There is no one better than entrepreneurs Emerson Hyppolito and Mervyn Lowe Neto to prove that the popular saying “a picture is worth a thousand words” is true. Both are partners in P3D, a technology firm that specializes in developing educational programs to teach science, biology, chemistry and geography. Founded 11 years ago at the business incubator in the Center for Innovation, Entrepreneurship and Technology (Cietec) at the main USP campus in São Paulo, P3D posted sales of R$30 million in 2012 by creating three-dimensional and interactive models that show parts of the human body, animal and plant organisms, different molecules, celestial bodies and Earth landscapes, to mention a few, for use in the classroom. The library of virtual objects already has more than a thousand models that students use for elementary and secondary education in over a thousand schools in Brazil and four thousand abroad. “We do business in more than 20 countries and our software has already been translated into 13 languages, including English, German, Arabic, Korean and Chinese,” says Lowe, an economist of Chinese descent who does not hide his satisfaction with the contracts signed in the country in which his grandparents were born. Just over a year ago, he attended an education trade fair in Shenzhen, China, and returned with applications for 460 licenses. It was the beginning of one of the most promising markets on the planet. The firm’s programs, which have received many international awards in education and technology, are also used in schools in Switzerland, Spain, Germany, the United States and other countries.
P3D is part of the promising group of domestic software developers that are attempting to break into the international market to diversify their business ventures and grow. With its headquarters in São Paulo and offices in Barcelona, Spain and Shanghai, China, P3D has received support from the Association for the Promotion of Excellence in Brazilian Software (Softex) to reach beyond domestic borders and take its products to the world. Since 2005, and with the Brazilian Trade and Investment Promotion Agency (ApexBrasil), Softex has coordinated the Sectoral Project to Promote Exports in the Software and Information Technology (IT) Services Sector. Its objectives are clear: to create new business opportunities in the international market for Brazilian companies, increase the volume of exports, increase exposure and strengthen the image of the Brazilian IT industry. The purpose of all of this is to make Brazil a global center of excellence in one of the most dynamic sectors of the economy. Over 200 companies are taking part in the Sectoral Project in 15 different areas of expertise in which Brazil has recognized competencies. These include agribusiness, aviation, oil, education, leather goods and footwear, industrial automation and telecommunications.
Data from the Softex Observatory, which is the entity’s center for studies and research, show that the efforts of the last few years have paid off. “From 2004 to the present, the value of exports of software and information technology services are up about sevenfold. There has been considerable effort to put Brazil on the radar screen of companies that purchase these products,” says Glaucia Critter Chiliatto, international executive director of Softex. In 2012, foreign sales of software and IT services reached $1.9 billion, versus $260 million in 2004. IT services, as Chiliatto explains, include the development of made-to-order software as well as consulting work, support, maintenance and training.
The Brazilian Association of Software Companies (Abes) reached similar conclusions. Each year, Abes publishes the study entitled Mercado brasileiro de software e serviços (The Brazilian Software and Services Market). This study paints a portrait of the sector and indicates future trends. In the most recent document, released in August 2013, Abes stated that the Brazilian software and services industry will post sales of $27.2 billion in 2012, including $2.2 billion in exports. This figure is not quite the same as the Softex figure because the two studies use different methodologies. With this result, Brazil ranked seventh in the world of the largest software producers; this included the domestic market but not exports. Brazil surpassed countries such as Canada, Australia, India and South Korea. Also, according to the Abes study, prepared in partnership with International Data Corporation (IDC), a consulting firm, the global software and services market was valued at $1.02 trillion that year.
“The figures for Brazilian exports of software and services have increased, and it is expected that the trend will continue. However, in the global IT scenario, the level is still low, so that there is still much room for growth,” states Jorge Sukarie, president of Abes. The entity does not rank the largest software and services exporting countries, but it is true that Brazil is well below the global leaders. Exports of software and IT services from India, one of the giants in this market, reached $75 billion in fiscal year 2012/2013, which ended in July of last year.
According to the Abes executive, there are many challenges that must be overcome for Brazil to increase its presence in the global software market. “Competitiveness is key in this business. You have to know the target market, its characteristics, the legislation and the tax system. Certification using international models such as the CMMI (the acronym for Capability Maturity Model Integration, the most highly respected quality standard for software in the world), can also be very helpful, and let’s not forget innovation. Without innovation, our products will not be attractive to spur the interest of the international market,” Sukarie mentions, emphasizing that in this area, Brazil has not been efficient. “Still, there are a few cases of entrepreneurs that have developed winning software that quickly reaches international markets, but these cases are the exception and not the rule in most instances.”
Investing in a portfolio of innovative and distinctive products was the strategy that CI&T selected to win over clients outside Brazil. The company was founded in 1995 by a group of recent graduates of the University of Campinas (Unicamp). CI&T’s area is software consulting and development, with a global presence for providing services. It includes four units in Brazil (Campinas, Rio de Janeiro, Belo Horizonte and São Paulo), five in the United States (New York, Atlanta, Philadelphia, New Jersey and Los Angeles), one in Europe (London) and two in Asia (Tokyo, Japan, and Ningbo, China). The company’s line of products and services includes consulting and the development of applications, including social, mobile, cloud and analytics. Last year, CI&T invested R$3 million in research and development, mainly in smart computing and cloud computing projects.
The company’s largest international market is the United States, followed by Japan and Europe. In 2013, 30% of sales (R$200 million) were generated by sales of software to clients in other countries. The company has 1,600 employees. “The international market is always part of the CI&T growth strategy. We have a pragmatic vision: Companies that are not internationally competitive will disappear or be stuck in niche positions. For CI&T, exporting is a window to the future, an opportunity to become familiar with and learn from the real competition in the industry, in which innovation and distinctiveness are crucial. In the long run, either you become globally competitive or you will be out of the market,” says Leonardo Mattiazzi, CI&T’s Vice President of Innovation.
The greatest challenge for competing outside Brazil, according to the CI&T executive, is to stand out in an extremely competitive market in which there are companies of all sizes from many places. They are subject to pricing pressures on the one hand and the ability to innovate on the other hand. “Despite the difficulties, and even though our company is not known outside Brazil, we are moving up internationally and this is an outstanding success. Among the multinationals, such as Johnson & Johnson, CI&T is considered a leader in excellence and always wins projects that are more complex.” Certifications are one of the pillars of the company’s international success, including the level 5 CMMI, the highest level of all, earned in 2007 after investing $1 million in employee training and process upgrades. That same year, Fortune magazine chose CI&T as one of the 10 rising stars, i.e., companies that are climbing to the top in the global outsourcing market, a business in the IT area that produces software solutions for other companies. CI&T received another important recognition in 2012 when the journal Época Negócios chose it as one of Brazil’s most innovative companies.
Another Brazilian firm that has done well abroad is Daccord Music Software, based in the state of Pernambuco. This firm specializes in developing technologies for learning music. With clients in 114 countries, Daccord sells educational applications, such as digital books, courses and musical games. One of its most successful products is iChords: software that opens audio files such as MP3s and shows on the guitar or virtual keyboard the chords that are being played. In recent years, sales to international clients have accounted for about 15% of revenue. Although the figures for 2013 are not yet final, it is estimated that revenue will reach R$1.6 million, or twice the figure of the previous year. Beginning in 2015, software exports will account for even more of Daccord’s operating results. “The growth of this segment (sales to international clients) is estimated at 30% in 2015, when we will launch the platform entitled Livro Educacional Digital (Digital Educational Book) abroad,” says Américo Amorim, one of the firm’s partners. This platform is already being used by some of Brazil’s largest publishers to produce and distribute interactive digital books for computers and tablets that students and teachers use.
Founded in 2001, just two years after it began to export its products, Daccord sprang from the inspiration of computer scientist Giordano Cabral, who wanted to invent an enjoyable and easy method of teaching music using computers. The first software that was developed, Violão Player (Guitar Player), was Cabral’s master’s dissertation at the Informatics Center of the Federal University of Pernambuco (UFPE). For the first few years, Daccord was housed in RecifeBeat, the institution’s incubator, and then it moved to Porto Digital, one of Brazil’s key technology hubs. In 2010, the company, which had already won many awards, including the Finep Innovation Award and the Santander Banespa Entrepreneurship Award, took a step forward when it obtained resources from a seed capital fund known as Criatec, founded by the Brazilian Development Bank (BNDES), with the mission of providing incentives to innovative emerging companies. “Criatec worked with Daccord to help us invest in marketing, sales, and to further improve our corporate governance. It has been a successful partnership and a wonderful experience for the entrepreneurs and the company team in general,” says Cabral, for whom the main difficulty in the internationalization process has been and continues to be the identification and management of good channels for selling its products.
For producer Módulo Security Solutions of Rio de Janeiro, the greatest challenges for winning a place in the global software market was competing with global companies and tailoring the product to the local markets and the legislation of some countries, including the United States, whose governments are prohibited from purchasing foreign programs. Módulo was founded in 1985 by a group of young students studying informatics at the Federal University of Rio de Janeiro (UFRJ). It specializes in solutions for governance, risks and compliance, i.e. the set of guidelines for meeting the legal standards, policies and guidelines put in place for doing business and for the activities of an organization. Módulo works in the areas of software, consulting and education; its main export product, Módulo Risk Manager, is sold to clients in about 30 countries, including Argentina, the United States, England, India and Canada. “Microsoft, Pennsylvania State University, Sumitomo Bank and Procter & Gamble are some of our clients. Módulo Risk Manager automates the processes of managing governance, risks and compliance in IT, the corporate environment and governance for IT to identify and assess risks in the most diverse organizations,” explains Rodrigo Palo, marketing manager for the company. For two years in a row (2011 and 2012), this software was chosen as the best buying option by SC Magazine of the United States, which specializes in information technology. In 2013, for the third year in a row, Módulo Risk Manager received the highest rating (five stars) among more than 20 products that the publication reviewed.
“Módulo Security Solutions is a Brazilian firm that has internationalized. Receiving this type of critical recognition from a major magazine in the IT segment was satisfying for us because we are doing the work right and we are showcasing Brazil among exporters of technology solutions,” recounts Sergio Thompson Flores, CEO of Módulo. With over 400 employees and its own offices in the United States, Canada, India and England, Módulo posted sales of more than R$85 million in 2013, up 20% over the previous year. “The outlook for 2014 is to continue our growth strategy by developing more solutions and functionalities in the Risk Manager software. We must continue to invest as well in stepping up our international work, primarily by setting up partnerships and winning new markets for the software,” stresses Rodrigo Palo, manager of the company based in Rio de Janeiro.
Another company from Rio is PhDsoft, which is on the verge of reentering the global market of suppliers of applications and technologies for the oil sector. The main product of the firm, founded 14 years ago by former UFRJ professor Duperron Marangon, is the C4D software, a simulation program that predicts structural failures on ships, oil platforms, bridges and other large constructions. The purpose of the technology is to prevent accidents and lower costs. C4D anticipates future conditions of critical structures. This avoids accidents and it also extends service life, resulting in significantly lower inspection and maintenance costs.
Large companies in the oil sector that operate in Brazil, such as Petrobras, Shell, Transpetro and Subsea7, are already clients of PhDsoft, which plans to open an office in Houston, Texas, by September of this year. “This will be our base for operations in the US market,” Marangon says. In addition, PhDsoft is negotiating with a government agency of the province of Nova Scotia in Canada to begin selling its products to that country. “We have always pursued the goal of internationalization. Expanding our sales outside Brazil will mean a change in the level of our business,” Marangon notes.