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Can Brazil Become a Global Competitor in the Information Technology Outsourcing Business?

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Minicase: Can Brazil Become a Global Competitor in the Information Technology Outsourcing Business?

1. Use the theories of international trade and investment that have been presented in this chapter to help explain Brazil’s intentions and actions regarding the international information technology sector.

The IT Service industry has expanded rapidly. Many companies worldwide have made the decision to outsource this industry to offshore companies. Worldwide demand has increased growth to 40 to 50 percent on an annual compounded rate basis. Many developing nations like Latin America and Asia have made an attempt to obtain some of the IT offshoring business from countries like the United States because it is seen as not only a source for skilled labor but an opportunity to improve the economy.

Brazil has steadily become a strong competitor in the IT offshoring sector for a number of reasons. Brazil is the 11th most powerful economy in the world and has a high-rated and technologically advanced telecommunications system and network services infrastructure. In fact it has been rated higher than even China in terms of reliability. Brazil also has many solid engineering schools, which are producing many quality tech graduates. Brazil also boasts a sophisticated banking sector along with an effective marketplace for IT software and support services. Real Estate is also quite affordable for corporate undertakings.

Brazilian wages are typically 40 percent of those for the same positions in the United States, but the country boasts a lower turnover rate compared to countries like India as an example. The operating costs are lower across the board for infrastructure, taxes and incentives and labor in comparison to other nations. Another strong advantage is that of time. The time zone difference from Brazil to time zones within the United States is minimal and…...

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