Wednesday, October 31, 2012

Building And Expanding Enterprise Software Business In Brazil

While in Brazil, describing his country, one of my friends said, "We have all the natural resources that we need to be a self-sufficient country and we have had no natural disasters such as earthquakes and hurricanes. The only disaster that we had: we lost the worldcup."

This pretty much summarizes Brazil.

A helipad in front of my hotel in São Paulo.
On one side, São Paulo, the seventh largest city in the world, has one the largest per capita helipads in the world where the rich people don't like to drive around in traffic in cheap cars to avoid getting kidnapped at stop lights. On the other side, it is one hell of a city, just like Mumbai - large, organized chaos, and money. It is growing and it's growing fast. While income inequality has been on a steep rise in emerging economies as well as in the western world, it is declining in the Latin American countries, especially in Brazil.

If you're thinking of building or expanding enterprise software business in Brazil, now is the time. This is why:

Developing to a developed economy

Brazil has been boxed into BRIC economies but in reality it behaves more like a developed economy with lingering effects of a developing economy. Even though corruption is rampant in Brazil, it exists at much higher level and a common man typically doesn't suffer as miserably as he/she would suffer in other countries such as India. Being a resourceful country, there are all kinds of jobs. The bureaucracy will break and the infrastructure will also catch up very soon due to the soccer world cup in 2014 followed by the Olympics in 2016. Don't apply your BRIC strategy to Brazil. Consider Brazil as a developed nation and aggressively expand.

Courtesy: Economist
Stronger middleclass

Middleclass has money and they are willing to spend. Brazilian tax laws are the most complex laws that I have ever seen.  Even though the global retail brands are present in Brazil, they are outrageously expensive. Making a weekend trip to Miami to shop is quite common. Even after paying for a plane ticket and hotels it is cheaper shop in the US. The retailers in Brazil are trying to better understand this behavior and the global brands are also looking at several different ways to market to this middleclass. As an ISV this is a gold mine that you should not be ignoring.

Local to Global

Following the nation's growth many local companies in Brazil are aspiring to go global, establishing their business in developed economies. Local ISVs neither have scale nor features to support these efforts. These companies (typically mid to large) are looking at global ISVs for help, and yes, they are willing to spend.

Then you ask, if it is this obvious, why aren't global ISVs already doing this. They are. It's obvious, but it is not that easy. These are the challenges you would run into:

Complex localization

Many global ISVs have given up localizing their software for the Brazilian market. The tax laws are extremely complex and so are other processes. If you are truly interested in the Brazilian market you need to build from scratch in Brazil for Brazil. Hire local talent, empower them, and educate them on your global perspective. Linux and related open source software talent is plentiful in São Paulo. These developers are also excited about the cloud are are building some amazing stuff. I would also suggest to either hire or partner with local domain experts as consultants, who can work with a product manager, to truly understand the nuts and bolts of local processes, laws, and regulations.

Rough sales cycles

Selling into large accounts is not easy. Work with partners for a joint go-to-market solution or have them lead or participate in your sales cycle. The sales cycle is not fair and square and the purchase decisions are not just based on merits of your offering. Even if customer likes a product, commercial discussion are a huge drag, from the sponsor, to buyer, to all the way up to purchasing. Be patient and take help of local experts to navigate these roads.

My taxi driver watching a live soccer game while driving
Language and culture

Speaking Portuguese is pretty much a requirement to get anything done. But, if you speak Spanish, you could get around and also pick up a little bit of conversational Portuguese. English-only approach won't work. Do not even attempt. Also, Brazilians don't like to be called Latin Americans. They like to be called Brazilians; avoid any Latin American references. While you are there, learn a thing or two from an average Brazilian about fitness. Unlike Americans, the Brazilians are not into junk food. At a churrascaria, they eat salad followed by meat followed by some more meat. If you wonder why they are so fit, especially in Rio, this diet perhaps explains. They do enjoy their lives and sip Cachaça at the beach, but they are damn serious about working out.

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