By Tarun GeorgeWith over $300 million in revenue, and a presence in nine countries in Latin America and Europe, Neoris has made a name as one of the big players in homegrown Nearshore IT services. The company is also being eyed by larger sourcing firms especially from India, and many wonder if a deal may be on the way.
In Part 1 of this special interview with Nearshore Americas, we asked CEO Claudio Muruzabal about his vision for the company this coming year, and whether the acquisition rumors and plans for a Neoris public offering are true. Read what he has to say below.
What do you see for the Nearshore outsourcing industry in 2011? Can Latin America compete with the Indian IT players, and what role is Neoris playing in that vision?
Muruzabal – What has happened in the last couple years is that the concept of nearshore services out of Latin America has been fully validated. Demand from the US has been growing significantly, more than for any other geography, and we’re very excited about the opportunity for the future. The LatAm market is robust and becoming more specialized and more sophisticated than it was even two or three years ago.
At Neoris we’ve taken the approach of making sure we play in the value added segments of the market. We target large global multinationals with a strong focus on SAP and IT support, and we’ve found that the talent pool available in Latin America in that space is attractive and competes very well with Indian talent. And in a few cases you’ll find that the Latin American culture and affinity to the US creates an environment of efficiency and innovation that completely differentiates the destination from other parts of the world.
Talking about Neoris in particular, can you give us an idea of who your main customers are? What is your typical client profile?
Muruzabal – The major share of our clients are large US-based multinationals that have invested significantly in IT and require both support for their infrastructure (typically SAP-centric infrastructure), and development of auxiliary applications that are client focused and not packaged solutions.
The way we approach the market is by having a combination of consulting capabilities onshore, with consulting and software development nearshore. We don’t follow the usual model of having a sales organization in the US and a delivery organization in the nearshore. I’m convinced that the best direction is to have a consulting delivery model – meaning that we have centers that can support clients from different geographies like Latin America and Eastern Europe.
Are those customers growing strongly, or they seeing increasing pricing pressure in the Nearshore market?
Muruzabal – The recent changes in the economy have definitely grown the appetite to look for lower cost application support and software development, and the nearshore has been a winner in that. For about a year we’ve been entertaining clients that have an India + 1 strategy, but more and more we’re seeing cases where it’s an Indian replacement they’re looking for, not a complement.
From our own client base we haven’t seen much decrease in volume, but the opportunity for us is to grow our share within existing clients. It’s not very difficult to do because in the high end value added segments of the market, the price-performance ratio of the nearshore is still very attractive compared to other locations.
Neoris is seen as a top acquisition target for many larger global outsourcers. Why have you consistently resisted those kinds of opportunities? Are there any offers on the table that you’re considering in the coming year?
Muruzabal – Our shareholders are happy with the performance of our company and the success we’ve had over the last few years, and they’re committed to supporting our growth and development into a larger player. At this time we’re completely focused on growing the business and making sure we’re a long term partner for clients. That’s important because we only work with a very limited number of clients on a global basis – so we can ensure that those clients have the appropriate management visibility and the support required to execute projects that in most cases are mission-critical. So no, there’s nothing on the table in the coming year in terms of acquisitions.
Nearshore Americas has heard rumors of potential plans for Neoris to go public in the next few years. Is there any truth to that?
Muruzabal – Well we actually have the resources that we need for building our business at the moment, and our continued maturity in this space is really all we’re focusing on for now. An IPO or any other change to our shareholder structure is something that is in our greater scheme for much later in the future. But at this point there are no plans to change that.
Stay tuned for Part 2 of this special interview where Muruzabal discusses plans for expanding Neoris into other regions.