

brazil’s ValUe ProPositionIndustry and business knowledge p. 32

Qualified human resources p. 36

Sound infrastructure p. 42

Governmental support p. 50

Favorable economic, political and legal environment p. 54

Cultural compatibility p. 60

Time zone proximity p. 62

conclUsionCost efficiencyp. 66

aPPenDiXp. 70

brasscom’s agenDa p. 12

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Information Technology (IT) plays a key role in the day-to-day lives of companies and nations.

If business needs to be expanded, it provides the essential input for planning, executing and

controlling action. If costs need to be rationalized, it provides the vital tools for enabling

more efficient operations and management. The process is global and Brazil takes a dynamic

and creative part in it. The IT industry has provided the country with great service for over

four decades. The eighth largest IT market in the world is planned here, and information and

communications technology represents about 7% of Brazil’s gross domestic product (GDP).

In this publication Brasscom offers the world a snapshot of Brazil’s IT industry. It is based on

recent studies carried out for Brasscom, which have outlined the comparative outlook for

domestic and global markets, and provided indispensible primary data for the industry and

for investors.

Recent evidence shows that Brazil is rapidly becoming a safe harbor for offshore IT and

business process outsourcing (BPO) services. This is the focus of this report, which is designed

for companies and opinion makers in the industry. It aims to reduce the imbalance in

information provided to agents in the area and to add value to their business decisions.

Above all, this publication seeks to share data and open up horizons. This is why it begins with

an overview of the global IT-BPO services market, which has shown to be resilient in face of

a global economic crisis, and continues to grow. It then presents the position held by Brazil’s

industry and its potential for expansion. It shows why Brazil has arisen as a consistent and

strategic offshore alternative.

This publication also proffers the point of view held by analysts of this market, identifies the

resources and advantages enjoyed by Brazil in global terms, and provides comparative data

on other traditional and emerging players. It also focuses on aspects of infrastructure, human

resources and policies for the industry, with special emphasis on the firm support offered by the

Brazilian government. The situation presented here may surprise some readers, and certainly

reveals a secret that has been well-kept in recent years but which now, with the country’s

projection in IT-BPO, is becoming an ever-more incontestable fact.

Many people, companies and institutions collaborated in the preparation and publication of

this report. Special mention must be made of the Brazilian Trade and Investment Promotion

Agency (Apex-Brasil), which embodies the Brazilian government’s commitment to our industry.

We also extend our warm thanks to our member companies and consultancies International

Data Corporation (IDC), A.T. Kearney, and Booz & Company.

Rogério Oliveira

President of the Brasscom BoardAntônio GilPresident of Brasscom

Brazil: a safe harbor for IT-BPO

6 brazil it-bpo book 2008-2009 message from the presidents 7

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global it-Bpo trenDs

CREATING JOBS, BOOSTING PRODUCTIVITY,

COMPETITIVENESS AND PER CAPITA GDP,

THE IT-BPO SECTOR IS TODAY A GROWTH

DRIVER FOR ThE COUNTRIES

Extensive market intelligence research carried out by Brasscom – the Brazilian Association of

Information Technology and Communication Companies – has shown how vital Information

Technology (IT) is to the economic development of any country that wants to be a part of the

global market. Over the last few decades the IT industry has become the main growth driver in

the leading global economies, illustrated by such indicators as job creation, a general rise in

productivity, increased competitiveness and rising per capita gross domestic product (GDP).

This strength and dynamism is best exemplified by Information Technology (IT) and Business

Process Outsourcing (BPO) services, sectors whose strong growth forecasts have been

maintained despite the global crisis. In 2008 IT-BPO generated US$ 1.23 trillion globally, with

outsourcing processes (both domestically and internationally) accounting for US$ 819 billion

of this total, having grown 6% a year from 2004 to 2008. This growth rate is expected to

reach 7.4% a year from 2007 to 2012, according to consultancy A.T. Kearney.

Demand is distributed as follows: applications (IT consulting, system development,

integration, expansion and management), US$ 289 billion; infrastructure (including software

development and software sales), US$ 271 billion; BPO, US$ 171 billion; and hardware

services, US$ 87 billion.

* Compounded Annual Growth Rate.

IT-BPO Services (in-house and outsourced)

IT-BPO Services (outsourced)

IT-BPO Services(offshore)

Source: Gartner, A.T. Kearney analysis.

2008

2009

e

2010

e

2011

e

2012

e

2007

GLOBAL IT-BPO SERVICES MARKETUSD Billion

11861233 1274 1316 1359 1404

748819 872

932997

1069

50 70 84 101 121 145

CAGR*

2004-082007-12

20% 40%

7.4% 6%

3% 3%

IT-BPO TUrNED OVEr US$1.23 TrILLION GLOBALLY IN 2008

global it-bpo trends 9

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BPO grew 8.2% a year from 2004 to 2008, a trend which is expected to continue even more

rapidly (8.7% a year) until 2012. We estimate that the rate of expansion will also increase in

infrastructure (7.2% a year from 2008 to 2012, compared with 5.9% in the previous period),

applications (6.6% compared with 5.2%) and hardware (2.8% compared with 2.3%).

In 2007 the United States accounted for 42% of demand, and Europe for 35%. Finance,

manufacturing and the public sector were the main vertical segments in the market.

Companies mainly opt to outsource services in order to expand their operations, to increase

revenue, to reduce costs, to streamline processes, and to concentrate their efforts in their

areas of expertise. Today, many companies are contracting service providers in developing

countries to take advantage of labor cost arbitrage, which leads to reduced costs.

‘Offshore Outsourcing’, which means outsourcing to other countries, is the segment that has

expanded the most, growing an average of 40% a year from 2004 to 2008 and turning over

US$ 70 billion in 2008 alone. From 2008 to 2012 average annual growth is expected to be

20%, turning over US$ 145 billion.

India is by far the largest supplier in this market, having exported US$ 41 billion from 2007 to

2008, according to A.T. Kearney. In the same period, however, Brazil, China, Russia, Mexico

and the Philippines, amongst other players, significantly increased their market shares.

Analysts in the sector forecast that over the next few years around 50% of the market will be

fought over by emerging players. Companies hiring services will need to create new strategies

to globally outsource (for example, prioritizing suppliers closer to their borders, which is

known as nearshore outsourcing), which will create clear opportunities for Brazil. A report

published by Gartner Group at the end of 2008 stated that Brazil is a natural choice when it

comes to potential investment in IT-BPO services.

industry has greatly improved training, quality and competitiveness. IT services are vital for all

sectors – government, industry, retail and services – and are the country’s flagships regarding its

standing on the international market.

The private sector and the Brazilian government share ambitious goals to position the country as

an increasingly relevant and strategic global player in IT-BPO.

Goals were established as a part of a development program for the sector within the government’s

Productive Development Policy (PDP), launched in 2008 by the Ministry for Development, Industry

and Foreign Trade. These goals included strengthening the microelectronics segment, enlarging

the production chain, and expanding the infrastructure for digital inclusion. Furthermore, the

Brazilian government set a goal for 2010 to boost IT-BPO exports, from US$ 2.2 billion to US$

3.5 billion. Projects to create 100,000 jobs in the area are also being implemented, and two large

Brazilian technology groups are being consolidated.

Initiatives that involve the federal government, Brasscom, and other industry associations are

handling expanded access to computers and broadband internet connections, professional

training, and job creation.

Finally, comprehensive, shared agendas to combat the crisis take in specific measures for the IT-

BPO sector, given the consensus regarding its relevance as a strategic sector of the economy.

30

5050

7070

84

101

90

110

2008

USD 31Billion

OFFSHORE COMPETITIVE SCENARIOSpending – USD Billion

Source: Gartner, A.T.Kearney analysis.

Estimate

India

BrazilChinaRussiaMexicoPhilippinesOthers

2009

e

2010

e

2007

BrAZIL HAS BECOME A STrATEGIC GLOBAL PLAYEr IN IT-BPO. WHAT WILL ITS rOLE BE IN THE NEAr FUTUrE?

The Brazilian IT-BPO market is among the strongest and most mature in the world. Over the

last few decades it has been evolving in size, coverage and complexity, in line with the other

economic sectors. Brazilian companies operate in the country, along with multinational firms.

The main hardware manufacturers have facilities in Brazil, and are also one of the main

consumers in this market. In 2008, according to consultancy IDC, Brazil was ranked fourth

in global computer sales, behind only Japan, China and the United States. Brazil’s software

10 brazil it-bpo book 2008-2009 global it-bpo trends 11

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brasscom’s agenDa

Brasscom – The Brazilian Association of Information Technology and Communication

Companies – represents the main IT-BPO companies, both Brazilian and international,

which account for 70% of Brazil’s gross domestic product (GDP) in the sector, as

well as research centers, universities and institutional partners. Founded in 2004,

Brasscom works to position Brazil amongst the world’s three leading strategic IT-BPO

centers. To this end, it seeks to align public policies with the private sector and local

and international markets, as well as to encourage cooperation with employees and the

associations that represent them.

Its agenda is built around promoting Brazil ’s excellence and innovative capacity in

IT-BPO, which is essential to increased efficiency and productivity in every sector

of the economy. In five areas of operation, Brasscom works to consolidate the

relevance of the IT-BPO sector in Brazil.

BrASSCOM SEEKS TO GET THE MOST OUT OF THE ADVANCES IN THE IT-BPO SECTOr

INSTITUTIONAL

BRASSCOM’S AREAS OF OPERATION

National councils Market strengthening Institutional relations Institutional communication Public relations

REGULATORY DIGITALCONVERGENCE

EDUCATION & HUMAN RESOURCES MARKETING & EXPORTS

Institutional relations

Labor law

Legislation & taxes

International agreements

IP & piracy control

Language training

Technical training

IT-BPO career promotion

Universities

Technical schools

Government incentives

Educational methods

Local governmentrelations

Market intelligence

Opinion makers

Demand generation Public relations

Publications

Events

Media & web

Branding

Infrastructure

Digital TV

Digital inclusion

Brazilian Digital Convergence Index

Innovation

Mobility

Broadband

LARGE COMPANIES IN THE IT-BPO SECTOR, RESEARCH

CENTERS, UNIVERSITIES AND INSTITUTIONAL PARTNERS

WORK TOGETHER TO PROJECT THE EXCELLENCE OF THIS

INDUSTRY IN BRAZIL AND WORLDWIDE Juscelino Kubitschek Bridge, Brasília

brasscom’s agenda 13

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DIGITAL CONVERGENCE

Brasscom provides a guide to the IT-BPO industry regarding the challenges in

infrastructure, digital convergence, and innovation.

Digital convergence is at the core of the profound transformation the IT-BPO sector

is undergoing globally. The fast adoption of new technologies, combined with the

continuous growth in the number of users, is changing the way in which consumers

interact with companies. This rapidly changing landscape demands a constant review of

the technologies and business models being used, and Brasscom coordinates a range of

programs in this area:

A digital TV work group has been set up within the association to deliberate the

massive business opportunities created by interactivity which will require a large

number of trained professionals to develop applications and other software platforms.

Brasscom prepares and publishes The Brazilian Digital Convergence Index, which

indicates that Brazil has been evolving in this area. The most recent issue of the

index shows dynamic growth in the indicators associated with the technological

platform (hardware, software and IT-BPO services) and convergence (connectivity,

communications, media, and digital access to services and products).

In partnership with consultancy Booz & Company, Brasscom has provided a wide

range of recommendations for the Brazilian government to strengthen the IT-BPO

industry and stimulate the national economy. The program is based on a balance

between the five pillars of cost, coverage, awareness, training, and regulation. The

plan is to attract investments of around US$ 407 million in wireless broadband,

generating 15,000 jobs to build this infrastructure, adding one million new

broadband access points in Brazil, selling five million new computers, creating

50,000 formal jobs and adding US$ 35 million in investments in Lan Houses

(Internet access for fee locations similar to Internet cafes).

BRASSCOM PROGRAM FOR IT-BPO INFRASTRUCTURE

Agenda Impact

SPILLOVER EFFECT IN OTHER ECONOMIC

SECTORS

UP TO 5 MILLION NEW PCS – GREATER PENETRATION

CREATION OF AT LEAST 15,000 JOBS

US$ 407 MILLION INVESTED IN WIRELESS BROADBAND

US$ 35 MILLION INVESTED IN LAN HOUSES

OVER 1 MILLION NEW BROADBAND ACCESS POINTS

FORMALIZATION OF UP TO 50,000 JOBS

BROADBAND 1.0

COMPUTER FOR EVERYONE 2.0

LAN HOUSES 3.0

TRAINING FOR SMES

ACCELERATE KEY REGULATORY PROCESSES

LAW N. 11,774 (EMPLOYMENT COST)

IT-BPO IN THE GOVERNMENT

REGULATORY FRAMEWORK

Brasscom aims to establish a competitive, fair, and ethical environment for the IT-

BPO sector. It works together with other associations, unions, and governmental

institutions to propose bills of law that will benefit the sector, and to get these

bills passed into law.

Law number 11,774, of September 17, 2008 reduced social security contributions on

company payrolls by 50% (from 20% to 10%).

Law number 11,908, of March 3, 2009 allows information technology and

communications companies to make tax deductions of 200% of the amount they spend

on training their employees working in software development, when the ‘actual profit’ tax

calculation system is employed.

Brasscom is monitoring the bill of law that deals with outsourcing services. It is also

working to improve the legal framework for intellectual property, digital convergence,

data security and privacy, and tackling software piracy.

The association is working on a standard to be used when IT-BPO professionals are hired,

based on current legislative principles (Consolidation of Labor Laws), allowing self-

regulation of work on the IT-BPO market.

EDUCATION AND hUMAN RESOURCES

Brasscom works actively with governments, universities, training centers,

institutions and companies to influence, create, manage and take part in technical

and language training programs in line with company needs.

A study amongst Brasscom members appraised the demand for IT-BPO professionals in

relation to geographical location, technical, and language needs. Based on these results,

a package of local, regional and federal programs is being offered, including the Sector

Qualification Plan – Information Technology (Planseq – IT), Forsoft and Pós-Técnico,

designed to train programmers and developers, and Englisoft, training people in English.

Brasscom takes part in several institutional forums designed to raise awareness at

various governmental levels of the need to adapt school curricula and to awaken an

interest in the IT-BPO area. This aligns training and education more closely with the

market. In addition, funding is sought to fill the existing gaps in this area.

A COMPETITIVE, FAIr AND ETHICAL

ENVIrONMENT FOr THE IT-BPO

INDUSTrY

Broadcast tower and TV antennas,Resende, Rio de Janeiro

14 brazil it-bpo book 2008-2009 brasscom’s agenda 15

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THE TArGET: US$ 3.5 BILLION

BY 2010 IN EXPOrTS

ABOUT APEX-BRASIL

The Brazilian Trade and Investment Promotion

Agency’s (Apex-Brasil) mission comprehends

a series of endeavors which include the

promotion of exports of Brazilian products and

services to foreign countries, the development

of the internationalization of Brazilian

companies and undertakings focused on

attracting foreign investment into the country.

The Agency seeks to increase the number of

Brazilian exporting companies and to add

value to the list of Brazilian exported products.

On the other hand, the Agency also strives

to consolidate the country’s presence in

traditional markets and to open new markets

for the Brazilian products.

At the moment, Apex-Brasil gives support to over 70 sectors of the Brazilian economy, ranging from agribusiness

to machines, technology, architecture and civil construction, entertainment and services to fashion and industrial

equipment. The Agency develops and builds the image of these productive sectors by means of solid marketing

activities and publicity campaigns directed to entrepreneurs and consumers of highly potential purchasing power. Every

year, Apex-Brasil provides assistance to Brazilian companies’ participation in more than 600 events – both in Brazil

and abroad.

To achieve these objectives, Apex-Brasil offers products and services in the following areas:

Information

Export training

Commercial promotion

Apex-Brasil has stepped up action to attract direct foreign investment in Brazil, seeking to identify opportunities,

holding strategic events and supporting investors throughout the process in Brazil.

Positioning and image

Backing for international expansion

INTERNATIONALIZATION, EXPORTS AND INVESTMENTS’ ATTRACTION

Brasscom positions and promotes Brazil’s potential in IT-BPO on both the domestic

and international markets, focusing on increasing Brazil’s export volumes and

building investment in the sector.

In January 2009, Brasscom, together with Brazilian Trade and Investment Promotion

Agency (Apex-Brasil), launched a joint initiative to boost IT-BPO exports to US$ 3.5

billion by 2010. The agreement concentrates on the implementation of a comprehensive

international program, with actions for promoting the sector internationally, fostering

business, and improving relationships with key influencers and decision-makers.

Over the next two years several projects will be rolled out involving ministries, funding

agencies, sector associations, chambers of commerce and international business

promotion agencies. The scope of these projects include the promotion of the sector

in Brazil and internationally, participation in strategic international events, and the

organization in Brazil of conferences and visits by analysts, journalists, and specialists

in the area.

The association maintains a close relationship with the main international organizations

and key stakeholders from the global IT-BPO industry, offering the best and most

accurate information about the Brazilian market.

INSTITUTIONAL

Brasscom represents the IT-BPO sector in Brazil and internationally.

Brasscom is a member of the Economic and Social Development Council, linked to the

Presidency of the Republic, and also of the Private Sector’s Consulting Council (Conex),

linked to the Ministry for Development, Industry and Foreign Trade, at which it discusses

proposals to promote economic and social development and to improve foreign trade

policies. It also participates in national forums on competitiveness.

The association operates as a hub connecting the Brazilian IT-BPO sector to potential

markets, and promoting Brazil’s competitive advantages. Brasscom has been acting as a

facilitator for potential partnerships, mergers and acquisitions, joint ventures, alliances

and other joint efforts between Brazilian and international companies.

Apex-Brasil headquarters, Brasília

16 brazil it-bpo book 2008-2009 brasscom’s agenda 17

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the brazilian it-Bpo sector

In 2008 the sector turned over US$ 59.1 billion, including exports and IT-BPO areas that are

part of the structure of Brazilian companies in every economic sector. If the communications

sector is included, which forms the ICT complex, turnover exceeded US$ 139.1 billion.

The country’s IT-BPO sector is 45 years old, has grown in step with Brazil’s economy and has

developed sophisticated solutions for companies in several business segments. Some of these

companies compete on the global market and are amongst the leaders in their fields. Examples

of such companies include Ambev (part of AB Inbev, the world’s second-largest beverage

company, after Coca-Cola), BrasilFoods (the largest chicken processor in the world), Petrobras

(the world’s 12th largest oil company), Embraer (the world’s third-largest commercial jet

manufacturer), Vale (the world’s largest producer and exporter of iron ore), CSN (the world’s

fifth-largest steel maker), Gerdau (the largest producer of long steel in the Americas), and

Aracruz (a global leader in the production of eucalyptus pulp). Brazil’s financial system is also

relevant in this scenario, and is considered by both the World Bank and the Gartner Group,

one of the most advanced in the world, with all the institutions connected to a fully developed

national network.

Hardware still has the largest market share in the IT-BPO sector, mainly servers, storage

devices, peripherals (printers, portable devices), and network equipment, followed by services

(including planning, development, support and systems and process management), BPO

and software.

SUPPORTED BY CONTINUOUS AND

RAPID GROWTH IN RECENT YEARS,

BRAZIL’S IT-BPO INDUSTRY IS

READY TO PLAY A LEADING ROLE

ON THE GLOBAL MARKET

BrAZIL HAS THE EIGHTH LArGEST DOMESTIC IT-BPO MArKET IN THE WOrLD

the brazilian it-bpo sector 21

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According to A.T.Kearney, the sector currently employs around 1.7 million people, including

programmers, systems analysts and managers, having grown by around 6.5% a year on

average since 2005 as a result of the constant expansion of the sector. Specialized schools

throughout Brazil produce around 77,000 new professionals for the market every year. Brazil is

recognized for its intensive use of global standard platforms, architectures and methodologies

– including Java, Unix, Linux, Cobol, Natural, .Net, C++, Oracle, SAP, Totvs, Siebel, PeopleSoft,

SOA, EAI, CMMi, ISO, and ITIL, amongst others.

Strong in vertical segments, such as financial services, manufacturing, communications, oil &

gas, retail and government, the Brazilian market is completely open, with both Brazilian and

international companies competing on it.

The Brazilian IT-BPO sector combines technological expertise with an extensive knowledge of

business processes for specific sectors. It currently provides mature solutions for agribusiness,

the aerospace and automotive industries, health services, e-commerce, insurance, banking,

and fiscal and tax operations, amongst others.

IT SPENDING, 2008USD Billion

HARDWARESOFTWARESERVICES

IT-BPO AND COMMUNICATIONS IN BRAZIL, 2008USD Billion

1. IT SPENDING2. BPO3. EXPORTS4. HARDWARE FOR

COMMUNICATIONS5. TELECOM SERVICES

6. IT IN HOUSE7. TOTAL

Source: Brasscom, IDC.

2

4

3 7

139.

1

5

11

6

69

4

2.2

1

29.4

23.5

16.2

10

3.2

7% of Brazil’s GDP

A survey carried out by the Center for Applied Information Technology at Eaesp-FGV at the beginning of 2009 has shown that there are 60 million computers being used in Brazil, in both the business and residential segments. In 2008 12.2 million units were sold – over 30,000 a day – up 16% on 2007, when for the first time computer sales surpassed those of television sets. Today the country has one computer for every three inhabitants and the forecast is that by 2012 this number will have increased to one computer for every two inhabitants. The survey also stated that Brazilian companies spend and invest and average of 6% of their net revenue on IT, an amount that has doubled in twelve years.

SPENDING ONIT-BPO, ADDED TO EXPOrTS AND THE COMMUNICATIONS

SECTOr, ACCOUNTS FOr 7% OF BrAZIL’S GDP

22 brazil it-bpo book 2008-2009 the brazilian it-bpo sector 23

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brazil goes global Brazil’s IT-BPO export market turned over US$ 2.2 billion in 2008 – including IT-BPO services,

captive centers and software.

Revenue comes mainly from IT services, and most (73%) is related to development, which is

a higher proportion than in other countries. According to the IDC, the biggest growth is in the

integration and consulting areas, as in the rest of the world, but development will continue to

dominate for a long time.

In the BPO segment demand is concentrated in call centers, which account for 40% of business

activity. These usually involve multinational company branches working for the head offices

(“captive centers”). Operations focusing on the market outside Brazil are mainly help-desks,

B2B, and B2C call centers.THE BRAZILIAN IT-BPO

INDUSTRY REAChES ITS

MATURITY WITH A RECORD

OF EXPORTS AND IS READY

TO MEET EVEN MORE

AMBITIOUS GOALS

HEADED BY IT SErVICES, BrAZIL’S EXPOrTS GO FOWArD SHOWING DYNAMISM AND VErSATILITY

1. IT SERVICES & BPO2. SOFTWARE LICENSES & RELATED SERVICES3. TOTAL

BRAZIL’S OFFSHORE SERVICES MARKET, 2008USD Million

1

3

2 187

Source: Brasscom, IDC.

2013

2200

BRAZIL’S IT-BPO OFFSHORE REVENUES, BY SERVICES, 2008

Source: Brasscom, IDC.

CUSTOM APPLICATION DEVELOPMENT

BPOINFRASTRUCTURE SERVICES

IT CONSULTING

73%

4%7%

16%

brazil goes global 25

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The main demand for IT-BPO services comes from the manufacturing sector, which may be

explained by the fact that the country is especially strong in ERP – followed by the finance

sector. Combined they account for 46% of this market. The main services include application

management, testing, and infrastructure, amongst others.

US companies are the main clients, accounting for over 80% of demand, followed by Latin

America (especially Argentina, Chile, Colombia and Mexico), and Europe (especially Germany,

Spain, France, England and Portugal).

The Brazilian market is very diversified, and offers services in several formats. COBOL

dominates, for two main reasons: the presence of heavyweight companies using this

language, and a significant financial sector. The country also stands out in Java applications

– it has one of the three largest contingents of Java programmers in the world, and is a

reference point in this technology. Its consolidated history in ERP has also attracted some

global projects to the country.

Brazil’s strategic position and its positive business environment have driven the development

of shared service centers and IT-BPO regional centers to serve Latin America.

CAPTIVE CENTERS

Captive centers are development centers created by companies to serve the IT BPO

demands of their head offices. They are becoming more common in Brazil as the result

of a combination of factors:

A significant presence of multinational companies

Consolidation of IT-BPO operations in Latin America

Total cost competitiveness

Increased presence on the local market

Global sourcing strategies increasing demand for Latin America

Favorable geographical location

Government incentives

JOHNSON & JOHNSON: MULTIPLYING EXCELLENCE

Johnson & Johnson has important operations in Brazil, in all three

of its business segments – Consumer, Medical and Pharmaceutical.

This was one of the reasons it set up a global service center in

São José dos Campos, São Paulo, with a small initial investment

that leveraged the existing structure of its industrial unit.

The innovative and creative capacity of the people involved in

development also had an influence on the decision. “In four years we

went from 10 to over 400 professionals, including direct employees

and outsourced workers,” says Argemiro Leite, J&J’s IT director.

The time zone benefits Brazil, especially in serving the USA and

Canada, which account for practically 90% of the services provided.

English is the official language at the center, but the use of Spanish

is increasing, in step with the development of the Latin American

market. “We have an English service desk, 24 hours a day, 7

days a week,” says Leite. The development and management

of internet portals and websites are among the projects carried

out by the center. There are hundreds of them, including the

institutional portal.

Johnson & Johnson has 250 companies in 57 countries, with a

complex IT structure. The Brazilian global service center was the

first to obtain the international certification CMMi 2, certifying the

excellence of its processes. “Information technology is not our core

business, but we still believe that we need to match the level of

quality expected of companies in this sector,” Leite explains, adding

that rigor is in part of Johnson & Johnson’s DNA. The Brazilian

team’s focus on results is also praised: “Our professionals are

trained to solve problems quickly, as the sector requires continuous

improvement”. Leite offers an example of a Brazilian solution that

combined innovation and proactivity. “We developed a quantifying

application, based on precise parameters, to effectively measure

the cost of each IT project carried out at Johnson & Johnson. The

tool became a global standard.”

“WE HAVE INTEGRATED A NETWORK THAT OFFERS GLOBAL SOLUTIONS, SUPPORTING INTERNAL IT STRUCTURES”

BRAZIL’S IT-BPO OFFSHORESERVICES MARKET, BY

IMPORTING REGION, 2008

Source: Brasscom, IDC.

USA 80.5%

LATIN AMERICA 8.5%EUROPE 7.8%

CANADA 1.2%

JAPAN 0.7%

OTHERS ASIA/PACIFIC 0.8%

MIDDLE EAST 0.5%

Source: Brasscom, IDC.

BRAZIL’S IT-BPO OFFSHORESERVICES MARKET,BY INDUSTRY, 2008

24%

15%

18%

22%

9%

9%

3%

MANUFACTURING

SERVICES

OTHERS

OIL & GAS

TELECOM

IT

FINANCE

Johnson & Johnson industrial unit, São José dos Campos, São Paulo

26 brazil it-bpo book 2008-2009 brazil goes global 27

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CITI: A BANK OF SOLUTIONS

Synergy with teams from North America and Europe, a small time

difference, an attractive alternative for the needs to decentralized

operations, a talent pool with expertise in banking technology,

and competitive costs – these are, in short, the main advantages

recognized by Citi that justified the set up of a global delivery center

(GDC) in São Paulo. “We support the bank’s critical applications,

especially those for institutional clients,” explains José Carlos

Labate, head of Citi’s GDC, which was set up five years ago.

Brazil benefits from flexibility, readiness, and maturity. Labate

says that technical knowledge in Brazil normally goes hand in

hand with practical experience, as many professionals work while

attending training courses. “In other countries, people wait

until the course is over to finally start working. Our dynamics

benefit project development.” Low personnel turnover, at around

3%, also makes teams stronger and improve productivity.

Transition – the Achilles’ heel for internationalization projects – has

been identified as one of the main successes for Citi’s GDC. “All our

transitions, with the transfer of knowledge and activities, were

a success. They followed a plan, stuck to the parameters set by

head office and had no impact on the continuity or the quality of

services, which is crucial for a banking institution,” says Labate.

Brazil has been gaining in strategic relevance. “We also work on

segmented projects, carried out simultaneously in India and Europe,

delivering high level solutions. We need to speed up the process

to become even more competitive, which may be achieved with

government incentives for premises, training personnel, and reducing

payroll taxes. This is a very dynamic market,” Labate concludes.

FLEXIBILITY, PROMPTNESS, AND MATURITY ARE KEY FACTORS IN FAVOR OF BRAZIL

RANKING OF IT-BPO EXPORTERSIN BRAZIL, 2008Total revenue

IBM1º

ACCENTURE2º

EDS3º

BT4º

STEFANINI5º

CPM BRAXIS6º

BRQ7º

DTS8º

SONDA PROCWORK9º

TATA CONSULTANCY SERVICES10º

GRUPO ASSA11º

CI&T12º

TIVIT13º

SATYAM14º

DELOITTE15º

T-SYSTEMS16º

GFT17º

BEARINGPOINT18º

ATOS ORIGIN19º

RESOURCE20º

POLITEC21º

UNISYS22º

SOFTTEK23º

OGEDA24º

IBM1º

EXXON MOBIL2º

MOTOROLA3º

DELL4º

JOHNSON & JOHNSON5º

HSBC6º

EDS7º

CITI8º

GM9º

BASF10º

SHELL11º

ROCHE12º

JP MORGAN CHASE13º

AMBEV14º

FORD15º

GOOGLE16º

RHODIA17º

AVAYA18º

DUPONT19º

BOSCH20º

CATERPILLAR21º

PHILIPS22º

RANKING OF CAPTIVE CENTERS, 2008Total revenue

Source: Brasscom, IDC.

In 2008, IDC carried out a survey of IT-BPO service exports amongst Brazil-based companies,

ranking them in terms of total revenue. The Brazilian offshore market can be split into three main

blocks – large multinational companies, with a long-standing and significant presence in the

country; Brazilian companies with a mature international status; and new players, both domestic

and international. Some companies position themselves as full-service providers, and others as

niche players, specialized in a certain business process, vertical operation, or technology.

Citi headquarters, Paulista Avenue,City of São Paulo

28 brazil it-bpo book 2008-2009 brazil goes global 29

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brazil’s VALUE PrOPOSITION

INDUSTrY AND BUSINESS KNOWLEDGE

QUALIFIED HUMAN rESOUrCES

SOUND INFrASTrUCTUrE

GOVErNMENTAL SUPPOrT

FAVOrABLE ECONOMIC, POLITICAL AND LEGAL ENVIrONMENT

CULTUrAL COMPATIBILITY

TIME ZONE PrOXIMITY

1

2

3

4

5

6

7

City of São Paulo

hERE ARE SEVEN STRATEGIC REASONS FOR

ChOOSING BRAZIL FOR CONSISTENT INVESTMENT

IN THE IT-BPO SECTOR – A UNIQUE COMBINATION

OF FACTORS THAT MAKE THE COUNTRY ONE OF THE

MOST COMPETITIVE IN COST EFFICIENCY

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Information technology plays a major role in all productive sectors in Brazil, and there is an

increasing awareness of its essential role in achieving real economic gains for the economy. This

explains why the country can put itself forward as a global strategic player in the IT-BPO industry.

Brazilian companies in the sector have created a very strong industry over the years (as we

have seen in the previous chapters). They have accumulated knowledge through decades

of experience, they have innovated to achieve excellent results in various business and

governmental areas, and they have grown in step with increased domestic demand.

FINANCIAL SEGMENT STANDS OUT

The financial area is one of the best examples of this strength. Having faced through the

difficult years of hyper-inflation and constant rule-changes in the 1970s and 1980s, Brazilian

professionals have developed an unmatched agility and innovative capacity. The Brazilian

Payment System (SPB) is amongst the most sophisticated, efficient and reliable in the world –

Brazil is one of the few countries in which inter-banking fund transfers can be made electronically

in real time. The country provides technological solutions that are benchmarks in banking

automation, internet banking, operations via mobile phone, ATMs, serving Brazilian giants

such as Itaú/Unibanco, Bradesco, Banco do Brasil and Caixa Econômica Federal, as well as

international banks, such as ABN/Amro/Real,

Santander, HSBC and Citi – leaders amongst

more than 100 banks in operation.

The most recent far-reaching project

involving banking operations is being

launched in 2009: authorized direct debit

(DDA), a system that will allow all payments

to be received electronically by the banks

that serve individuals and corporations. To

illustrate the impact of this change, monthly

school bills, purchases, mortgages and car

loans, amongst others, leave a paper trail

of around 2 billion printed banking slips per

year. Besides saving paper and postage,

DDA will offer benefits in terms of speed

and security. The implementation of the

system once again confirms Brazil’s position

as a pioneer and a global reference point in

business-related technology solutions for the

financial services sector.

Brazil’s Stock Market and Commodities

Exchange (BM&F Bovespa) is a leader in

Latin American equity and derivatives, and an

international financial center trading shares,

commodities and other financial instruments.

BM&F Bovespa is recognized for its IT-

supported operational excellence.

Brazil has a sound and dynamic payment

system. Electronic payments have been made

in the country for over 50 years, supported by

innovative IT companies. In 2008, according

to the Brazilian Credit Card and Services

Association (Abecs), there were 514 million

cards on the market, including credit, debit,

and private label cards. That year around 5.3

billion transactions were performed, 20%

more than in the previous year.

The companies that make up the financial

system, such as banks, private pension,

insurance, finance and brokerage firms,

account for around 20% of the total

spent on IT in Brazil, according to IDC.

In 2008 the segment was responsible for

42.8% of the total investment in servers

(including mainframes) and 29.3% of the

investment in data storage.

EXPERIENCE AND CAPACITY TO INNOVATE SET BRAZIL APART

INDUSTrY AND BUSINESS KNOWLEDGE

1

Salvador, Bahia

32 brazil it-bpo book 2008-2009

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MANUFACTURING, RETAIL AND SERVICES

The manufacturing segment accounts for the greatest volume of IT investments in

Brazil due in part to its competitiveness. Companies, especially in the chemical,

base metal and pharmaceutical sectors, are intense users of integrated Enterprise

Resource Planning (ERP), Business Intelligence (BI), Supply Chain Management

(SCM) and Research and Development (R&D) systems. It is not unusual for

organizations to be challenged by the need for new product or process innovations,

enabled by technological solutions developed in short timeframes.

The Brazilian retail sector, with its large companies, poses similarly large challenges

for IT-BPO companies and professionals. Giants such as Pão de Açúcar and B2W (which

includes Americanas and Submarino) invest massively in technology in order to expand

their businesses, especially in Customer Relationship Management (CRM), e-commerce

and, more recently, radio-frequency identification (RFID), a system that helps monitor

the transport of goods carrying intelligent labels from the pallets in the plants to their

arrival in the supermarkets.

ELECTRONIC GOVERNMENT

Information technology-based public services are on the rise in Brazil. Best practices are being

promoted throughout the most diverse areas – health, education, public safety, and finance,

amongst others – and in the three spheres of the government – federal, state and municipal.

Communications with society are increasingly done via computers. A law approved in May

2009, for example, requires that government agencies report all their revenue and spending

on the internet, consolidating a practice that had already been in use by some agencies.

Some Brazilian e-government case studies are internationally recognized successes. Electronic

voting was used for the first time in the municipal elections of 1996. In the most recent

municipal elections, held in 2008, in which mayors and city councilors were elected, electronic

ballot boxes were available to the entire electorate. The numbers involved are impressive

and show how complex the operation was in terms of information technology: 5,563 cities,

371,874 electoral sections, and over 110 million voters. Almost all the votes were counted

before midnight on the same day of the election.

Another example that adds to Brazil’s credibility is its tax return system, which is almost

exclusively internet-based.

It is also worth to highlight the Brazilian Federal Government’s Electronic Procurement System

(ComprasNet), considered by the Inter-American Development Bank (IADB) to be a reference

point in the procurement of goods and standard services for the public administration,

providing an intuitive and secure application.

BrAZIL EXPANDS BEST PrACTICES

IN E-GOV AND STANDS APArT

ON THE GLOBAL SCENArIO

34 brazil it-bpo book 2008-2009

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The great scale and the quality of labor currently available in the country, as well as the ability

to prepare an increasing number of professionals to meet the market demands in an effective

manner, set Brazil apart.

In step with its economic growth, Brazil has invested over the last two decades in the

universalization of its education. Amongst 7 to 14 year-olds, 97.6% – around 27 million

young people – are in school, attending 9 years of primary education. Secondary school’s

duration is 3 years, with 9.4 million students. Professional education, including technical

schools (4 years), short-term technical courses, and professional training courses, take in

6 million people. According to the last Post-Secondary Education Census, in 2007 over 1.5

million people entered post-secondary education, in 2,281 institutions.

The challenge of meeting the labor needs of the IT-BPO market, which has been growing

at an annual average rate of 6.5% over the last four years, is shared by public and private

institutions throughout the country. A Ministry of Education survey carried out in 2007

revealed that there are 1,714 courses, from technical to university courses, directly linked to

information technology in Brazil. Over 220,000 people are estimated to be currently being

prepared to enter the market. This estimate includes courses in mathematics, physics and

some engineering areas, as it is not uncommon in Brazil for professionals from those courses to get into the IT-BPO area. There is an ongoing

plan to double the current number of vacancies offered by the federal technical and technological area to 500,000 places by 2010.

A qualification in information technology will be a priority in this initiative.

QUALIFICATION IN ENGLISH IS ALSO A PRIORITY

Foreign language skills must also be included in the qualification of IT-BPO professionals, especially when the focus is on the external market.

In Brazil, English is a mandatory language course on the school curricula in primary, secondary, and post-secondary schools.

Latin

Am

eric

a(s

elec

ted

coun

tries

)

% total populationENGLISH SPEAKERS, 2007 Million

BRAZIL 5.4%10.2

COLOMBIA 15.7%7.4

CHILE 34.7%5.9

MEXICO 4.5%4.9

ARGENTINA 9.8%3.8Ot

hers

BRI

Cs

INDIA 8.2%90.6

RUSSIA 4.8%6.8

CHINA 0.8%10.0

Source: A.T. Kearney.

PEOPLE AND KNOWLEDGE: ThESE ARE ThE DRIVERS IN ThE IT-BPO SEGMENT IN BRAZIL

QUALIFIED HUMAN rESOUrCES

2

Paulista Avenue, City of São Paulo

36 brazil it-bpo book 2008-2009

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RANKING OF DEGREE COURSES IN INFORMATION TECHNOLOGY, 2007

1 Unicamp-Universidade Estadual de Campinas Computer Engineering

2 Unicamp-Universidade Estadual de Campinas Computer Sciences

3 UFRGS-Universidade Federal do Rio Grande do Sul Computer Engineering

4 UFRGS-Universidade Federal do Rio Grande do Sul Computer Sciences

5 ITA-Instituto Tecnológico de Aeronáutica Computer Engineering

6 Unicamp/Limeira-Universidade Estadual de Campinas Technology in Information Technology

7 PUC-RJ-Pontifícia Universidade Católica do Rio de Janeiro Computer Engineering

8 ICMC-USP/São Carlos-Instituto de Ciências Computer Sciences Matemáticas e de Computação da USP

9 Poli-USP-Escola Politécnica da Universidade de São Paulo Computer Engineering

10 UFMG-Universidade Federal de Minas Gerais Computer Sciences

11 PUC-RJ-Pontifícia Universidade Católica do Rio de Janeiro Information Systems

12 Poli-USP-Escola Politécnica da Universidade de São Paulo Engineering, emphasis in Computing

13 UFRJ-Universidade Federal do Rio de Janeiro Computer Sciences

14 ICMC-USP/São Carlos-Instituto de Ciências Information Technology Matemáticas e de Computação da USP

15 IME-USP-Instituto de Matemática e Estatística da USP Computer Sciences

16 UFPE-Universidade Federal de Pernambuco Computer Sciences

17 UFSCar-Universidade Federal de São Carlos Computer Engineering

18 UFPE-Universidade Federal de Pernambuco Computer Engineering

19 UFSCar-Universidade Federal de São Carlos Computer Sciences

20 UFMG-Universidade Federal de Minas Gerais Information Systems

21 PUC-RS-Pontifícia Universidade Católica do Rio Grande do Sul Information Systems

22 UFSC-Universidade Federal de Santa Catarina Computer Sciences

23 Unisinos-Universidade do Vale do Rio dos Sinos Computer Sciences

24 Unisinos-Universidade do Vale do Rio dos Sinos Information Systems

25 PUC-RS-Pontifícia Universidade Católica do Rio Grande do Sul Computer Sciences

26 Fiap-Faculdade de Informática e Administração Paulista Information Systems

27 Unesp/Bauru-Universidade Estadual Paulista Júlio de Mesquita Filho Computer Sciences

28 Unesp/Bauru-Universidade Estadual Paulista Júlio de Mesquita Filho Information Systems

29 UFF-Universidade Federal Fluminense Computer Sciences

30 Unesp/Rio Claro-Universidade Estadual Paulista Júlio de Mesquita Filho Computer Sciences

31 Unesp/S.J. Rio Preto-Universidade Estadual Paulista Júlio de Mesquita Filho Computer Sciences

32 PUC-SP-Pontifícia Universidade Católica de São Paulo Computer Sciences

33 PUC-Campinas-Pontifícia Universidade Católica de Campinas Electrical Engineering, major in Telecommunications

34 UCB-Universidade Católica de Brasília Computer Sciences

35 PUC-PR-Pontifícia Universidade Católica do Paraná Computer Engineering

36 UFCG-Universidade Federal de Campina Grande Computer Sciences

37 UEL-Universidade Estadual de Londrina Computer Sciences

38 UFRN-Universidade Federal do Rio Grande do Norte Computer Sciences

39 UEM-Universidade Estadual de Maringá Information Technology

40 PUC-MG/Poços de Caldas-Pontifícia Universidade Católica de Minas Gerais Information Systems

Source: Info Exame.

Many students also attend supplementary courses in English as a second language (ESL),

which are widely available throughout the country. Out of the largest developing economies,

Brazil has the second-highest number of English speakers (10.2 million), behind only India.

Spanish and French are also widely taught in Brazil, especially in private, independent courses.

The immigrant community also provides professionals fluent in Italian, German, Japanese and

Arabic, amongst other languages.

The development of language skills is a priority as Brazil moves forward with its internationalization

process. To this end, Brasscom has been working hard in close partnership with the government and

private businesses to implement programs over the short, medium, and long term.

BRAZILIAN WORKERS ARE RECOGNIZED

FOR THEIR COMMITMENT AND FLEXIBILITY

According to IDC, Brazil has one of the largest communities of COBOL and Java programmers

in the world. It also certifies a large number of professionals every year in Unix, Linux, Natural,

.Net, C++, as well as other programming languages.

Based on interviews with executives in the sector, IDC has concluded that Brazilian workers

are recognized for the quality of their work and their commitment. They are considered to

be flexible, not afraid to face challenges, and they are also not afraid to draw attention to

problems that arise in projects. This can be explained by their curiosity and more holistic view

of the process. They are also considered innovative and creative.

Turnover in Brazilian teams is around 4% on average, and is even lower in global projects.

For the clients, especially offshore outsourced services, this has a significant impact on

productivity, quality, training and transition costs and, consequently, on the total cost of the

project. Stable teams maintain their knowledge of the business processes and systems, which

is usually transferred in the initial phases of the project.

85MEXICO

QUALITY OF ENGLISH AS A SECOND LANGUAGE, 2007 Score (out of 120) – IBT*

* Internet based TOEFL. Source: A.T. Kearney analysis.

Latin

Am

eric

a(s

elec

ted

coun

tries

)Ot

hers

BRI

Cs

84INDIA

84RUSSIA

78CHINA

88CHILE

80COLOMBIA

86BRAZIL

94ARGENTINA

38 brazil it-bpo book 2008-2009 qualified human resources 39

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RIO GRANDE DO NORTE

PARAÍBA

PERNAMBUCO

DISTRITO FEDERAL

MINAS GERAIS

RIO DE JANEIRO

SÃO PAULO

PARANÁ

SANTA CATARINA

RIO GRANDE DO SUL

DistribUtion of selecteD

technology coUrses

The 50 graduate and post-graduate courses

identified in the ranking by Info Exame are in

nine of Brazil’s States and the Federal District.

INFO EXAME SURVEY

The following criteria were included to rank degree courses: academic reputation; integration

with the labor market; number of staff with doctorates; number of exclusively dedicated staff;

infrastructure for research; percentage of students graduated in the minimum period and

candidate/vacancy ratio in the College entrance exam. For post-graduate courses, the criteria

included academic reputation; Capes assessment; number of articles published; integration

in the labor market; number of staff with doctorates; number of PhDs awarded, number of

Masters Degrees awarded, and infrastructure for research. The last criterion is assessed by

connectivity, computer ratios, high technology research, and integration with the market.

RANKING OF THE POST-GRADUATE COURSES IN INFORMATION TECHNOLOGY, 2007

1 Coppe UFRJ-Instituto Alberto Luiz Coimbra Computing and Systems Engineering de Pós-Graduação e Pesquisa em Engenharia

2 UFPE-Universidade Federal de Pernambuco Computer Sciences

3 ICMC-USP/São Carlos-Instituto de Ciências Matemáticas Computer Sciences and Computing Mathematics e de Computação da USP

4 UFMG-Universidade Federal de Minas Gerais Computer Sciences

5 PUC-RJ-Pontifícia Universidade Católica do Rio de Janeiro Information Technology

6 Unicamp-Universidade Estadual de Campinas Computer Sciences

7 Poli-USP-Escola Politécnica da USP Electrical Engineering-Digital Systems

8 IME-USP-Instituto de Matemática e Estatística da USP Computer Sciences

9 UFF-Universidade Federal Fluminense Computing

10 ITA-Instituto Tecnológico de Aeronáutica Electrical Engineering and Computing

Source: Info Exame.

40 brazil it-bpo book 2008-2009

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BRAZIL’S INFRASTRUCTURE RESPONDS WELL TO ThE ChALLENGES OF GROWTH IN THE SECTOR AND WILL EXPAND

As with any economic sector, the development of the IT-BPO industry depends on a robust

infrastructure. Brazil offers a world-class infrastructure and a strongly globalized market,

especially in the IT-BPO sector, with a mature regulatory environment and business practices.

Brazil’s basic infrastructure is currently undergoing wide-ranging expansion through the

Program for Accelerated Growth (PAC), launched in 2007 by the federal government. Within

the scope of this program, the public and private sectors intend to invest around US$ 273

billion in energy, logistics, social, and urban infrastructure.

COMMUNICATIONS

Communications services have spread throughout Brazil and continue to develop rapidly.

Gartner states that Brazil ’s infrastructure can support the expected double-digit annual

growth in IT-BPO services.

High quality and 100% digital fiber optic networks connect all large cities internally and also to

hubs outside the country, providing high-speed internet connections. Internet access doubled

from 2005 to 2008 and the broadband sector is expanding rapidly.

Recent data released by the British research institute Point Topic shows that Brazil ranks ninth

globally in total broadband connections. Brazil’s mobile telephone market is the fifth largest in the

world, with 150.6 million handsets, and the fixed-line telephony market is the fourth largest.

Brazil ’s IT-BPO infrastructure has an advantage over that in the other BRIC countries,

according to the Economist Intelligence Unit, whose methodology takes into account the

money spent on hardware, software and IT services, as well as the number of computers

and broadband connections.

SOUND INFrASTrUCTUrE

3

150120906030

LINHAS DE TELEFONE CELULAR NO BRASILEM MILHÕES

Fonte: Anatel, Teleco e Barômetro Cisco

2007

2008

2005

2003

2006

2002

2004

150

120

90

60

30

0

150,

6

121

99,9

86,2

65,6

43

1,7

MOBILE PHONE LINES IN BRAZILMillion

Source: Anatel, Teleco e Barômetro Cisco.

2007

2008

2005

2003

2006

2002

2004

0

150.6

121

99.9

86.2

65.6

43

1.7

Source: Point Topic.

BROADBAND CONNECTIONSMillion, march 2009

Ranking

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Country

China

United States

Japan

Germany

France

UK

South Korea

Italy

Brazil

Canada

Mexico

Russia

India

Turkey

Netherlands

Taiwan

Poland

Argentina

Belgium

Sweden

17.6

15.7

12.4

Connections

88.0

83.9

30.6

24.1

18.0

6.0

5.8

4.6

10.0

9.5

8.01

7.9

6.1

3.1

3.0

2.9

4.3

1. BRAZIL2. RUSSIA3. CHINA4. INDIA

IT INFRASTRUCTURE INDEX

Source: EIU (Economist Itelligence Unit) IT industry competitiveness index, 2008.

13.41

2

5.23

1.34

10.6

Norte Fluminense Thermal Power Station, Macaé, Rio de Janeiro

42 brazil it-bpo book 2008-2009

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REAL ESTATE

Large Brazilian cities have experienced expansion of real estate, due to greater demand

fueled by economic growth and greater access to funding. Prices are internationally

competitive and have an advantage over cities in India and Russia. As an example, the

average price of commercial rent in São Paulo, Rio de Janeiro and Brasília is around one third

of the price in Mumbai and Moscow.

In areas close to the technology parks of other Brazilian capitals, such as Porto Alegre, Belo

Horizonte and Recife, the average price of rent can be up to 50% lower. A trend towards

geographical decentralization is helping move IT-BPO centers to these areas, offering scale,

professional qualification, quality, and communications infrastructure comparable to the

large centers.

TRANSPORT

Brazil’s road system covers 1.6 million kilometers and serves the whole country. Brazil also has

a 44,000-kilometer water transport system, which is important in transporting agricultural

production for exports. The country’s rail system is 30,000 kilometers long.

The country has 35 international airports, 33 domestic airports, and 2,498 smaller airports.

Domestic and international airlines offer short-haul direct flights, easily connecting main

Brazilian cities to main cities in North America and Europe.

Air and land transportation are key contributors to the efficiency of the postal service, offering

an express delivery system that covers the whole country and delivers over 32 million letters

and packages every day. All large international dispatch companies, including FedEx, UPS, and

DHL operate in Brazil.

ENERGY

Brazil has a guaranteed, safe, diversified and green supply of energy. The electricity generation

network includes 2,065 stations, including hydroelectric facilities (75% of the sector’s

capacity), thermoelectric, solar, wind and nuclear powered stations. Electricity prices are

established at tender and the market is regulated by the National Electrical Energy Agency

(Aneel). Generation capacity, at 103,502 MW, has grown 42% over the last nine years. The

forecast is that this trend will continue and that by 2013 the amount of energy supplied will

have grown by another 19% on today’s levels. The current infrastructure serves almost the

whole country’s population.

Source: National Energy Report 2009, Ministry of Mines and Energy.

BRAZIL’S ENERGY MATRIX, 2008

PETROLEUM AND DERIVATIVES 37.3%BIOMASS 31.4%

SUGARCANE PRODUCTS 16.6%WOOD 11.4%OTHERS 3.4%

HYDRAULIC AND ELECTRICITY 13.9%NATURAL GAS 10.2%COAL 5.7%URANIUM 1.5%

RENEWABLE RESOURCES

BRAZIL 45.4%

OCDE 6.7%

WORLD 12.9%

rEAL ESTATE PrICES ArE

GLOBALLY COMPETITIVE

sound infrastructure 45

Cumbica Airport, Guarulhos, São Paulo

Sugar and alcohol refinery, Ribeirão Preto, São Paulo

SAFE AND DIVErSIFIED ENErGY DISTINGUISHES BrAZIL

44 brazil it-bpo book 2008-2009

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Brazil produces more oil than it consumes, thus being less susceptible to a fluctuation

in prices. The world’s leader in deep water exploration, the country is preparing for

a leap in production. The recent discoveries of reserves in ultra deep water (7,000

meters) indicate that the Brazil ’s oil and gas reserves will at least double over the next

few years, placing Brazil amongst the five largest exporters. This production growth,

combined with the construction of new refineries, will also make Brazil self-sufficient in

oil-based products, such as gasoline.

Brazil has the most advanced biofuel technology in the world. Its sugar cane-based

ethanol production model is considered by the UN an example to be followed, with the

lowest costs and highest environmental sustainability levels. Annual ethanol production is

the second largest in the world – it should reach 27 billion liters in the 2008/2009 harvest

– trailing only the United States.

46 brazil it-bpo book 2008-2009

BrAZIL IS SELF-SUFFICIENT IN OIL, AND WILL INCrEASE ITS PrODUCTION IN COMING YEArS.

IT ALSO HOLDS CUTTING-EDGE TECHNOLOGY IN THE PrODUCTION OF rENEWABLE ENErGY

Tucuruí Hydroelectric Power Station, Pará

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TECHNOLOGY PARKSBrazil has speeded up the growth and maturity of

technology parks since 2000, and the objective is to

invest in further development and grow. All major

tech parks have an educational center as an active

component. Brazil currently has 30 technology

parks, including units already operating and those

in the final stage of implementation, which form

dynamic networks and connect various

points in the value chain, including IT-

BPO companies, universities, research

institutes, consulting and service firms,

the government, business fostering agencies

and clients. The report details information on 18 of

these technology parks, those that are fully operational

and with the required infrastructure in place for Brazilian

and international companies to operate.

2

9

13

10 são carlos technology clusterICT Companies: 30Revenue: $ 5MMTarget area: ICTUniversities: USP, UFSCar

12 londrina technology ParkICT Companies: 2Revenue: $ 10MMTarget area: chemistry, ICT, electronics Universities: UEL, UNOPAR

13 curitiba technology ParkICT Companies: 28Target area: ICTUniversities: UFPR

8 rio de Janeiro technology ParkICT Companies: 15Revenue : $ 10MM 2008eTarget area : ICT, energyUniversities: UFRJ

9 Vale do Paraíba technology Park – univapICT Companies: 10Revenue: $ 120MMTarget area: ICTUniversities: Univap, ITA

6 uberaba technology ParkICT Companies: 1Revenue: $ 6MMTarget area: biotech, clean energy, ICTUniversities: Uniube

1 Paraíba technology Park – PaqtcPbICT Companies: 70Revenue: $ 16MMTarget area: ICT, design, digital TVUniversities: UFCG

2 Porto digital technology Park – recifeICT Companies: 117Revenue: $ 236MM Target area: ICTUniversities: UFPE

5 itajubá technology ParkICT Companies: 39Revenue: $ 0,75MMTarget area: energy, ICTUniversities: UNIFEI

11 campinas technology clusterICT Companies: 100 +Revenue: $ 1,4 BnTarget area: ICTUniversities: Unicamp

15 iPtec-ijuí technology clusterICT Companies: 8Revenue: $ 2MMTarget area: ICTUniversities: Unijuí

18 Puc-rs technology Park – tecnoPucICT Companies: 25Revenue: $ 210MMTarget area: biotech, clean energy, ICTUniversities: PUC-RS

17 Vale do rio dos sinos technology Park – ValetecICT Companies: 12Revenue: $ 53MMTarget area: ICT, leather goods and shoesUniversities: Feevale

7 Petrópolis tecnopólis technology ParkICT Companies: 70Revenue: $ 137MMTarget area: ICT Colleges: Universidade Católica de Petrópolis

4 brasília technology ParkICT Companies: 5Target area: biotech and ICTUniversities: UnB

16 são leopoldo technology clusterICT Companies: 39Revenue: $ 175MMTarget area: ICTUniversities: Unisinos

14 alfa technology ParkICT Companies: 42Revenue: $ 160MMTarget area: ICTUniversities: UFSC

3 sergiPetec technology ParkICT Companies: 19Revenue: $ 5MMTarget area: energy, ICT, biotechUniversities: UFSE

Notes: ICT: Information and Communication Technology Revenue 2007Source: Anprotec, A.T. Kearney analysis.

87

4

1

3

2

5

6

10

91112

13

14

15 17

1816

48 brazil it-bpo book 2008-2009 sound infrastructure 49

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STRATEGIC FOR ThE GOVERNMENT, ThE SECTOR RECEIVES IMPORTANT INCENTIVES AND SUBSIDIES

Over the last ten years the Brazilian government has viewed the IT-BPO industry as strategic,

which has led to the prioritization of incentives and the creation of institutional support.

These measures have improved the competitiveness of companies, both in domestic and

international markets.

DIRECT INCENTIVES:

TURNOVER TAXES, PAYROLL TAXES, AND INCOME TAXES

Spending on staff training and development, and R&D can be deducted against income tax

at 200% and 160% to 200%, respectively. There is also a 50% deduction on excise tax (IPI)

when purchasing equipment for R&D, and this tax is exempt when software development

materials are imported. Another benefit is the tax deductibility on technology transfers,

licenses and royalties.

For exporting companies, the social security (INSS) contributions may be reduced by up to

50%, depending on the $ amount of exports. They are also exempt from contributing to a

network of employer entities known as the “S System”. When products are purchased to be

exported, social charges (PIS/Cofins taxes) are not applicable.

In downtown São Paulo, as an example, municipal project “Nova Luz” is revitalizing the

region and promoting the creation of a complex of IT-BPO companies. The project offers

several fiscal incentives, such as a 50% reduction on Property Tax (IPTU) and a 60%

reduction in Service Tax (ISS). Companies installed in technological parks, in any region,

do not pay property taxes and receive discounts on service taxes. In the Northern and

Northeastern States of Brazil, the government subsidizes 40% of salaries paid to research-

focused staff. If they work in technology parks, the subsidy increases to 60%. Other benefits,

such as subsidized infrastructure, are offered by municipalities or States that wish to attract

IT-BPO companies.

INVESTMENTS

IT-BPO companies in Brazil can count on several public credit facilities at subsidized rates.

The Brazilian Development Bank (BNDES) is the main public funding agency and Finep, an

agency that finances scientific innovation and technological research and is subordinated to

the Ministry of Science and Technology, offers a special credit line for technology projects. The

main public banks in the country – Banco do Brasil and Caixa Econômica Federal – also offer

credit at special rates and terms.

GOVErNMENTAL SUPPORT

4

Palácio do Planalto (Presidential Complex), Brasília

50 brazil it-bpo book 2008-2009

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The government also stimulates the

establishment of consortiums and joint

ventures in the sector, as well as investments

through funds and venture capital into small

and mid-sized companies, and business

incubators.

QUALITY

The Brazilian government has also

systematically supported, together with

Brasscom and other sector-related entities,

initiatives aimed at qualifying human

resources and increasing certifications and

innovations.0

20

40

60

80

100

PUBLIC FUNDINGUSD Billion

TOTAL PUBLIC FINANCE SOURCES

BNDES

Source: BNDES, The Central Bank of Brazil.20

0712

033

2006

9224

2005

6919

2004

5014

2003

4212

2002

3713

120

FISCAL INCENTIVES

Expenditure deduction on income tax base

R&D

Training

Accelerated depreciation

Tax credit (e.g. payroll expenses as VAT credit)

Reduced property tax

Import duty exemption

Special credit lines for selected industries, with reduced interest

rates and longer maturity

Government agencies programs

Infrastructure

Subsidized real estate and infrastructure

CO-INVESTMENTS INCENTIVES

Source: A.T. Kearney.

Turnover taxes

Payroll taxes

Income taxes

INDIRECT INCENTIVES

FINANCING INCENTIVES FOR PRIVATE INVESTMENTS

DIRECT INCENTIVES

SUBSIDIZED PUBLIC

CrEDIT DrIVES TECHNOLOGY

52 brazil it-bpo book 2008-2009

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Covering 8.5 million square kilometers, almost double the size of the European Union, Brazil

has the fifth-largest population in the world and massive reserves of natural resources (such as

iron ore and oil). With over 300 million hectares of agricultural land in privileged geographical

conditions, its territory is also safe from natural disasters. Factors such as these put the

country in a relevant position on the global market.

Recent economic growth confirms this positive outlook. From 2002 to 2008, real GDP in

US dollars doubled, going from US$ 724 billion to US$ 1.5 trillion, with constant growth

from 2004 onwards. Brazil is today the tenth-largest economy in the world, ahead of Russia

and India, and the largest in Latin America. The country was classified by the United Nations

Development Program (UNDP) as having a high Human Development Index (HDI), ahead of

the other BRIC countries (Russia, India and China).

Brazil is an important player in global markets such as mining, aerospace, energy, agriculture

and cattle farming.

With a population of 191 million people, Brazil’s domestic market is expanding as a result

of economic growth and income distribution policies. Household consumption has grown

vigorously over the last few years, reaching US$ 243 billion in 2008.

A FAVOrABLE ECONOMIC, POLITICAL AND LEGAL ENVIrONMENT

5

This expansion has been influenced by gains in the lowest income bracket. Between 2004

and 2008, according to a survey carried out by Fundação Getúlio Vargas (FGV), the Brazilian

middle class grew from 42.2% to 51.9% of the population, while the low income segment fell

from 46.1% to 32.6%. In this period, high income and middle class brackets accounted for

large sections of the population, totaling around 122 million consumers.

SELECTED DEVELOPING COUNTRIES’ GDP, 2007 USD Billion

BRAZIL 1313

MEXICO 893

ARGENTINA 262

COLOMBIA 172

CHILE 164

RUSSIA 1290

INDIA 1137

CHINA 3242

Notes: 2007 amounts; forecasts made on Oct. 24th 2008.Source: IPEA, The Central Bank of Brazil, Economist Intelligence Unit, World Bank, A.T. Kearney analysis.

Latin

Am

eric

a(s

elec

ted

coun

tries

)Ot

hers

BRI

Cs

ThE TENTh LARGEST ECONOMY IN ThE WORLD, BRAZIL ENJOYS POLITICAL STABILITY AND SOCIAL PROGRESS

BRAZIL’S REAL GDP EVOLUTIONUSD Billion

724

2002

699

2003

775

2004

961

2005

1115

2006

1313

1570

2007

2008

Source: A.T. Kearney, IPEA, The Central Bank of Brazil.

54 brazil it-bpo book 2008-2009

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This positive scenario was recognized by credit rating agencies Standard & Poor’s and

Fitch, which in the first half of 2008 classified Brazil as ‘investment grade’. According to

the analysts, this reflects a continuing trend in its economic policy, focused on inflation

control and in a floating foreign exchange rate system, low external debt and a public debt

profile in line with that of other countries with a similar risk classification.

This progress has attracted foreign direct investments, which more than doubled from

US$ 17 billion in 2005 to US$ 45 billion in 2008, the highest value since the Central Bank

of Brazil began tracking this indicator.

Brazil has commercial partnerships with countries on every continent. China, Europe and

the United States, along with South America and Japan, are among the main commercial

partners and are helping boost Brazilian trade. According to the Ministry of Development,

Industry and Foreign Trade, exports and imports tripled between 2002 and 2008, from

US$ 107,6 billion to US$ 371.1 billion.

30

35

40

45

50

55

JAN

02

JUL

02

JAN

03

JUL

03

JAN

04

JUL

04

JAN

05

JUL

05

JAN

06

JUL

06

JAN

07

JUL

07

JAN

08

JUL

08

JUL

01

JAN

01

JUL

00

JAN

00

NET PUBLIC DEBT In % of GDP

Source: The Central Bank of Brazil.

The democratic system, political stability and consolidated institutions also position Brazil as

one of the safest destinations for investments. With the status of a political leader in Latin

America, and with good relations with neighboring countries, the country has not been

involved in a war since World War II.

Since the 19th century, Brazilian foreign policy has aimed to increase the country’s

international presence, following the principles of commercial collaboration. Brazil currently

has diplomatic representations in 114 countries.

The Brazilian political system is Federative (26 states make up the Federation) and the

presidential mandate is four years, renewable for another four.

Embraer jets assembly line, São José dos Campos, São Paulo

25.3%

10.4%

8.7%12.4%

1.2%

3.8%

7.7%

9.8%10%

INFLATION, 2000 to 2008(IGP-M)

Note: Inflation index calculated from prices of goods and services collected in 12 Brazilian cities up to day 20 of each month.Source: FGV.

2000

2001

2002

2003

2004

2005

2006

2007

2008

FDI* INFLOWS, MAIN RECIPIENTUSD Billion * Foreign Direct Investment.

Source: Economist Intelligence Unit, Unctad.

0

20

40

60

80

100

120

140

BRAZIL

45

35

19

CHINA

7813

8

92

MEXICO

19 19

25

INDIA

20

46

24

RUSSIA

32

70

52

CHILE

7

14 17

COLOMBIA

6 9 11

ARGENTINA

5 6 7

2006

2007

2008

BRAZIL’S FOREIGN TRADEUSD Billion

Source: Ministry of Development, Industry and Foreign Trade.

2008

2007

2006

2005

2004

2003

2002

400350300250200150100

500 10

7.6

121.

4

159.

3

191.

9

228.

9

281.

3 371.

1

56 brazil it-bpo book 2008-2009 a favorable economic, political and legal environment 57

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Source: Economist Intelligence Unit, TSE, A.T. Kearney analysis.

POLITICAL STABILITY 2007The Economist Index (high=10)

CHINA

CHILE

INDIA

ARGENTINA

MEXICO

RUSSIA

COLOMBIA

BRASIL

8.3

8.1

7.1

6.9

5.4

6.0

5.1

5.1

CRITERIA

Political instability

Risk of armed conflict

Defense spending

Risk of social unrest

Transfer of power rating

Terrorism threat

International disputes and tensions

Level of corruption

Impact of crimeNote: Every criteria is rated from 1 to 5, where 5 means higherSource: Economist Intelligence Unit, A.T. Kearney analysis.

COMPOUND INSTABILITY INDEX (high=45)

RUSSIA

CHILE

INDIA

ARGENTINA

MEXICO

COLOMBIA

CHINA

19.3

19.8

21.7

22.4

26.5

27.7

31.1

31.9

BRASIL

DEGREE OF PROPERTY RIGHTS PROTECTION(high=5)

Source: Economist Intelligence Unit, Sebrae, MCT, A.T. Kearney analysis.

CHILE

BRASIL

MEXICO

COLOMBIA

INDIA

RUSSIA

CHINA

ARGENTINA

5.0

4.0

4.0

3.4

3.4

2.7

2.4

3.0

high

er p

oliti

cal s

tabi

lity

Leas

t ins

tabi

lity

High

est d

egre

e of

pro

tect

ion

INTELLECTUAL PROPERTY

Brazil has an advanced legal framework regarding the defense of intellectual property. Since

1970 there has been an agency (INPI) regulating and supervising intellectual property rights

and since the 1990s there has been a national council to fight piracy.

Software is protected by law for 50 years (during which time a license is required from

the owner in order to offer technical assistance) and confidential information is protected.

Copyright infringement is punishable by imprisonment and victim compensation for any

eventual damage. Brazil is also a signatory of the Berne Convention, the Patent Cooperation

Treaty (PCT), the Paris Convention, and the Agreement on Trade-Related Aspects of Intellectual

Property Rights (TRIPS).

58 brazil it-bpo book 2008-2009

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Brazil has a rich mixture of cultures. Native-Indian, European and African roots form the base,

which was formed after the 16th century. The European connection was reinforced by the

intense migration that occurred after the 19th century. In addition to the Portuguese, there

soon came Italians, Germans, Spaniards, and Polish, creating a strong link and contributing

to development and diversity. The arrival of a large number of Japanese and, more recently,

immigrants from other Asian countries, as well as from its South American neighbors, has

increased the multicultural nature of the Brazilian society.

The large variety of ethnic groups living together in the country has molded a tolerant and

plural society. Brazilians respect different cultures, and easily incorporate new habits and

working methods. In outsourcing contracts they integrate quickly with local customs when

working in other countries, and they easily understand the demands made by other countries.

This diversity extends to belief systems. Religious freedom is guaranteed under the Federal

Constitution. Catholicism predominates, followed by Protestantism, Judaism, Buddhism,

Islamism, Umbanda, Candomblé, and others.

CULTUrAL COMPATIBILITY

6

CULTURAL DIVERSITY SETS BRAZILIANS APART

25 million Italian-Brazilians

18 million German-Brazilians

15 million hispano-Brazilians

10 million Arabic-Brazilians

1,6 million Japanese-Brazilians

1,8 million Polish-Brazilians

Flamengo Landfill, City of Rio de Janeiro

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Time zone proximity has a positive impact on IT-BPO outsourcing contracts signed with Brazil

enabling more effective communications and reduction in costs.

On the one hand, it contributes to an easier interaction between the client and the offshore

team. New York, for example, has only a two-hour difference in relation to the main Brazilian

cities, and London has a three-hour difference. This facilitates telephone contact between the

units installed in different countries, and avoids additional spending for night shifts.

In additional, Brazil ’s location allows for shorter and less expensive overnight flights to

many developed countries that take from 8 to 12 hours, leading to better use of time and

reduced costs.

WORKING HOURS TIME ZONEGEOGRAPhICAL

LOCATION FAVORS COMMUNICATIONS AND TRANSFERS

TIME ZONE PrOXIMITY

7

WORKING HOURS TIME ZONES (9am to 6pm)

ASIA

BEIJING

DELHI

EUROPE

MOSCOW

PARIS

ROME

BERLIN

LONDON

NORTH AMERICA

NEW YORK

CHICAGO

DALLAS

LOS ANGELES

SOUTH AMERICA

BRASÍLIA RIO DE JANEIRO SÃO PAULO

Source: A.T. Kearney analysis.

9am 10am 11am 12pm 1pm 2pm 3pm 4pm 5pm6pm

9am 10am 11am 12pm 1pm 2pm 3pm 4pm 5pm6pm

9am 10am 11am 12pm 1pm 2pm 3pm 4pm 5pm6pm

9am 10am 11am 12pm 1pm 2pm 3pm 4pm 5pm6pm

9am 10am 11am 12pm 1pm 2pm 3pm 4pm 5pm6pm

9am 10am 11am 12pm 1pm 2pm 3pm 4pm 5pm6pm

9am 10am 11am 12pm 1pm 2pm 3pm 4pm 5pm6pm

9am 10am 11am 12pm 1pm 2pm 3pm 4pm 5pm6pm

9am 10am 11am 12pm 1pm 2pm 3pm 4pm 5pm6pm

9am 10am 11am 12pm 1pm 2pm 3pm 4pm 5pm6pm

9am 10am 11am 12pm 1pm 2pm 3pm 4pm 5pm6pm

9am 10am 11am 12pm 1pm 2pm 3pm 4pm 5pm6pm

62 brazil it-bpo book 2008-2009

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TIME DIFFERENCES IN REGARD TO BRAZIL

EXAMPLES OF DIRECT FLIGHTS TO BRAZIL

NEW YORK - SÃO PAULO

LONDON - SÃO PAULO

DALLAS - SÃO PAULO

PARIS - SÃO PAULO

MADRID - SÃO PAULO

WASHINGTON - SÃO PAULO

MIAMI - RIO DE JANEIRO

LOS ANGELES - SÃO PAULO

LISBOA - RECIFE

9h30 pm

9h45 pm

7h45 pm

11h20 pm

10h50 pm

10h00 pm

10h10 pm

9h pm

4h pm

8h05 am

5h15 am

7h40 am

5h50 am

5h05 am

8h20 am

7h30 am

1h20 pm

7h50 pm

9h35

11h30

9h55

11h30

11h15

9h20

8h20

12h20

7h50

TAKE-OFF ARRIVAL FLIGHT TIME

Source: American Airlines, British Airways, Delta Airlines, Air France, TAM, TAP, US Airways.

Chicago-3h

Miami-2h

Los Angeles-5h

Brasília

Rio de Janeiro

São Paulo

Paris+4h

Beijing+11h

Luanda+4h

London+3h

Madrid+4h

Berlin+4h

Rome+4h

Moscow+6h

Cape Town+5h

Tokyo+12h

Delhi+8,5h

Dallas-4h

Washington-3h

New York-2h

IN 2008, BrAZIL rECEIVED, ON AVErAGE, 570

INTErNATIONALFLIGHTS

EVErY WEEK

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conclUsionCOST EFFICIENCY

Subway Station at Copacabana District, City of Rio de Janeiro

MAXIMIZING GAINS FrOM INFOrMATION TECHNOLOGYOUTSOUrCING

IN PROSPECTING FOR POTENTIAL

SUPPLIERS IN IT-BPO, BRAZIL IS A SAFE AND

ADVANTAGEOUS PARTNER

Companies outsourcing IT services and business processes have an undeniable aim in

common: to improve cost efficiency. They also share the view that delegating tasks to

partners outside their borders may work to their advantage. They are opting to strengthen

their roles in management and control whilst delegating tasks connected to the operation

and the development of solutions. The natural evolution of this strategy was to extend the

geographical frontiers of partnerships, identifying markets in other countries that would

maximize outsourcing gains.

Since the beginning of this movement, one of the main challenges faced by CIOs has been

to evaluate the cost of outsourcing in order to justify their decisions. Inspired by models

such as Total Cost of Ownership (TCO) created by Gartner, which introduced rationality

to the evaluation of direct and indirect costs related to the implementation of IT-BPO

solutions, new models were developed, adjusted to the variables that must be considered in

offshore outsourcing. This produced the Total Cost of Engagement (TCE) model, offering a

comprehensive and holistic view of the costs involved in this type of employment, which go far

beyond project team’s salaries.

This report has presented Brazil as a potential offshore IT-BPO supplier (or near-shore, for

some strategic markets), and has revealed aspects which must be taken into account in a

mature study.

66 brazil it-bpo book 2008-2009 conclusion cost efficiency 67

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A unique combination of aspects makes Brazil one of the most competitive destinations in terms

of cost. Brazil has a consolidated and mature IT-BPO industry, knowledge of business, strong

economic indicators, sound infrastructure, qualified human resources, high productivity levels

and low staff turnover, a favorable geographical position, a time zone close to that of the United

States and Western Europe, and is culturally compatible. Furthermore, the Brazilian government

is consistently attracting investments in the IT-BPO sector, making it even stronger.

From any angle that the IT-BPO industry in Brazil is looked at, the challenges and opportunities

lead to the same conclusion: Brazil’s opportunity to be one of the three main global centers in

Information Technology.

LOW TRAVEL & COMMUNICATION COSTS

LOW MANAGEMENT COSTS

HIGH PRODUCTIVITY & BUSINESS KNOWLEDGE

TIME ZONE: REAL TIME INTERACTION

OPTIMIZED ON SITE X OFFSHORE RATIO

HIGH LEVEL OF CULTURAL COMPATIBILITY

LOW LEVELS OF REWORKING

BRAZIL COST

ADVANTAGES

68 brazil it-bpo book 2008-2009

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70 brazil it-bpo book 2008-2009

Appendix soUrcesThis report includes data and analysis produced by Brasscom, public and private research

bodies and institutions and consultancies that specialize in the IT-BPO sector.

main sourcesNext steps in the Strategic Agenda for the “IT Offshore Outsourcing” sector, A. T. Kearney

(carried out for Brasscom and the Ministry of Science and Technology).

A.T. Kearney is an international consultancy with 60 offices in over 30 countries.

It advises high-profile companies in their segments on gaining and maintaining

competitive advantages in the markets they operate in. It offers consulting services in

various areas, from strategy and organization to information technology and operation.

It combines its expertise in the industrial sector with management and solutions

consulting to add value to its clients.

www.atkearney.com

Brazil’s offshore services market in 2008, IDC – International Data Corporation

(carried out for Brasscom).

IDC is dedicated to consulting and providing information for the information technology

and communications sectors. It uses its extensive knowledge base on the market, providers

and consumers to help its clients on strategic issues related to the supply and the use of

technological solutions. It has over 1,000 analysts in 110 countries, and provides global,

regional and local information on technology, opportunities, and trends. IDC is a subsidiary of

IDG, a global leader in technology media. In Brazil, IDC has followed the market since 1990.

www.idc.com

Digital Brazil – leveraging ICT for economic stimulus, Booz & Company

(carried out for Brasscom).

Booz & Company is an international consultancy that supports companies, public

institutions and organizations all over the world. It uses vision and knowledge, profound

specialization and a practical approach to develop skills and have a real impact for

its clients. It is recognized for its significant global studies and the development of

administrative key-concepts since the 1940s. It publishes the management magazine

strategy+business.

www.booz.com

Analysis of Brazil as an Offshore Services Location, Gartner Group.

Gartner produces objective and profound analysis on information technology and provides

consulting services on business and technology decisions for executives and public

and private companies. It has 3,700 associates, including 1,200 research analysts and

consultants in over 75 locations worldwide. Among other events of relevance to the sector,

it holds the annual conference in Brazil on the future of technology.

www.gartner.com

Photo credits

p.8 StockXpert; p. 12 Patrick Grosner/

Folha Imagem; p.14 Diomedia;

p.15 Marcos Issa/Argosfoto; p. 17 Apex-Brasil;

p. 20 Diomedia; p. 24 Eric Gevaert/

Veer Marketplace; p. 27 Johnson & Johnson;

p. 28 Citi; p. 30-31 Diomedia; p. 32-33 Diomedia;

p. 33 Vinícius Tupinambá/Veer Marketplace;

p. 36-37 Cia da Foto; p. 37 Diomedia;

p. 42-43 Cesar Duarte/Argosfoto; p. 44 Anac;

p. 45 Claudio Rossi/Argosfoto;

p. 46 Salomon Cytrynowicz/Olhar Imagem;

p. 50-51 Alan Marques/Folha Imagem;

p. 51 Galina Barskaya/Veer Marketplace;

p. 54-55 StockXpert; p. 55 Veer Marketplace;

p. 56 Cássio Roosevelt /Folha Imagem;

p. 60-61 StockXpert; p. 62-63 Nasa;

p. 63 Diomedia; p. 66 Cesar Duarte/Argosfoto.

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accentUrewww.accenture.com55 21 4501 9107We work with clients from all industries

to help them become high-performance

businesses.

Management Consulting, Systems

Integration & Technology Services, and

Outsourcing.

atechtecnologias críticaswww.atech.br 55 11 3040 7300Air Traffic, Defense, Health, Transport,

Law Enforcement, Space, Logistics,

International, Environment and Energy.

Conceptualizes; Specifies; Integrates;

Manages problems, challenges and

innovates to make progress and find better

solutions.

atos originwww.atosorigin.com.br55 11 2183 2344Consulting and Information Technology

Services.

Consulting, systems integration and

management services. C&SI Consulting

and Systems Integration; MO - Managed

Operations; Software Factory/ Offshore.

brQit serVices www.brq.com/en EUA 1 516 541 3100 Application Management Outsourcing and

Global Delivery.

Applications Management and Maintenance

- Custom Development - IT Consultancy

- Systems Architecture - Software Factory –

Training - Test Services - Solutions: Portal, IT

Governance, e-commerce, BPM, Web 2.0, BI,

RFID, ERP, ECM e SOA.

btwww.bt.com/globalservices55 11 2101 9800IT & Telecommunications.

Connectivity, Infrastructure, Managed

Services and Outsourcing Solutions.

bsitecnologia ltDawww.bsitecnologia.com.br55 11 4613 7700IT Outsourcing, Development

and Integration of Systems, IT

Management, Infrastructure

Management, Automation and Human

Capital Management.

castinformÁtica sawww.cast.com.br55 11 5105 037155 61 3429 7300Software Development Centers, Testing

Centers, IT Outsourcing, System Maintenance

Centers, Legacy System Refactoring,

Business Intelligence, Enterprise Content

Management, IT Consulting, Projects Office,

Information Security and Business Process

Management.

cesarrecife center for aDVanceD stUDies anD systemswww.cesar.org.br55 11 2166 7100Private innovation center that creates

Information and Communication Technology

products, services and new ventures.

Open innovation for organizations in the

telecom, electro-electronics, finance,

media, health and utilities sectors.

ciscocisco Do brasil ltDawww.cisco.com.br0800 702 4726 Leading supplier of networking

equipment and network management

for the internet.

eDsan hP comPany www.eds.com0800 7700 130Leading global technology service company

delivering business solutions to its clients.

A broad portfolio of information technology

and business process outsourcing services

to clients in the manufacturing, financial

services, healthcare, telecommunications,

energy, transportation, consumer and retail

industries, and to governments around

the world.

cticenter for information technology - renato archerwww.cti.gov.br55 19 3746 6000Development of software technologies,

electronic components, prototypes and

products in the area of information

technology, as well as internet tools and

applications.

MEMBERS

cPm braXiswww.cpmbraxis.comEUA 1 212 717 8500CPM Braxis vision is to be among the Top 10 global IT companies. Already the largest Brazilian IT and outsourcing company providing IT consulting, application, ERP and infrastructure services. Industry expertise spans financial services, telecom, consumer goods, manufacturing, retail, energy and media sectors.

brazilian association of information technology and communication companies – Brasscom

ANTôNIO GIL President

NELSON WORTSMAN Digital Convergence Director

SéRGIO SGOBBI Education and Human Resources Director

EDMUNDO OLIVEIRA Institutional Relations Director

boarD

eXecUtiVe boarD

ROGéRIO MARCOS MARTINS DE OLIVEIRAPresident of the BoardIBM General Manager for Latin America

JAIR RIBEIRO DA SILVA NETOVice-President of the BoardPresident of the Executive Committee of the Board of CPM Braxis

LAéRCIO JOSé LUCENA COSENTINOVice-President of the BoardCEO of TOTVS

BENJAMIN QUADROSMember of the BoardPresident of BRQ IT Services

CLáUDIO VITA FILHOMember of the BoardItautec Executive Commercial Vice-President

HéLIO SANTOS OLIVEIRAMember of the BoardPresident of Politec

JACQUES FRANçOIS DEPOCASMember of the BoardCenter Head of HSBC Global Technology Center Brasil

LUIz ROBERTO NOVAES MATTARMember of the BoardCEO of TIVIT

OSCAR VAz CLARKEMember of the BoardIntel Brazil General Country Manager

RICARDO ASSE Marketing and Exports Director

MARCO ANTONIO SILVA STEFANINIVice-President of the BoardPresident of Stefanini

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soFttekwww.softtek.com55 11 3748 0333Global provider of IT and business

process solutions.

Application Development, Software

Testing & Quality Assurance, SAP

Services, AMS, Application Security,

Data Integration, BI, Web Projects

(Java and .NET).

uBik do Brasilwww.ubik.com.br55 11 3179 1102Manufacture, Telecom, Finance, Insurance

and Systems integration services,

Data Center, Security, IT outsourcing,

Software development and IT

infrastructure.

Unisyswww.unisys.com.br55 11 3305 7100Services and IT solutions.

Consulting, systems integration,

outsourcing and infrastructure

services, combined with

enterprise servers.

Uol UniVerso on linewww.uol.com.br55 11 3038 8100UOL is the largest internet portal in

Brazil, with a complete platform of

products and services for the web

environment, such as communication,

e-commerce, host and security.

VirtUswww.virtus-ti.com.br55 11 3847 0105Information Technology (Software)

Virtus IT provides comprehensive tools and

services to enable efficient management

of today’s sophisticated IT and converged

communication environments. Service

assurance, software and hardware

monitoring, IT and telecoms performance

management and capacity planning are

just some of the areas covered by our

portfolio of products.

institUtional members

B2B magaZine

uFpe - Universidade Federal de Pernambuco

unesp - UniversidadeEstadual Paulista Júlio de Mesquita Filho

unicamp - UniversidadeEstadual de Campinas

totVssawww.totvs.com0800 70 98 100Software and support services for

corporate management.

Software, Technology, Consulting,

Support, BPO, E-learning and

Service Desk.

tiVitterceirização De Processos, serViços e tecnologia sawww.tivit.com.br55 11 3757 2222Large-scale critical-mission operations,

process reengineering and business

knowledge for various industries.

IT Infrastructure, Application Systems

and BPO integrated services.

sUnmicrosystemswww.sun.com.brEUA 1 800 786 0404 Finance, Industry, Commerce, Services,

Telecommunications and Government.

Consulting, Training, Infrastructure,

Solution Architect, Implementation &

Migration, Installation, Management,

Support.

tcstata consUltancy serVices www.tcs.com 55 11 3306 7000Financial, Manufacturing, Retail &

Distribution, Telecommunications,

Energy & Utilities and Media. IT

Infrastructure, Enterprise Solutions,

Consulting, BPO, BI, Engineering &

Industrial Services.

hUgheswww.hughes.com.br55 11 3818 7500Global leader in satellite

telecommunication equipment

and services.

ibmbrazilwww.ibm.com/br 0800 707 1426 Information Technology.

Strategic consulting and solutions

involving Services, Hardware,

Software and Financing.

intelsemiconDUtores brasilwww.intel.com55 11 3365 5500Leading manufacturer of computer,

networking and communications

semiconductors.

Develops technology, products and

initiatives to continually advance the way

people work and live.

resoUrcewww.resource.com.br55 11 3748 6000Outsourcing, Software Factory,

Professional Allocation, Card Solutions,

Oracle Service Line, Business

Intelligence, EMC Solutions, Business

Applications Performance Monitoring -

SiteSeeing, Contact Center, SOA/BPM,

Quality Assurance and Infrastructure.

gftbrasil consUltoria informÁtica ltDawww.gft.com55 11 2176 3253One of the leading international IT service

providers for the financial services sector.

GFT offers IT based services covering

consultancy, application development

and management.

hsbcglobal technologywww.hsbcglt.com.br55 41 3778 5555Offshoring to HSBC Group

operations.

Development, Support, Tests and IT

Operations.

gPtitecnologia Da informação sawww.gpti.com.br55 11 3218 4700One of the largest information technology

service providers in Brazil.

ITO and BPO solutions through Consulting/

Mentoring, Projects and Outsourcing.

itaUtecwww.itautec.com.br55 11 3543 3000Hardware manufacturing (PCs, commercial

and banking automation) and services.

Helpdesk and service desk; IT training,

outsourcing and customized projects.

microsoftwww.microsoft.com.br55 61 2107 7243Software and Services in IT

Politecwww.politec.comEUA 1 770 771 6500Nearshore IT Outsourcing, Application

Development, Maintenance, Testing,

Strategy/Transformation, Consulting,

IT Infrastructure Management, plus

a standalone SAP SI practice.

Focus on Financial, Public Sector,

Manufacturing, Utilities, Telecom,

Gas and Natural Resources.

siemens agwww.siemens.comGERMANY 49 89 6 36 00With the largest green portfolio in

the world, the company is a world

leader in many fields with activities

in Infrastructure, Industry, Energy,

Medicine, IT, always focusing on

innovation.

stefaniniit solUtions www.stefanini.com EUA 1 954 229 9150 Stefanini IT Solutions is a global provider

of onshore and nearshore IT Consulting,

Systems Integration and Outsourcing. The

company has over 7,400 employees with

36 offices in 16 countries, and more than

350 active clients in a variety of industries.

Services include: Application Life Cycle

Management, Infrastructure Administration,

BPO, Custom Software Development, ERP,

Systems Architecture (SOA).

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76 brazil it-bpo book 2008-2009

www.brasscom.org.br

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RORAIMABoa Vista

AMAPÁMacapá

MARANHÃOSão Luís

2

2

2

PARÁBelém

AMAZONASManaus

RONDÔNIAPorto Velho

PIAUÍTeresina

CEARÁFortaleza

RIO GRANDE DO NORTENatal

PARAÍBA

PERNAMBUCO

ALAGOAS

SERGIPE

BAHIASalvador

ESPÍRITO SANTO

2

SÃO PAULO

2

2

PARANÁ

SANTA CATARINA

RIO GRANDE DO SUL

MATO GROSSO DO SUL

TOCANTINSPalmas

ACRERio Branco

MINAS GERAIS

GOIÁS

DISTRITO FEDERAL

2 3João Pessoa

Recife

4

Maceió

Aracaju

2 2Belo Horizonte

2

5

73 2

Vitória

Rio de Janeiro

2 232 3 3

São Paulo

32 22

Curitiba

22Florianópolis

3 6 44Porto Alegre

23Campo Grande

Goiânia

BrasíliaMATO GROSSOCuiabá

Capital

RIO DE JANEIRO

GDPUS$ 1.5 TRILLION

FDIUS$ 45 BILLION

EXPORTS AND IMPORTS: US$ 371 BILLION

POPULATION191 MILLION (80% URBAN)

MIDDLE CLASS AN ABOVE: 122 MILLION

HOUSEHOLD CONSUMPTION: US$ 243 BILLION

IT-BPO SECTOR

Turnover: US$ 59.1 BILLION Exports: US$ 2.2 BILLION

INFRASTRUCTURE Broadband connections: 10 MILLION Mobile phones: 150 MILLIONComputer ownership: 1 for every 3 people

IT PROFESSIONALS

Working: 1.7 MILLION Technical and graduate courses: 1,714 Graduate students: up to 220,000

BRAZIL AT A GLANCE

SERVICES 65.3%

INDUSTRY 28%AGRICULTURE 6.7%

GDP – COMPOSITION

HARDWARE US$ 16.2

SOFTWARE US$ 3.2

SERVICES US$ 10

IT SPENDINGUSD BILLION

2008

BRAZIL’S ENERGY MATRIX, 2008

PETROLEUM AND DERIVATIVES 37.3%

BIOMASS 31.4%

HYDRAULIC AND ELECTRICITY 13.9%

NATURAL GAS 10.2%

COAL 5.7%

URANIUM 1.5% Maritimeports

Graduate courses in IT

Technologyparks

Hydroelectricpower plants

Internationalairports

The ten largestplants:up to

1,500,000 KW

Selected by InfoExame survey, 2007

SUGARCANE PRODUCTS 16.6%WOOD 11.4%OTHERS 3.4%

Source: Brasscom, IDC.

Source: National Energy Report 2009, Ministry of Mines and Energy.

Source: IBGE.

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BRAZIL IT-BPOBOOK2008-2009