Within five years, Brazilian IT firm Stefanini wants international operations to account for 75% of its revenue. Such global expansion has been part of the 29-year-old company’s business strategy for years now, but this ambitious goal, which it plans to meet through both acquisitions and organic growth, highlights Stefanini’s increasingly aggressive outlook.
Stefanini, a São Paulo-based firm that provides IT outsourcing, application management and consulting, currently gets more than 50% of its revenue from the international market and this is helping it navigate through the current recession in Brazil.
The company achieve a growth of 11% in 2015, totaling 2.6 billion Brazilian real (USD 650 million). This was well above the Brazilian IT market growth average of 7.3% last year, and the company’s goal for 2016 is to grow revenue by 10% to 12%.
In January, Stefanini announced its first acquisition of the year with the purchase of the Colombian Sysman, which provides ERP management system for municipalities, states, and public services companies. The new acquisition reflects Stefanini’s growth in Colombia — 25% over the last three years — as well as the economic strength of the country. In 2015, Colombia grew at around 3%. “This was a specific opportunity to work with ERP that we found in the Colombian market,” Marco Stefanini, CEO of the company, told Nearshore Americas. “We may extend this ERP solution to other countries such as Peru, but it isn’t our focus for the global market.”
Just in recent years, the company has acquired 10 companies, including the Brazilian Tech Team and Vanguard, the American CXI and Colombian Computers & Technology, as well as Orbitall.
In spite of the company to focus on growing in developed markets such as Europe and the United States, with the U.S. market accounting for 40% of international operations, Stefanini has expanded its presence in Asia, aiming to reap long term rewards.
In the Asian market, the aim is to provide IT services for large markets such as China and Japan, as well as to use these operations as delivery centers to offer services to other countries, including the United States. Last month, Stefanini announced that it intends to expand its operations in the Philippines, which has grown at an average of 25% per year, and forecasts an increase from 1,000 to 2,000 in the number of employees in this subsidiary by the end of the year.
The aim is to use the Philippines operation as a BPO service delivery platform to others markets, especially to the United States. “Philippines offers a competitive cost of labor and the employees have a good level of English,” said Stefanini.
Aiming to expand its operations in the region, Stefanini also opened both office and a research-and-development center in Singapore last year in partnership with the local Agency for Science, Technology, and Research and the Singapore Management University (SMU). “The focus of the research center in Singapore is to develop Big Data and analytics solutions,” said Stefanini.
The plan is making the base in Singapore a hub to serve Asian countries. “Singapore has a highly industrialized economy with modern port installations and a large presence of foreign multinationals,” said Stefanini. “The country is investing in leading technology development and due to this reason we believe it has full conditions to lead the innovation process globally.”
In addition to Singapore and the Philippines, Stefanini has operations in Thailand, India, China, and Malaysia. “Besides Singapore, we have two other delivery centers in Asia, one in China, which is focused on the Chinese and Japanese markets and another in India, which is a platform to serve the U.S. market,” said Stefanini.
Competition in the Asian IT services market is very strong, especially with Indian companies. “The differential of Stefanini is that we have a large customer base, we offer services in 35 languages and further have a presence in 39 countries,” said Stefanini.
In Brazil, the research center has a broader focus. “We seek to develop solutions designed for retail, mobile, payment systems, financial, and telecom” said Stefanini.
Stefanini has taken the advantage of the devaluation of the Brazilian real to expand its operations in Brazil through acquisitions. Last year, the company acquired 40% of Saque e Pague, a self-service multi-service network based in Porto Alegre.
Stefanini also announced a merger with IHM Engenharia, focused on automation processes, as well as making a joint venture with Tema Sistemas to create Stefanini Capital Market and open a new office in Ontario, Canada.
This year, the company is negotiating a joint venture with a Brazilian company in the security sector. “Our strategy in Brazil is to acquire companies that may add new offers to our portfolio, while in the international market, the focus is to gain volume and scale,” said Stefanini.
In addition to serving the local market, the operation in Brazil serves as a delivery center to export services to offshore markets, especially to the United States. “With the devaluation of the Brazilian real, Brazil has become more competitive for exports,” said Stefanini. “However, IT exports in Brazil are still very small.”
Furthermore, despite the more favorable exchange rate, the language barrier, with few people fluent in English, the high labor cost and a high tax burden make Brazil less competitive in comparison to other delivery centers such as the Philippines, Romania, Mexico and India. “We have a high cost of doing business in Brazil,” said Stefanini.