Latin America Raises Outsourcing Profile
A survey by the IT services firm Capgemini finds that Latin America is gaining ground.
Earlier this week IT Business Edge contributor Mike Vizard wrote about Latin America's emergence as an outsourcing contender, a topic I've written about myself in the past. Mike interviewed Steve Rudderham, Capgemini vice president and senior delivery executive for major accounts in Latin and North America. Earlier this week I attended Fusion, itSMF USA's annual conference, where I met some folks from CPM Braxis, Brazil's biggest IT services company. They all seemed quite excited that earlier this month Capgemini paid $298 million for a 55 percent ownership stake in their company.
According to a Nearshore Americas article, a Gartner report tapped CPM as having the "highest growth" from 2008 to 2009 among Latin America's top 20 IT services providers. CPM Braxis' revenue grew from $286 million in 2008 to $403 million in 2009. The company is forecasting revenues of nearly $600 million this year.
One of its specialties is the financial sector. Its biggest client is Brazilian lender Bradesco, which was also its largest shareholder before the Capgemini deal, according to an FT.com article. CPM also has clients in telecommunications, utilities and manufacturing. When I spoke to him at the conference, Alfredo Neves, CPM's global clients director for finance, told me Brazil's own financial troubles had prompted his company to fine-tune its risk-management and other business processes, what he called "a good consequence" of the country's once-rampant inflation. This process excellence helped CPM attract prominent clients in the financial industry including global credit bureau TransUnion, a company with which it presented a case study at Fusion. (Unfortunately I was unable to attend.)
It's not surprising that Capgemini and other companies are eager to establish a presence in the country. Brazil's economy is booming, reports The Wall Street Journal. As the recession roiled the globe last year, Brazil's economic output fell just 0.2 percent. This year it's expected to grow as much as 6 percent. The world's 10th-largest economy, Goldman Sachs predicts it will move into fourth place by 2050.
Still, there are challenges. The Wall Street Journal articles mentions a still-restrictive business environment, outdated infrastructure, a high crime rate and a public sector that is responsible for an oversized chunk of the country's gross domestic product. Neves mentioned a need for better language skills, a shortcoming that he said is being addressed by requiring students in grades 1-12 to supplement their native Portuguese with English and Spanish. And Brazilian services companies need to get better at marketing themselves, he told me. In contrast to outsourcing giants like India, which were forced to look outside their borders for business due to a lack of local work, Brazilian companies focused on local clients until fairly recently.
Brazil's large population gives it an advantage over other Latin American countries with smaller labor pools. But interest in Latin America has been growing for years. In 2008 I wrote an article that noted the presence of companies such as Experian, Genpact and HP and the creation of a Central American chapter of the International Association of Outsourcing Professionals.