Exclusive: IBM Wants to Turn Brazil into an Exporting Services Superpower

By Edileuza Soares

IBM’s  president for Latin America, Rogério Oliveira, believes Brazil is endowed with the right ingredients to become a major global offshore hub, but he recognizes that the market must continue offering higher levels of sophistication to stand out in the global market.

The Brazilian economy is growing faster than other emerging markets, which has spurred IBM to invest more in offshore delivery within Brazil.  The company is investing in the expansion of its service centers and trying to deliver differentiated capabilities with the objective of turning the local operation into an IT export center.

With headquarters in São Paulo, IBM Brazil runs a Technology and Global Services Center, in the city of Hortolândia, about  115 kilometers from São Paulo. With about 7,00 professionals, the unit is the second largest IBM delivery service center in the world, after those in India.

The Hub Takes Shape

The Brazilian delivery center serves approximately 200 national and international companies that are based in the United States and other regions. Services such as system monitoring and infrastructure management have become most popular, followed by business process outsourcing (BPO) for call center and human resources management. Recently, the unit received an investment of US$ 22 million for business service capacity expansion. From this total, $10 million went towards construction of a data center based on Green IT concepts and virtualization to provide solutions based on cloud computing model.

With that infrastructure, IBM Brazil is one of the main IT service providers for the external market.   Brazil generated about US$ 3 billion in 2009 in IT services and is projected to reach $20 billion by  2020, positioning the country among the top five in the world’s ranking. Clearly, Big Blue is running toe-to-toe against other majors like Accenture and HP, which expanded its base significantly after acquiring EDS.

Brazil generated about US$ 3 billion in 2009 in IT services and is projected to reach $20 billion by  2020, positioning the country among the top five in the world’s ranking.

Quality Competition is Good

“The IT exports are growing in Brazil and the country already has the capacity to turn into an offshore hub”, states Rogério Oliveira, IBM president for Latin America, who believes the local market in generating critical mass.  As an example of this, he mentioned the recent acquisition of 55% of CPM Braxis national company by France-based technology and information provider Capgemini.

For Oliveira, the fusion with the French company strengthens the local companies. “Their business makes Brazil more competitive”,  he says, adding that he’s not afraid of the competition with more than one international player. IBM tries to stand apart by selling a variety of services, including an infrastructure to business application, which according to Oliveria, other players have yet to offer.

With 38 years in IBM, Oliveira has – not surprisingly – very deep  knowledge of the services market. Instructed in Computer Science in the Universidade de Campinas and with an MBA from the Fundação Getúlio Vargas, he occupied several positions at IBM, having managed the Brazilian subsidiary between 2002 and 2007. He participated in the transformation which brought IBM out of its hardware-only focus into services.

When he took over the operation, services represented around 25% of the business and in 2006 that ratio increased to over 40%. Oliveria took charge of all IBM Latin America operations three years ago, and currently leads 20 countries in the region.

When he was leading the Brazilian operation, Oliveira was able to place the subsidiary among the top ten IBM delivery operations, among 160 facilities worldwide. Next to India, China and Russia, Brazil has emerged as a critical part of the firm’s emerging market services strategy.

Brazil Obstacles

Oliveira admits that Brazil will achieve its real offshore potential once it overcome several obstacles. He understands the difficulties the country faces in export IT services because of his role as president of Brasscom, an entity created by leading IT services executives several years ago to promote exported professional services  to the international market.

He points out that one of the greatest difficulties faced by the services suppliers is the high cost of IT labor that is double the costs of Argentina. where IBM also has delivery facilities.  Roughly 70% of service companies’ costs are payroll based, and as result they operate at a disadvantage compared with India, China and even with countries in Latin America.

Another barrier is the lack of differentiated services that add real value to the actual service. “The country has to deliver sophisticated services and not call center services”, he says, highlighting the need for investments in innovative solutions that offer competitive differentiation.

In order to provide smart solutions, IBM has just chosen Brazil to be the headquarters of two projects. One is a Rio De Janeiro operation – the third of its kind in the world – focused on developing applications for oil, gas and mining companies. The other is Research IBM, a laboratory that will search and create devices to make a more intelligent planet. Both will operate together to serve local and international client demands.

Edileuza Soares is a Brazilian journalist with extensive experience covering the IT and telecommunications markets. This is her first article for Nearshore Americas.