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Brazil Outsourcing Seminar Gaining New Customers and Managing Them Well

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Title: Brazil Outsourcing Seminar Gaining New Customers and Managing Them Well


1
Brazil Outsourcing SeminarGaining New Customers
and Managing Them Well
David L. Ross July 7th, 2005
2
Introduction
  • David L. Ross Partner Consultant
  • Email dross_at_itesa.com
  • Phone 312.498.4770
  • ITESA IT Enabled Services Alliance
  • Headquarters in New York City
  • Offices in New York, Chicago, Bangalore, Manilla,
    Hong Kong
  • Global Call Center/BPO/IT Consulting
  • We help clients outsource, build or market their
    operations onshore, near shore or offshore.
  • We offer strategic planning guidance, provider or
    site selection services, deal flow analysis, and
    technology/optimization studies.
  • We partner with clients for greater value and
    profit.
  • We optimize people productivity quality using
    technology enabled solutions and best
    practices.
  • Independent
  • Organizationally
  • Geographically

3
US IT Outsourcing Market Growth and Trends
  • Currently IT outsourcing
  • 17 Billion annually IDC
  • India 7.5B
  • China 1.6B
  • Canada 2.1B
  • Latin America total 135 Million
  • IT outsourcing offshore will be
  • 50 Billion by 2007 Gartner
  • 125 Billion 2008 Global Insight
  • 20 annual compounded growth each year IDC and
    reported separately by the Meta Group
  • 8 out of 10 CIOs will have offshored at least a
    piece of their business by 2015 making up a 136
    Billion market Gartner
  • 80 of multinationals will have offshore presence
    by the end of 2005 Global Insight
  • That presence is expected to diversify and
    involve multi-country strategies to reduce
    geopolitical and other risks
  • 74 of IT Managers and Directors expect to
    increase their level of IT outsourcing within the
    next 12 months - DiamondCluster
  • Aging of the US population and work force will
    lead to labor shortage by 2010 US Congressional
    Budget Office

4
Top 5 reasons US-based companies are starting
global sourcing programs
  • 1) To focus on core competencies
  • 2) To reduce and/or variablize costs
  • 3) To gain expertise that is not currently in
    house
  • 4) To increase quality, efficiency, and speed of
    delivery
  • 5) To be able to scale operations effectively
  • Source  ITESA

5
What types of work will US-based companies look
to send to Brazil?
  • Work-types US companies avoid sending offshore
  • Relationship-oriented work
  • Process where repeatable process map cannot be
    created
  • Roles with complex industry structure and/or long
    product learning curves
  • Success criteria are not well defined or
    measurable
  • Strategic aspect to the business
  • High levels of sensitive intellectual property
    are shared across wide groups of people

6
What types of work will US-based companies look
to send to Brazil?
Key service opportunities for Brazilian IT firms
  • High transaction volume
  • High repeatability
  • Low domain knowledge needed
  • Low mission criticality
  • Few touch points
  • Low complexity
  • Low training efforts
  • Non-strategic
  • Well defined process and metrics
  • Easily transmitted over electronic wires
  • Outcomes can be easily managed

7
How do US-based customers become familiar with
services?
  • Personal Relationships
  • Partnerships
  • Web Search
  • Conferences in the USA
  • Advertising
  • Direct Marketing
  • Consulate Contacts
  • Associations

8
What are the many ways Brazil can be part of
global sourcing from the USA?
  • Legal Structures
  • Build
  • Joint Venture
  • Outsource
  • MA
  • BOLT
  • Incubate
  • Quantity
  • Single Source
  • Multi-Source
  • Geographical
  • National
  • Nearshore
  • Offshore
  • Rightshore/Multi-shore

64 methods to achieve similar goals!
9
How are your potential customers conducting site
selection activities?
  • Gut Feel
  • Pro vs. Con
  • SWOT Analysis
  • Weighted Average

10
How does Brazil Compare?
CIO Insight
  • Why and How?
  • Large Labor Pool
  • Good educational system
  • Good IT skills and technical management
  • Good project management and strict following of
    process and documentation
  • Needs to control the economy and IP protection
  • Cheapest country in the region only China, India,
    Russia are less costly
  • Best amongst Latin American countries
  • Still not as advanced as India or China

AT Kearney
11
India
  • Government
  • Worlds largest democracy
  • New Prime Minister (trade reforms)
  • English common law system
  • Economy
  • Growth rate of 6 annually since 1990
  • 23 services
  • GDP 2,600
  • British accounting system
  • Advantage in experience Y2K
  • Culture
  • Family business
  • Feelings and faith over facts and evidence
  • Authority and the meaning of Yes

Source  Strategic Interventions, CIA Factbook,
And Executive Planet
12
India
  • Labor
  • Largest English speaking country in the world
  • Multi-lingual support is limited
  • Labor force 472 million
  • 1 million college graduates/year
  • Real Estate
  • 6 mature cities
  • Telecom
  • 30 million main line telephones
  • 3 international major points of contact
  • Inbound 2.9 billion minutes, outbound 800 million
    minutes
  • Total telco costs 155 of average USA based
    operation
  • High demand and waiting list for private lines
  • Steady improvement due to public and private
    investment
  • Technology
  • All major international system integrators
  • World class local technology
  • Competition
  • Intense competition for talent in major cities

Source  Strategic Interventions, CIA Factbook,
And Executive Planet
13
India Advantages
  • Low cost
  • Native English
  • Early market entrance
  • Governmental software export strategy since 1972
  • Early adoption to quality standards
  • Strong educational programs
  • Government incentives
  • Technology park development
  • Tax advantages and tax breaks
  • Low import duties

14
India Disadvantages
  • Geo-political risk with Pakistan
  • Electrical Power issues
  • 24 hour travel
  • Time zone
  • Costly Turnover
  • Salaries rising 20 annually for skilled workers
  • Mid-manager staffing difficulties
  • Cultural differences

15
China
  • Government
  • Communist since 1948
  • A complex amalgam of custom and statute,
  • largely criminal law rudimentary civil code
  • Economy
  • Command style economy
  • GDP 5,000
  • 10 in services
  • Growing 8/year
  • 2nd largest only to USA
  • Culture
  • Sun Tzu, The Art of War
  • Friends first, business later

Source  C-Solutions, Inc CIA Factbook, and
Executive Planet
16
China
  • Real Estate
  • Major cities on the eastern coast
  • Over a dozen with populations over 2m
  • Property ownership issues
  • Labor
  • 778 million labor force
  • Majority Asian languages
  • No significant English penetration
  • Importation of workers to various cities
  • Telecom
  • 500 million fixed line and mobile telephones
  • Heavily regulated with significant variation
    amongst regions/provinces
  • International fiber-optic links to Japan, South
    Korea, Russia, and Germany
  • Inconsistent infrastructure in remote areas
  • Technology
  • Dispersed and uncertain technology support
  • Issues of piracy
  • Competition
  • Not heavy competition for labor

Source  C-Solutions, Inc CIA Factbook, and
Executive Planet
17
Issues w/ China outsourcing
  • Focused on Japanese and Asia-Pacific market
  • English
  • Cultural differences and inward thinking
  • Uncertain governmental actions
  • Communist effect on property laws
  • Intellectual property theft is rampant
  • Poor infrastructure
  • Manufacturing focus
  • Poor customer service
  • Need for local representation/local partner
  • Indian offshore companies are having problems
    with offloading their own work to China

18
What India and China do well
  • Certifications
  • ISO, CMM (India 48 companies with CMM level 5),
    PMI, others
  • Government and Associations
  • Trade minister now Prime Minister
  • Nasscom
  • Leverage nationals
  • Projects
  • Financing
  • TIE
  • Diligence

19
Why would a US company choose Brazil?
  • Time Zone
  • Proximity
  • Culture
  • Diversification
  • Labor
  • Entering into Brazil market for products
  • Specific strength of a particular service
    provider
  • Specific and trusted relationship with a sales
    delivery team
  • Special deals
  • Tax advantages
  • Lines of credit
  • Local competencies not dealt with by India/China

20
Areas for Brazil to Improve
  • Two Quotes
  • "Brazil is a sleeping giant with a tradition of
    high-quality software" Computerworld
  • "Brazil has an internal market that is at least
    half a decade ahead of India," the report's
    authors wrote. "But in terms of its export
    sector, it is now where India was probably about
    a decade ago." - MIT study
  • Focus on exports - National export marketing plan
  • 2001 8 billion total with only 100 million
    exports
  • 2004 Between 100-400 million exports
  • Brazillian Agency of Industrial Development goal
    of 2 billion by 2007
  • Solve Intellectual property problems
  • Improve English skills
  • Work with universities and improve the profile of
    working in IT outsourcing for US based companies
  • Reduce brain drain
  • Further develop technology parks and free trade
    zones
  • Comply with International Standards of quality

21
Connecting with American Culture
  • Top things average Americans think of when they
    think of Brazil
  • The beach and watch your husband
  • Rio de Janeiro Copacabana and Girl from Ipanema
    ? Relaxing
  • Carnival crazy party and samba music ? Fun
  • Fuitbol/soccer Goooooooooolllllll Soccer Moms
    and Dads ? Champions
  • Racial mixing ? admiration and curiosity
  • Street Crime ? dangerous
  • Huge country in Latin America ? sizeable nation
  • Amazon and rainforest ? wild and untamed
  • Top things American Investors think of when they
    think of Brazil
  • Hyperinflation ? financial risk mostly in the
    past
  • Brazil is growing so fast that Wall Street now
    counts it in the same league as other strong,
    emerging markets like Russia, India and China.
    And some money managers even have a shorthand
    term for these four economic powers BRIC. -
    MSNBC
  • Poverty and Street Crime ? dangerous and risky
  • Coffee and commodities
  • Its like the India of South America

22
Key opportunities for Brazilian IT firms
  • Specialize and optimize horizontal and vertical
  • Follow Hot industry and horizontal market areas
  • Lobby for governmental support
  • Demand English fluency of your staff and used at
    the workplace
  • Adopt International Quality Standards
  • Learn the US Market
  • Leverage multinationals to bring suppliers to
    Brazil
  • Leverage Brazillian powerhouses to bring foreign
    suppliers to Brazil
  • More than just software ADM ERP, BPO, Call
    Center, etc
  • Improve infrastructure
  • Partnering with Indian firms
  • Pursue firms that are diversifying to reduce risk

23
Keeping customers by managing them well
  • Add on and cross sales from excellent performance
    and satisfied customers
  • Dedicated relationship manager to manage
    expectations and objectives with the client
  • Meet both hard goals of quality metrics and on
    time on budget but also soft goals of customer
    satisfaction and contentment
  • Proactively solve problems before they get bigger
  • Anticipate challenges
  • Reward staff for identifying new opportunities
    within your existing clients add on sales
    awards
  • Mirror the client organization
  • Best practices and apply methodologies when
    appropriate
  • Transcend cultural barriers ( reference English
    class) know USA culture
  • Transparency furthers a partnership
  • Be a strategic partner, conduct strategic account
    workshops proactively be a part of their growth
  • Offer not only IT services but also expertise and
    training of their staff
  • Utilize consultants to help you implement best
    practices
  • Communicate, communicate, communicate

24
Thank You!
  • David L. Ross
  • dross_at_itesa.com
  • 312.498.4770
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