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Why is IBM Tying up with Brazil’s Most Famous Billionaire?

Why is IBM Tying up with Brazil’s Most Famous Billionaire?

By Filipe Pacheco 

The encounter of two giants: one of them is IBM, a global IT provider, and the other is Eike Batista, the richest man in Brazil and the commander of a corporate empire in the country. Together, they closed a deal that includes the construction of an industrial tech center and the supply of outsourcing services of around US$ 1 billion in a ten year interval.

Batista is the head of the EBX Group and the agreement that has been under the spotlight of the local market last week involves the selling of 20% of SIX Automação, a subsidiary of SIX Soluções Inteligentes, the technology branch of the EBX Group. SIX Automação is a technology provider specialized in systems for the utilities and marine sectors.

The Agreement

According to a joint communique issued by IBM and the EBX Group, the “strategic partnership” has three main purposes:

1) IBM’s investment in SIX Automação;

2) The creation, within SIX Automação, of a development center for tech solutions and research and development (R&D) focused mostly in the infrastructure and natural resources segments; and

3) The outsourcing to IBM of operational activities of the EBX Group over a ten year period.

SIX Automação was created in October of 2011 after the acquisition of AC Engenharia, a company that was active in the Brazilian IT industry for over 18 years. IBM’s contribution to SIX Automação should be mainly focused in the Oil and Gas, Mining, Naval Engineering and Ports sectors.

According to the terms of the agreement, IBM will provide IT services for the EBX group until 2022, which include operational and support services and development of new IT solutions for the group. The partnership also previews the creation of an industrial solution center for clients from four Latin American countries (Brazil, Chile, Colombia and Peru) — the location of the center was not disclosed, though. The EBX Group which currently employs  around 20,000 people, will invest approximately US$ 15.5 billion over 2011 and 2012 in the Brazilian economy through its different business. For the next ten years, the group expectsto invest more US$ 50 billion in its operations.

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“Partnering with one of the largest technology companies in the world offers EBX Group a broad portfolio of modern IT solutions,” Batista said in a statement. “IBM, in turn, will expand its presence in one of the most promising markets in the world, working with a group that has a significant presence in strategic sectors.”

“The broad knowledge of the business of EBX opens significant opportunities to participate in the development of markets inside and outside of Brazil. IBM will bring innovation and high technology that will contribute to the development of the country,” said Ricardo Pelegrini, president of the Brazilian IBM unit.

This is the second “billion-dollar” deal announced by EBX in 2012. In March the Mudabala investment fund, owned by the government of Abu Dhabi, announced an investment of US$2 billion in EBX, through the acquisition of about 5% of the shares of the group.

According to Gartner’s latest IT spending forecast, emerging markets, including Brazil, will account for 31% of global IT spending in 2012. Latin America will collectively spend up to US$326 billion on IT during the year, the research firm predicts.

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