An increasing number of Indian technology companies are expanding into the emerging markets of Latin America in an attempt to reduce their overreliance on saturating markets of the United States and Europe, says a report from analyst firm IDC.
At the forefront of this invasion are the country’s information technology and outsourcing firms whose growing dominance in the US remains a political hot-potato.
Given the IDC’s estimation, Latin America’s IT services market reached $23.97 billion in 2011 and is on pace to grow at 10.8 percent annually over the next four years.
Latin America presents a $40 billion untapped market, IDC says. Though the region has cultural similarities with India, there are many a number of unique challenges to deal with like language, the report noted.
IDC says there has been a rapid increase in IT spending in Latin America over the past ten years, and the entire IT ecosystem of the region has been transforming with greater spending on emerging technologies such as cloud computing, social web, mobility and big data.
“With markets stagnant in mature countries, Indian IT companies are looking at Latin America as the next frontier of growth. Big banks, telecommunication companies and large manufacturers have already started to outsource large chunks of their IT operations here,” said Jaideep Mehta, vice-president and country general manager at IDC India.
LatAm’s IT market is worth about $124 billion, but much of this market will remain untapped until 2016, IDC says.
The research firm has cited two IT outsourcing contracts as examples to support its argument: IBM’s recent agreement to provide IT services to Peru’s Banco de Credito and Brazil’s Caixa Economica Federal’s outsourcing deal with Indra Sistemas.
“For companies to win here, they need to be seen as serious players. This means establishing a local presence, investing for the long term and patiently developing the market. Strong local relationships and the right alliances are key to success,” reported India’s Economic Times quoting IDC LatAm’s Ricardo Villate as saying.
For Indian IT services firms, matured markets of US and Europe account for more than 80 percent of their revenues. Given the IDC’s forecast, that is now set to change.
The matured markets, according to the Indian paper, are likely to see less than 5 percent growth in the coming years.
Indian IT firms have already started capitalizing on Latin America’s booming technology market. Country’s top outsourcing companies like TCS, Infosys and Wipro have several delivery centers in the region catering to the needs of both the local market as well as their clients in the United States.