The global economic crisis and other recent events in the Indian IT Services industry have created opportunities for diverse emerging markets known as new offshore, or nearshore destinations. Indeed, major Brazilian companies in the sector should be able to capitalize on significant planning and investment made during the past several years. For some specialists, Brazil is at the top of the list of “beneficiaries” under the new global context taking shape, especially because of the quality of its services and maturity of its offerings. However, how prepared is the country to assume a leading position in the global outsourcing arena?
First of all, consider an objective analysis of the actual situation of Indian companies. Even with the recent slip ups of some giant companies, the strength of Indian market is still unquestionable, above all else due to its tradition. India dominates this market with a share equal to US$ 41.0 billion versus US$ 5.7 billion from Russia, US$ 3.0 billion from China, US$ 2.9 billion from Mexico, and US$1.3 billion from Brazil (according to an AT Kearney survey of the 2007-2008 period). Above all, it was the Indians who consolidated the concept of IT Outsourcing nine years ago, when they took advantage of the demands that emerged during the millennium bug panic.
India’s low costs are very difficult to beat. In consequence, competitors must develop differentiated strategies that leverage the cost benefit relationship of other industries outside of India. The challenge becomes even greater when we consider that not only are India’s prices lower, but they also deliver quality services – a very attractive combination in times of global economic crisis.
But, if the Indians are unbeatable as they seem to be, what is left on the table for Brazil? It is true that India will continue to lead the IT Outsourcing market for a long time, but there are factors that make local perspectives very optimistic.
First of all, independent of the global economic situation, the IT sector always will grow. It is a historical characteristic that IT market growth rates exceed global economic growth because of increasing demand for technology and automation.
The economic crisis could serve as a big boost to Brazil, once natural competitive pressure creates new offshore markets. Despite evident declines in investments to increase revenue, companies on the other hand must search for innovation and cost reduction, both supported by technology. There is no runner-up in this race.
Another point is Brazil´s favorable geographic location. Located in an intermediate time zone between Europe and North America, Brazilian companies can deliver remote services at hours more in sync with client operations in contrast to Indian providers, which end up having to maintain teams 24 hours per day. This factor, combined with greater cultural compatibility, make Brazilian companies a very attractive option for strategic offshore services.
Brazilians have a cultural knack for good human relationships. When we think about IT outsourcing, in which many services can be done remotely, “how” to talk to the client is as important as “what” to say. Nowadays, the human relationship is crucial to successful interaction between client and provider and must be reinforced every day.
With so many positive aspects, one wonders … is Brazilian industry sufficiently mature to take advantage of the opportunities that will appear? Brazilian IT services companies have grown by delivering to the internal market, which always has provided huge demand. However, this characteristic also points out a deficiency since it is impossible to identify local companies with full outsourcing businesses.
Brazilian companies still have a long way to go. It will be necessary to adopt global industry best practices, to implement corporate governance with transparency and audits typical of the market, unburden capital and labor costs, besides investing massively in IT professional qualifications and in English usage as primary skills in global teams. The country must define what awaits its IT Industry: a strong sector, or a fragile industry that will be seen in a few years only as the dream of a few visionaries?
No industry has transformed social reality as fast as IT services did in India during the past decade. If we expect that same phenomenon to take place in Brazil, the principal focus should be on investment in education. All the rest, such as telecommunications, energy and building infrastructure is already in place with the same quality and costs competitive to what’s found in the rest of the world.
No economic activity brings revenue with lower impact to the environment than IT Services. The missing thing here is decision that will allow focused action. Whoever knows how to take advantage of the challenges and opportunities in this period of crisis will assume a major IT outsourcing role once it has passed.
*Alex Jacobs is a Global Service director at CPM Braxis.