Title: Brazil Outsourcing Seminar Gaining New Customers and Managing Them Well
1Brazil Outsourcing SeminarGaining New Customers
and Managing Them Well
David L. Ross July 7th, 2005
2Introduction
- 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
3US 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
4Top 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
5What 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
6What 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
7How do US-based customers become familiar with
services?
- Personal Relationships
- Partnerships
- Web Search
- Conferences in the USA
- Advertising
- Direct Marketing
- Consulate Contacts
- Associations
8What 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!
9How are your potential customers conducting site
selection activities?
- Gut Feel
- Pro vs. Con
- SWOT Analysis
- Weighted Average
10How 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
11India
- 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
12India
- 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
13India 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
14India 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
15China
- 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
16China
- 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
17Issues 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
18What 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
19Why 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
20Areas 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
21Connecting 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
22Key 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
23Keeping 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
24Thank You!
- David L. Ross
- dross_at_itesa.com
- 312.498.4770