Offshore Opportunities
There are three basic types of offshore outsourcing:
- ITO (Information Technology Outsourcing)
- BPO (Business Process Outsourcing)
- Software R&D (Offshore Software Development)
Brazil, a country that derives over 66% of its GDP from service industries (according to a 2003 estimate), is a key player in web and software programming, game development, IT support, network solutions, and offshore outsourcing services. A.T. Kearney Inc recently ranked Brazil #5 on the Global Services Location Index. Using 40 metrics, including labor pool, infrastructure and legal pool, A.T. Kearney assigns each country a Global Services Location Index.
Global Services Location Index 2006 (A.T. Kearney)
1. India 2. China 3. Malaysia 4. Thailand 5. Brazil 6. Indonesia 7. Chile 8. Philippines 9. Bulgaria 10. Mexico.
Brazil developed strong core competencies in application development and maintenance and is enhancing expertise in IT services delivery. With a solid infrastructure and strong cultural alignment with western cultures, Brazil has become a strong competitor in the IT global services market. Brazilian IT is particularly efficient in providing solutions for financial services, defense, CRM, eGovernment, and healthcare. Companies such as AGCO, Alcatel, American Express, Blue Cross Blue Shield, Caterpillar, Citibank, Deutsche Bank have outsourced operations to Brazil.
India and China continue to lead the index in the IT services market by a wide margin with declines in cost advantage offset by further improvements in talent supply and business environment.
Advantages to off-shoring in Brazil:
* Brazil has an $18 billion dollar IT industry, one of the largest in the world
* Large, experienced, highly educated workforce due to competitive, comprehensive university programs
* Competitive billing rates (more than India, less than Canada)
* Minimal time zone difference (1-3 hours) from the US and UK
* Strong English language capabilities
* Convenient air travel
* Good industrial infrastructure and low cost telephony
* Diverse, friendly culture. Brazil’s ethnic and racial heritage includes immigrants from Europe, Syria, Lebanon, Japan and Africa
* Support for women executives in workforce
* Higher rankings in data security than India, Russia, China, and the Philippines according to a study by Transparency International’s Corruptions Perceptions Index (2005)
* US Patent, copyright, and trademark regulations are acknowledged and enforced under penalty of law
According to a study by Accenture, miscommunication and rework top the list of complaints and issues for outsourcing operations in India. Rework is rare with outsourced operations to Brazil due to the culture’s strong work ethic.
Accenture Outsourcing Study (2006)
Disadvantages / Challenges to off-shoring in Brazil:
* English training is expensive
* Most IT operations are currently local. Brazil is emerging in the global market
* Competitive cost. Outsourcing to India and China is much cheaper
Analysis
Offshore Opportunities Analysis
Brazil is in direct competition with India and China for the coveted IT services market segment. To date, India has managed to attract most companies, due to its large skilled labor force, relatively stable economic and political situation and cheap real estate. As the Brazil government continues to provide support for education initiatives and start up IT companies, it will be able to capitalize on its strengths, such as low turnover rates, creative IT solutions, and neutral accents. Brazil has a diverse culture, wealth of resources, and strong government support. Brazil is an emerging market that is experiencing strong growth and will continue to be competitive in the global market.
Offshore Opportunities Recommendations
* Continue to expand in services sectors (programming, knowledge management outsourcing)
* Continue education initiatives and reforms across the country to ensure workforce is well-educated and competitive with the global workforce
[2] http://www.investmail.com/content/view/214388/30 Johns, Henry. Vision TRE (2006).
[3] http://en.wikipedia.org/wiki/Brazil
[4] http://www.atkearney.com/main.taf?p=1,5,1,184
[5] http://proceedings.informingscience.org/InSITE2007/IISITv4p251-260Dugg356.pdf