Nearshore Americas

What’s Fueling the Sonda Acquisition Spree?

When the biggest IT company in Chile announced it was planning to spend $500 million on acquisitions between this year and 2012, it apparently wasn’t just blowing smoke. Going where the money (and expertise) is, most recently Sonda picked up innovative Brazilian IT services firm Kaizen.

Sonda’s buying streak now includes Brazilian IT services provider Telsinc; Mexican IT company NextiraOne; and Bogota-based software developer Red Colombia. In 2007, Sonda purchased Brazilian provider Procwork.

The Chilean company delivers IT solutions in nine Latin American countries, but clearly wants a bigger slice of Brazil. IT spending there will be “nearly $114 billion in 2012,” according to research firm Gartner. The IT market there is “largely unsaturated, with plenty of room for growth,” the analysts say.

Besides a better foothold in Brazil, Sonda is gaining more capabilities and more outsourcing services it can offer customers (as well as more locations to serve those customers). Kaizen is an interesting pick-up because its development toolbox includes virtualization, cloud computing, and security solutions. Kaizen claims 150 customers around the world and has partnerships with VMware, EMC, and SAP.

“Kaizen is a ‘rising star’ in the Brazilian IT market,” Fernando Belfort, Frost & Sullivan research analyst for Latin America IT, tells Nearshore Americas. Kaizen has “strong expertise in high-growth markets such as virtualization, advanced consulting services, as well as application development,” Belfort says. “This acquisition will definitely be important to strengthen Sonda’s IT services portfolio in Brazil.”

We’ve also heard that Sonda is eyeing an acquisition in the States. With the US economy hurting, and the M&A market heating up, that is not far-fetched.

US Potential

What these buy-ups mean for the nearshore outsourcing community is that more US firms could be doing business with Sonda, or one of its entities, in the not-too-distant future.

“For any buyer working in Latin America, Sonda becomes an important vendor to consider now along with the big global companies and Indian suppliers,” says Anand Ramesh, research director at Everest Research Institute. “Sonda’s acquisitions strengthen their position in Latin America, and expand the services they can offer. For buyers, it makes Sonda a more viable contender.”

New Brazilian Powerhouse?

“Together with Brazilian companies such as Tivit, Totvs, and Stefanini IT Solutions, Sonda is currently one of the few local IT services companies that can compete with the global IT giants for IT contracts with key clients in Latin America,” Belfort says. “The acquisition of medium-sized local companies arms companies like Sonda to compete with the global IT service providers.”

Sonda has worked with some very large global clients, including Coca-Cola and Walmart, but it’s not exactly well known in North America. Yet. The firm is talking to a U.S. company about a partnership involving cloud computing, as chairman Andres Navarro has admitted. He didn’t name names but said vaguely that the goal is to “eventually be able to merge our cloud computing operations in the U.S. and in Latin America.”

We’d guess VMware or Cisco will appear in a future scenario. And that’s where recent acquisitions could fit in: Kaizen has a partnership with VMware, and Telsinc with both VMware and Cisco.

We’ve also heard that Sonda is eyeing an acquisition in the States. With the US economy hurting, and the M&A market heating up, that is not far-fetched.

Is Sonda itself likely to be snatched up?

“In some ways they seem attractive to big suppliers looking to expand into Latin America or increase their capabilities or clients there,” Everest’s Ramesh told us. “But at Sonda’s size, it would be a huge and complex acquisition, and a big-ticket deal.” That ticket could be $1 to $2 billion. “I wonder if anyone has that kind of appetite right now.”

The really big players already have reasonably good LatAm capabilities, Ramesh says. But set aside the financial and integration issues and “it could be an interesting deal for one of the big Indian companies.”

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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