Nearshore Americas

Brazil Gains International Acclaim for IT Services, But Red Tape Gets Attention Too

The IT sector in Brazil has developed considerably in the past two years, but there are still great challenges for the country when it comes to being competitive internationally — especially bureaucracy and workforce issues. The good news is: Things appear to be improving, at least by one accounting. According to the newly released IT Industry Competitiveness Index, an international ranking organized by the Business Software Alliance, in partnership with the Economist Intelligence Unit, Brazil is positioned 39th in terms of being “capable of supporting a strong IT production sector.”

Brazil moved up one position from 2009, the last time the ratings were published. (The United States is ranked at the top this year, followed by Finland and Singapore.) The new Index, updated for the fourth time since 2007, benchmarks 66 countries on a series of 26 indicators covering six critical foundation areas for IT implementation and innovation: overall business environment, IT infrastructure, human capital, research and development, legal environment, and public support for industry development.

The main factor behind Brazil’s advance was investments made in research and infrastructure, but the country is still behind two of its colleagues from the BRIC countries: China is right ahead, at 38th, and India is 34th, having moved up 10 spots since the last round. Russia trails behind at 46th.

One Latin American country is ahead of all the BRICs: Chile, which came in at 32nd with an overall index score (43.2) that’s 3.7 points above Brazil`s grade (39.5). Although Chile scored better than any other Nearshore country, it slipped five points this year in the eyes of the BSA judges.

Although Chile scored better than any other Nearshore country, it slipped five points this year in the eyes of the BSA judges

R&D Good, Bureaucracy Not

Brazil earned a good grade (21.2) for its R&D environment, which weighs heavily on the final score, accounting for 25%. The country has the best such rating in Latin America — tromping Chile’s 1.4 — but is still far behind India (42.9) and almost nudging China (25.6).

The results indicate a positive scenario overall for Brazil IT. The report comments that “Government support for industry development remains steady and reasonably balanced.” But the lack of IT professionals in the country could be seen in its grade in the Human Capital category: 33.1, superior to that of China with 25.6, but still quite lower than that of India with 42.9, and Chile with 42.1.

For Frank Caramuru, director of the BSA in Brazil, what stopped the country from advancing higher in the ratings, besides the workforce problems, is the huge bureaucracy involved with everything, which slows down innovation and IT implementation.

“Restrictions to hire and fire people are a barrier especially for the IT and innovation sector, in which the market is constantly changing and that considers agility as mandatory to keep a business competitive,” Caramuru said in an interview with BBC Brasil.

China and India improved their IT fortunes since 2009 by increasing the number of students in engineering and science courses, and providing more people with a solid background in IT, he said. Both countries are now among the top 10 when it comes to human capital, according to the BSA.

Changing Centers of IT Power

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The biggest mover in this year’s index was Malaysia, which went 11 spots up in the overall rankings because of a surge in R&D activity. “It is abundantly clear … that investing in the fundamentals of technology innovation will pay huge dividends over the long term,” said BSA President and CEO Robert Holleyman.

He had what might be interpreted as a warning for the countries that currently dominate IT services. “We’re seeing the fast-growing economies of the developing world invest heavily in things like research and development and human capital,” Holleyman said. “They are moving away from a more singular focus on providing low-cost products and services. Because of that, we are moving to a world with many centers of IT power.”

This report originally appeared in Sourcing Brazil

Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

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