Having opened a 4,000-seat delivery center in the Brazilian city of Londrina last August, India’s Tata Consultancy Services (TCS) plans to continue its expansion in the country, in the three cities in which it already operates.
“We are very positive about Brazil and we are investing heavily, and we aim to grow our workforce in the country to 4,000 in the medium term”, from the current 2,200, Tushar Parikh, TCS’s country head for Brazil, told Nearshore Americas in an interview.
“There is potential for growth in Brazil, we are meeting our expectations, but we want to be more aggressive, and we expect more growth this year than in 2018.”
“We want to expand further and over the next couple of years, but in the locations that we are already present in,” which are São Paulo and Rio de Janeiro, in addition to Londrina, he said.
“Our expectation for growth in Brazil is good, and our strategy here is to serve Brazilian customers. We are not looking at exporting services from Brazil,” he said, explaining that the company entered Brazil in 2002 and its strategy for the country differs in that respect compared to other markets.
“Brazil is a big market and initially we made some changes to our strategy, focusing on core, local customers, over the last 7-8 years we have started focusing on more global and regional clients.”
“We work on a country-growth strategy, but which is line with our global strategy,” he said.
“Growth is going in the right direction and we have grown every year in Brazil for the last five years,” he said, adding that the company serves three categories of client in the country: local, regional and global players.
Brazil is the only Latin American country ranked within the top ten of AT Kearney’s 2019 Global Services Location Index (GSLI), occupying ninth place, having slipped four places since the previous index was published in 2017.
However, a country slipping down the index is not necessarily an indication of it performing poorly, but rather it being overtaken by other countries, Johan Gott, a principal at global strategy and management consultant at AT Kearney, and co-author of the GSLI, told Nearshore Americas in June.
“Mexico and Brazil have been in the top ten before and are the main contenders in Latin America, but Brazil is less cost-competitive, although it compensates for that by being large scale, and due to the sophistication of the labor force,” he said.
“TCS is something of a pioneer in Londrina,” Parikh said, and which has contributed to it becoming an emerging tech hub, and where he expects the competition to also set up shop, citing the example of how TCS’ arrival in Guadalajara, Mexico, spawned the arrival of other companies in the business process outsourcing (BPO) and software development spaces.
“We have got good results from Londrina,” Parikh said.
“It’s too early to say if competitors will also come to Londrina. So far we do not see competition as a risk, but competition is also good, because it creates an environment for employment,” he said.
“We studied Londrina for about two years and it is attractive for various reasons, such as the resource pool, the infrastructure capability of the location, and the real estate is more competitive cost-wise than in Brazil’s larger cities,” he said.
Among Londrina’s other attractions and the reasons for its emergence as a tech hub are its good talent pool, “with seven or eight good universities, and which TCS collaborates with”, in addition to its proximity to other cities within Paraná state that are a commutable distance, thus widening that talent pool, Parikh said.
And in order to further nurture that talent pool, TCS has been investing in the local population, he said.
“We believe in creating talent and making people ready for this sector, and we have had a lot of support from universities, especially in Londrina,” he added.
According to the Organisation for Economic Cooperation and Development (OECD), Brazil is among the countries with the lowest student participation in science, technology, engineering and mathematics, at 17%, compared to the average of 24% among the 34 OECD member countries.
And according to IDC Brazil, there are currently more than 100,000 vacant positions in the technology sector in Brazil.
“To change this scenario, supporting the local talent is part of our strategy, investing hand in hand, preparing us for the Business 4.0 era, Parikh said. “We also started our Enable program four years ago to help people in under privileged areas to learn new technologies and give them better job prospects.”
The way we have trained people has led to economic growth in those locations. We work together with universities to upgrade their courses so that graduates have the technical capabilities that the market demands. Londrina is now identified as a technology pool by the government. Education is part of what we do at a global level,” he said.
In 2017, TCS expanded its goIT digital education program to Brazil, striking an agreement with the government of the state of São Paulo to train youths in IT.
Parikh said the main sectors the company serves in Brazil are banking, financial services and insurance, mining and retail, and manufacturing and life sciences.
“BFSI services are growing across Latin America and Brazil is leading that growth, but the sector is also seeing growth in Mexico and Colombia, followed by Peru and Chile.”
“Both Brazil and Mexico are important for us, in terms of size Brazil is bigger, but Mexico is not a market to be ignored, from a BFSI perspective, and we are expecting both countries to grow,” he said.
Investor optimism returns to Brazil
Both countries recently elected new presidents, in Mexico the left-leaning Andrés Manuel López Obrador, who has caused concern among investors with the cancelation of an already under way US$14 billion airport project for Mexico City, while Brazil’s Jair Bolsonaro is perceived as more pro-business and investor optimism has increased since he took office.
“It really seems now we have a more stable environment at least, [and] we are going to see the country grow independent of what happens in politics, at least over the next couple of years,” Marianna Waltz, managing director for Latin American corporates at Moody’s, was quoted as saying by the Financial Times in April.
However, Parikh remains cautious about the economic prospects of both countries.
“I would say that there is so far no significant positive or negative effect since the new governments took office in Brazil and Mexico, it’s too early to say, and we hope that things will pick up economically in the second half of this year.
As part of its efforts to diagnose what its customers need, TCS recently carried out a Business 4.0 survey among some 1,200 respondents and made the results public.
“In Brazil we are focusing on Business 4.0, and which consists of four pillars: Agile, intelligence, automation and cloud, and we are trying to support all our customers in these areas. Location-independent Agile, and which involves projects across various locations, and we do a lot of work in Brazil in AI and automation and robot process automation.”
“We are seeing that all four pillars are generating a lot of reaction among our customers,” Parikh said. “Our study reveals a strong link between Business 4.0 maturity and technology adoption.”
And Parikh added that, as it grows, the BPO will be forced to evolve.
“BPO is facing the challenge of evolution, it is important for businesses to transform the way they operate the increase their revenues and I see a lot of opportunity in Latin America for more cognitive solutions,” he said.
In its annual report, published in May, TCS said it foresees more and more entrepreneurs in Latin America, India, and South Africa, investing in digital transformation, and in April, the company joined forces with Google to develop cloud solutions in a bid to capitalize on the growing demand for cloud in the digital services industry.