Exclusive: Amazon Set to Launch Cloud Services in Brazil

Amazon will soon start offering cloud computing services to small and medium-size businesses (SMBs) in Brazil, using basically the same model it employs in the US. The company …

Amazon will soon start offering cloud computing services to small and medium-size businesses (SMBs) in Brazil, using basically the same model it employs in the US. The company has already hired an executive to lead the operation and is quietly creating its team in Brazil.

The official date for opening the Amazon office in Brazil is still secret, but rumors say that it will happen soon, possibly by the end of December. The executive chosen to lead the operation is José Nilo Cruz Martins, a Brazilian who was local director of sales for Google, worked for Sun before its acquisition by Oracle, and he also worked for Promon.

Martins was hired in May as the director of Amazon Web Services (AWS), the unit’s cloud computing company. Since then he has been trying to structure the operation. He would not reveal details about Amazon in Brazil, but said the service launch strategy will be announced at the right time by executives at company headquarters in the US.

Negotiations are still going on between Amazon and Oracle Brazil to offer ERP applications to Brazilian SMBs on a software-as-a-service (SaaS) basis. Amazon will also work with other partners to broaden its cloud computing offerings.

Renting Its Infrastructure

It’s not clear yet how Amazon will price its model of cloud computing services in Brazil. But presidents of local data centers say that the company does not have its own infrastructure as it has in the US, or at least not yet. To save time, Amazon will start serving customers using third-party data centers.

According to market sources, Amazon has closed an agreement with TIVIT, a Brazilian company that provides IT services, infrastructure, and BPO and is controlled by the American investment fund Apax Partners.

There are also rumors that Amazon is talking with Terremark, a provider of IT infrastructure and cloud services that is linked to the American telecommunications carrier Verizon, which operates in Alphaville, a metropolitan region of São Paulo.

“Amazon has bought equipment from Cisco and will operate in Terremark with a co-location model,” says an executive of an IT company serving the Brazilian market. He says that Amazon can launch their cloud computing offerings in Brazil at any time.

Negotiations are still going on between Amazon and Oracle Brazil to offer ERP applications to Brazilian SMBs on a software-as-a-service (SaaS) basis. Amazon will also work with other partners to broaden its cloud computing offerings.

None of the companies would comment on their possible agreements with Amazon.

“It’s no secret that Amazon is already in Brazil,” says the president of a data center, located in São Paulo, that sells cloud computing services to SMBs. This same executive, who prefers to remain anonymous, says that the next big company to come to Brazil with cloud services will be Microsoft.

Microsoft confirms that it intends to bring its cloud computing services to Brazil to compete for SMB clients. Its argument is that the Brazilian market is strategic for the company and that it has a project to provide IT services in the country. However, it has no forecast of when it will be arriving and if it will have its own data center or use infrastructure from a Brazilian partner.

Counting On Cloud Growth

Fernando Belfort, industry analyst at Frost & Sullivan in Brazil, notes that cloud computing still represents a small slice of IT spending, but will tend to expand over the next year. Gartner estimates that this kind of service grew in 2010 to 3% of all investments on IT, and that by 2014 this share will rise to 19%.

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Currently Brazil is the seventh largest information technology and communications (ITC) market in the world, with approximately $130.6 billion dollars of revenue in 2010, according to Gartner. The annual growth rate is projected to be about 10% by 2014. The IT services business should follow this pace of 10% and jump from approximately $15 billion dollars in 2011 to about $23 billion dollars in the next three years, the research consultancy predicts.

Amazon and other international players want to explore the IT services market in Brazil because of the potential for business growth, Belfort says. There is strong demand for outsourced services driven by the momentum of the economy, he says. The choice of Brazil to host the World Cup and the Olympics should also heat up these businesses.

The biggest buyers of cloud computing in Brazil are SMB enterprises that do not have their own IT departments and have limited budgets. Government estimates indicate there are more than 5,000 companies of this size in Brazil in various segments of the economy, many of which lack technology to integrate operations and improve business management.

The cloud computing model of buying infrastructure and software can be a cheaper alternative way to consume ERP, BI, CRM, corporate e-mail, and other business IT solutions. It is this market that Amazon wants to get a piece of in Brazil.

Amazon will increase the local IT services competition — but Brazilian providers contacted by Sourcing Brazil say they aren’t worried. “Their arrival in Brazil should not impact our business,” says Marcelo Safatle, director of HostLocation, which has two data centers in São Paulo and specializes in cloud offerings for SMBs.

David Shpilberg, co-founder and CEO of CPM Braxis Capgemini, considers the entry of Amazon in Brazil as positive. He says he thinks the competition with the US company will strengthen the local market and help position Brazil as a global player in IT services.

This article was originally published in Sourcing Brazil

 

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