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HCL’s Brazil Strategy: Step Away from ‘India Inc.’ Pack

By Tarun George

HCL logo HCLs Brazil Strategy: Step Away from India Inc. PackA late arrival to the LatAm market as compared to its larger Indian rivals, HCL Technologies has in less than two years ramped up to a strong presence in the region. But there’s something very different about its growth strategy in the Nearshore that sets it apart from companies like TCS, Infosys and Wipro. We chatted with Sandeep Kalra, Vice President of Emerging Markets to find out what that is.

Sandeep tells us how HCL’s Latin American expansion goes against conventional sourcing practices, and his plans for the large domestic market in Brazil. Read on for more.

What specific opportunities does HCL see in Latin America? What are the specific types of functions that you’re looking to accomplish through your Latin American centers?

Kalra: Most companies see Latin America as a services delivery location. But for us Latin America is a business location, and if we can do Nearshore delivery from here, that will be an added advantage. When we look at countries like Brazil (our first foray into Latin America), we’re looking to be a significant player in the local market and compete for local business, while also delivering from here to the US, Europe, etc. So our interest in Latin America is predominantly based on expanding our market and market share in the region first, before exporting services.

We’re currently present in Brazil, Argentina and Mexico. The kinds of services we’re planning to deliver to our overseas as well as local clients are around ERP services including Oracle and SAP, application development and maintenance, and finally infrastructure services. We’re not focusing on BPO in Latin America, but as we mature in the region, we may take a look at it later.

It’ll soon be two years since HCL landed in Brazil. What results have you seen, and have your expectations been met in terms of finding skilled IT labor?

Kalra: Our first employee in Brazil was in April 2009, and since then we’ve grown to about 280 employees on the ground in Brazil. Our headquarters are in Sao Paulo, our delivery center is in Sao Leopoldo, and we’re also present in other cities like Curitiba. So we’re quite satisfied with that growth, and finding talent has not been much of a challenge.

The reception among local companies has been very good. For example we work with the largest electronics retailer in the country, among the largest apparel retailers, and among the largest publishing houses – we’re providing them with services like implementation of ERP, or ADM functions.

In terms of our business mix in Brazil, more than 85% of our business is domestic. So that has not been impacted by the currency fluctuation at all

Do you have any plans for expanding in Brazil? Has the currency appreciation in Brazil led to increased pricing pressure for your clients?

Kalra: Absolutely we will be expanding. We’ve got a very firm footing in Brazil, so we definitely believe this will be a revenue growth engine for us going forward. I think Brazil should be seen as a fairly mature and sizable IT outsourcing market in its own right. We’re focusing much more on its domestic market, and so our Nearshore component from Brazil will be much less than in Mexico for example, which is more amenable to exports because of NAFTA and its proximity to the US.

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In terms of our business mix in Brazil, more than 85% of our business is domestic. So that has not been impacted by the currency fluctuation at all.

What is the strategy for catching up to your larger Indian rivals like TCS who already have a large Latin American presence?

Kalra: Our foray into Latin America is led mainly by local business generation. By contrast, the strategy followed by our other Indian competitors is either led by Nearshore objectives and exporting services from here, or driven by one or two major customers. For example TCS’ expansion and growth into Brazil was led by one client, ABN-AMRO.

Our strategy is different – in order to have a sustainable business model in Latin America, and in order to hedge against any of the currency or geo-political risks that can affect our company, we need to have a very strong and healthy local business component. So we lead with local business units and then add exports to that, rather than leading with exports and then adding local business. Those strategies are not really comparable.

Will you be expanding into any smaller IT markets in Latin America – Chile, Colombia, Costa Rica? Anything on the table for the next year or so?

Kalra: For now we’re mainly focusing on consolidating our current centers in Latin America, so no there’s nothing on the table for the next year or two, unless some very good opportunities present themselves. As we go along, we’ll definitely look at expanding in other markets – and I think countries like Colombia and Peru will be on our radar at that time.

Are there any acquisitions that HCL is looking at in Latin America in terms of expanding your footprint there?

Kalra: We’re definitely open to looking at acquisitions in Latin America. But in countries like Brazil there are labor law related risks, a lot of paperwork, and many liabilities that could come in hidden form. So while we’re not averse to doing acquisitions, we would consider mid-size or smaller companies so that we get niche focus areas that we want or customers that we want, and limit our liability. Large scale acquisitions are not what we’re looking for.

About Tarun George

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