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As Brazil’s BPO Sector Matures, Businesses Seek Out Brazil-based Partners

As Brazil’s BPO Sector Matures, Businesses Seek Out Brazil-based Partners

As the global BPO market is on pace to expand, Brazil is looking for ways to seek its cut. Its business process outsourcing market is expected to see a growth upwards of 7 percent through 2012, with revenues inching closer to $5 billion. Nearshore Americas sat with Anderson Figueirendo, IDC Brazil´s Enterprise Services Analyst, to learn about the prospects and the potentials of Brazil’s BPO industry. Figueirendo says Brazil businesses are quite familiar with relying on third-parties, but the complexities of business process outsourcing are not widely understood.

NSAM:  What does Brazil’s overall BPO landscape look like?

Figueirendo: Brazil is under the spotlight now as we have a very large internal market for both domestic and global BPO providers. The big Indian and American companies are coming here mainly to sell their services inside, not to develop offshore delivery centers. Much of it is driven by culture, because Brazilian companies prefer to buy services and products domestically.

They are not big offshore buyers when it comes to outsourcing services (CRM, ITO or BPO), so the services providers have to come here if they want a share in the market. We have Infosys, Wipro, HCL here, but they are not huge operators compared to domestic players. Stefanini and CPM-Braxis (now owned by Capgemini) are the big players in the IT services sector. They are involved in BPO services as well. Brazil has a long tradition in ITO, the IT services market is almost three times the size of BPO, but BPO is growing rapidly.

NSAM:  What are domestic enterprise attitudes toward outsourced services particularly with BPO?

Figueirendo:  Here in Brazil companies are mature when it comes to outsourcing services particularly in IT.  IBM’s first foreign subsidiary was in Brazil even before Canada. Something like 30 percent of IT enterprise functions are outsourced here. When you talk about BPO at the beginning there was some confusion on the concept but enterprises are starting to understand the potential and return on investment.

The service providers now have clearer definitions and clearer service offerings but vendors still have to do more to explain the overall value proposition and return on investment of BPO. Human resources outsourcing is the first thing Brazilian companies would look for, aside from call centers. For Brazilian companies, HR definitely presents the clearest value proposition.

NSAM: What are the key verticals?

Figueirendo:  When we talk about BPO outsourcing we have to look first at which sectors are outsourcing IT services.  There are financial services, manufacturing, and then telecoms. These sectors are most comfortable with outsourcing in general. Definitely not in government (public sector) because the contracting laws here are so complex that this will not be a big focus. Retail is another big opportunity for BPO in Brazil.

NSAM: What are the key regional markets?

Figueirendo: You have to look at market share and proximity. Sao Paulo is the biggest economy. Between 30 and 35 percent of the country’s economy is in the state of Sao Paulo. For example, Infosys has operations in Belo Horizonte because costs are much lower. Distancing yourself away from Sao Paulo is problematic however because there are some cultural issues.

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Brazilian companies don’t like to take contracts from providers outside of their area. It’s the way Brazilians do business, so you need to make sure that you have a presence not only in the country but also regionally. I would say that if you position yourself within a 500-600 kilometer radius of Sao Paulo, then you’re OK.

NSAM: What about services exchange between Sao Paulo and Rio? 

Figureirendo:  There is no problem with contracting services between these two markets. The main companies in Sao Paulo are now building new sites in Rio so there is business continuity there. Rio is very hot right now because it will be the center of the two major sporting events – 2014 World Cup and 2016 Olympics. With these two events comes a lot of investment in physical and telecommunications infrastructure. Rio has not traditionally been a big commercial city, but now there is a bigger focus on changing the city’s image.

NSAM: Some forecasts suggest that Brazil’s economy is slowing down. Is it true?

Figueriendo: GDP growth over the next year or two will be slower but overall on the ground the markets and consumers are moving the economy in the right direction. I don’t think we have built up a bubble. We have a large consistent economy and a good political support. We have huge demand for IT workers, unemployment is low, we might not grow as fast as last year by GDP standards but the fundamentals are stable.

NSAM: What about the labor market? 

Figueriendo: Yes, talent is a problem, but mainly in the ITO space. We are desperate for IT professionals. I don’t think it’s a big problem for BPO in the domestic market, which presents new growth opportunities for services providers. If you need language skills for BPO that does present a problem, which is another reason why the industry is focused more on the domestic market rather than exporting services.

About Luke Bujarski

Based in New York City, Luke Bujarski has over ten years of market research and international business experience. As former head of research for NSAM, Luke has traveled to the following markets performing market analysis: Guatemala, Panama, Colombia, Brazil, Mexico and Honduras.

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