Observations From Brazil

My first whirlwind trip to Brazil confirmed much of what I’d expected.  Brazil is booming.  Traffic in the cities is horrendous.  The buzz of helicopters in Sao Paulo is incessant.  And, there is huge opportunity for IT vendors and services providers.  But contrary to what I had expected, IT preparation for the upcoming mega-events seems to be getting off to a slow start. 

Several analysts from Forrester traveled to Brazil this week to participate in events sponsored by the Brazilian Chamber of E-Commerce, the Brazilian Association of Information Technology and Communications Companies (BRASSCOM) and the Brazilian Association for Promoting the Software Export (Softex), and iO2. 

We also met with a distinguished list of Brazilian IT services firms in both Rio and Sao Paulo, including PromonLogicalis, CMP Braxis, Cast, BRQ, Dimension Data, CI&T, iO2, and Sedna Partners. 

What did we hear?

  • Good times for Brazilian IT industry, which was recently among the strategic industries given a tax break to promote its competitiveness.
  • Currently many Brazilian IT services firms are experiencing 30%-40% annual growth. 
  • And, many are looking to double their revenues in the next few years.
  • Unlike their Indian counterparts, they have built their businesses domestically with 80%-90% of their revenues coming from Brazil.  Great partners for vendors looking to enter the Brazilian market.
  • They plan to further exploit the growing internal market but also interest in becoming increasingly relevant international players.  
  • They are not low cost outsourcers; they all try to differentiate based on skill and innovation. 
  • Although the new tax cuts will help the industry’s competitiveness, there is more to do such as addressing the skilled labor shortage by improving and increasing the availability of education. According to one services firm we spoke with, 70% of technology employees receive job offers every month.  Human capital constraints are a major issue.

One surprise I did have was how little mention there was of IT for the World Cup and the Olympics.  Yes, there is talk of the upcoming mega-events but not necessarily from an IT perspective.  We heard from several people that IT will be an afterthought to the Games.  And, with concerns about corruption and the complexity of working for the government, some firms find government work daunting.  Others are ready, but not yet engaged.  Dimension Data mentioned its experience in building connected stadiums in Cape Town, South Africa. And, CI&T is currently building mobile, social applications for several of the sponsors of the Olympics but is still working on London, not Rio.

As for smart cities, as I presented at the Brasscom/Softex event, Latin America is the most urbanized of the developing regions – behind only North America.  Latin American cities are no exception to the pressures of urbanization.  That translates into huge opportunity for IT vendors – once the cities themselves embrace IT as a tool to address both urban pressures and address competitiveness.

I will be going back to Brazil in November to investigate further.  As you can see in my photo above, I didn't get a clear enough picture this time!

Comments

There are many "Brazils"! The

There are many "Brazils"! The Sao Paulo Brazil is not the same as Rio de Janeiro Brazil... I think it is neither in one or two trips that you will get to know this great country.

November is a great month to visit Brazil in the same work: hot, hot! :)

I will follow your adventures because we are also exploring ways to enter Brazil with our SaaS solutions.

Absolutely agree

Thanks for the comment, Daniel. I agree wtih you, and recognize that after only a week I did not even scratch the surface. We have some interesting data on technology adoption in Brazil, including attitudes toward SaaS. Let me know if you'd like to set up an inquiry.

Thanks Jennifer. I share with

Thanks Jennifer.

I share with you some of our main challenge when we approached the Brazilian market.

First of all … language! Although we are a Portuguese SaaS developer, Brazilian Portuguese was treated like any another language: we used a “Brazilian Portuguese” translator.

A second question was online payments. In a B2B environment (for example we have a SaaS solution for law firm – www.lawrd.com), credit card are not often used by corporation. In Brazil they use a system called “banking boletos” to make payments. We needed to find a payment partner that used this feature because PayPal does not have it. After some talks and meetings we found PagSeguro from UOL.

Third question: very complicated fiscal system. If someone wants to open a Brazilian branch, first talk to a Brazilian accountant because there are some differences between the Brazil states regarding taxes.

Fourth question: Brazil is a very bureaucratic country. To open a bank account you will need someone with fiscal residence in Brazil. To buy a .com.br you must have also a corporation with residence in Brazil. It is better to have a Brazilian partner for these issues.

Well … my 5 cents and sorry for my poor english! :)