The New Economics of Outsourcing

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Brazil is a Beneficiary

Indian providers, including Tata Consultancy Services (TCS), Wipro, and Infosys Technologies are trying to build similar global networks as well. TCS made the decision to move into Latin America about six years ago and now has 5,571 workers in Mexico, Argentina, Brazil, Chile, Colombia, Ecuador, and Uruguay. TCS serves customers such as General Motors (GM), Goodyear (GT), and Motorola (MOT) from the region.

"Two-thirds of our customers use more than one location," says Gabriel Rozman, executive vice-president for emerging markets at TCS, adding that after the terror attacks of September 11, many U.S. companies realized the risk of outsourcing to only one location. Still, while the U.S. dollar has held fairly steady against the Mexican peso and Argentine peso in the past five years, it's dropped nearly 49% against the Brazilian real and nearly 39% against the Colombian peso. "We're not in great shape with [some] currencies in Latin America either," says Rozman.

The dollar's decline aside, even Brazilian firms are benefiting as companies spread their outsourcing around. "We're seeing increased demand, and it has been accelerating in the past three months," says Alvi Abuaf, president of North America for CPM Braxis. He says that the labor pool of IT workers is about 1 million in Brazil and growing at about 100,000 per year. Like Softtek, CPM Braxis positions itself as a complementary service to India. Adds Abuaf: "Latin America has been overlooked over the past two decades, but companies are realizing there is a viable alternative, and it's more viable today than it was before."

Already, Softtek is moving global delivery centers into smaller Mexican cities in an effort to avoid the competition for talent happening in places like Monterrey and Guadalajara. "The demand for talent is going to get bigger and bigger in the next five to eight years," says Lopez.

For more, see BusinessWeek's slide show.

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India Offshore Outsourcing
Global Outsourcing
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Information Technology Expenses

King is a writer for BusinessWeek.com in San Francisco.