IT firms cautious on local operations in Latin America

Written by Rachana Khanzode | Mumbai, Aug 19 | Updated: Aug 20 2008, 07:36am hrs
Large Indian IT companies, which have major operations in most large geographies like the US, Europe and Asia are cautious in approaching Latin America (LatAm), potentially a big market for these companies.

Although most large IT companies like Infosys and Wipro are considering it as an option for delivery centers, they are not keen on ramping up operations for the local market immediately. This is largely because the local market in LatAm is yet to open up, say experts. However, LatAm is an attractive location for delivery centres for the US due to time zone proximity while for Europe, it provides language skills.

Milan Sheth, partner-outsourcing advisory, Ernst & Young, said, It is strategically important for IT companies to have a delivery center in LatAm in a bid to service global clients. However, the IT buying market in LatAm is less mature at the moment and therefore, we see a cautious approach towards it.

Laxman Badiga, chief information officer, Wipro Technologies said, We are not looking at ramping up immediately in LatAm as we are not seeing the local market maturing enough. Also, LatAm is not competitive compared to India in terms of the total cost basis, added Badiga.

Interestingly, the business and cultural environment in LatAm too remains a challenge for these companies. Infosys, which plans to set up a few centers in the next 12-24 months feels a need to establish its brand. Dheeshjith VG, vice president, new markets & services, Infosys, says, The LatAm IT market is largely untapped and an important market for us. We, therefore, want to establish the Infosys brand for stakeholders and convince the customers that outsourcing is important even if cost arbitrage is not a significant factor.

However, Tata Consultancy Services (TCS), that has 4.8% of its revenues coming from LatAm, plans to focus on the local market. A TCS spokesperson said, We strategically focus on local as well as global customers in the region. Also, we intend to replicate the success of our Chile and Ecuador BPO operations across all other countries in the region.