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Innovate to reinvent

Brazilian IT services multinational Stefanini backs R&D to help it achieve 85% of its revenue from digital solutions

Alex Williamson / Getty ImagesStefanini, a Brazilian IT services company with annual revenues of R$2.6 billion, is reinventing itself. The company is currently seen as a provider of IT support and maintenance, service desk, field service management, and business process outsourcing (BPO). In five years, it wants to be recognized as a digital solutions company for the financial, retail, and public administration sectors, as well as being able to support the transition to industry 4.0, where production processes utilize advanced technology such as artificial intelligence, the internet of things, cloud computing, and cyber-physical systems (machines or equipment that interact with computer components). Based in São Paulo, the company wants digital business to represent 85% of its revenue by 2022. In 2016, it accounted for 26%.

“We concluded that we needed to change our focus, or the company would go out of business within five to ten years,” says Digital Business and Innovation director Breno Barros. Stefanini’s restructuring strategy, which began last year, is based on investment in research and development, and the acquisition of innovation-focused startups and businesses that complement the company portfolio.

It has already acquired 14 companies since 2011, including Document Solutions, a specialist document digitization and processing company; Orbitall, which operates in the payment systems sector; Top Systems, which provides financial transaction solutions; Woopi, a company that develops self-service systems based on artificial intelligence; and IHM Engenharia, which specializes in industrial automation.

The Innovation Board, led by Barros, was established in early 2016 to coordinate this restructuring process. In its first year, its research, development, and innovation (RD&I) budget was equivalent to 5% of global revenue. In 2017, it has risen to 7%, and is expected to gradually increase to 10%, or even higher. “We are looking at opening up the company’s capital as a way of directing more resources to innovation.”

Company
Stefanini
R&D center
São Paulo (SP)
No. of researchers
140 (Brazil and abroad)
Main products
Digital banking platforms, cognitive service systems, industrial automation solutions

Digital bank
Stefanini is starting to see the first results of its R&D efforts and technology acquisitions. In September 2016, the company launched one of the first integrated digital bank platforms on the Brazilian market, composed of a core banking solution that offers financial transaction management, a credit and accounts opening platform, document fraud analysis, automation of customer contact channels such as ATMs, and back-office operations.

“We can set up a complete digital bank within six months, while our competitors sell separate digital solutions for each banking activity,” says Barros. In 2016, online and mobile banking together accounted for 57% of the banking transactions carried out in Brazil, a figure which is expected to reach 80% within the next 10 years.

In April 2016, the Brazilian Central Bank authorized online-only checking accounts, requiring no face-to-face contact between clients and banking institutions. Almost one million online-only accounts were opened in the country within a year, with another 2.2 million expected by the end of 2017. Online accounts offer customers greater convenience and lower costs.

Wander Cunha, executive director of Business Consulting at Stefanini, reports that the company first began planning to develop an integrated digital banking platform in 2015. In September of that year, the company requested R$21 million in funding from the Brazilian Funding Authority for Studies and Projects (FINEP), but started work using its own resources before the grant was approved in 2017.

Cunha believes that this pioneering spirit can create the perfect opportunity for Stefanini to establish itself in this market. “We are aiming to conquer 30% to 40% of the Brazilian digital banking platform market,” he says. The first contract has already been signed with cooperative bank Sicredi, which has 3 million members in 20 Brazilian states.

Stefanini Virtual assistant generated by the Sophie cognitive service platform: used in call centersStefanini

Sicredi’s digital platform is being implemented by Stefanini’s Porto Alegre office, with support from the Science and Technology Park (TECNOPUC) at the Pontifical Catholic University of Rio Grande do Sul (PUC-RS). Stefanini was one of the first companies to partner with the technology park, soon after it opened in 2003. According to Marcelo Barradas, regional director for the south of Brazil, the innovative environment created by TECNOPUC played an important role in adapting global digital banking solutions to Brazil, since the account opening processes, regulatory standards, bank accounting, and security instruments differ from one country to another.

In 2016, Stefanini’s relationship with TECNOPUC was strengthened by the establishment of a joint laboratory with the PUC-RS School of Information Technology. The facility has a fixed staff of three researchers—which should soon be reinforced by two more—and three interns. “The partnership is really positive for the company, which adds value to its products by collaborating with university specialists, and it is great for the college, where professors and students are given the opportunity to apply their knowledge to real problems and create innovative solutions that actually go to market,” explains Ricardo Bastos, director of the PUC-RS Technology Management Agency.

Another recent innovation is the Sophie cognitive service platform, which is capable of interacting with human users and systems through a growing set of text and voice interfaces, managed by Artificial Intelligence (AI) algorithms. Like all AI platforms currently available on the market, Sophie uses neural networks capable of pattern recognition and machine learning, meaning it can evolve without being specifically programmed. IBM, Google, and Microsoft already offer tools with these features.

Sophie, however, is one of the first platforms created specifically for customer service systems such as call centers, says Alexandre Winetzki, founder and president of Woopi, the company that developed the platform. “While other platforms deal equally with data, photos, and images, our approach was to focus on human language, semantics, and natural language processing,” he explains.

The platform was developed in Portuguese, with English and Spanish versions on the way. Sophie is already in the approval process with 20 potential clients: 18 in Brazil, one in the United States, and one in Europe. Emprel, an IT company from Recife, was the first to sign a contract for the platform.

Focus on automation
Industrial automation is another business sector in which Stefanini is investing in order to expand its digital solutions. In 2015, the company acquired IHM Engenharia, a company founded in 1994 and based in Belo Horizonte that has worked on more than 800 automation projects in a range of industries. IHM has an R&D team of 15 automation and artificial intelligence researchers who are now dedicated to developing industry 4.0 solutions.

IHM Engenharia was responsible for developing a system that mitigates risks and prevents stoppages of the Anglo American Minas-Rio mineral pipeline. At 529 kilometers, it is the world’s largest mineral pipeline, connecting an iron ore mine in Conceição do Mato Dentro, Minas Gerais State, to Açu Port, in São João da Barra, Rio de Janeiro State. The HMI system automatically checks each stage of the operation and sends information to a control room, eliminating the need for employees to physically inspect the pipeline to verify that it is functioning correctly. The process reduces incident response times and limits the occurrence of problems. “We used deep learning techniques to develop a mathematical model based on historical data on the process, enabling the system to predict anomalies such as blockages or leaks, and thereby reducing the risk of environmental accidents or significant loss of productivity,” says Breno Barros.

Anglo American View of the processing unit for the Minas-Rio pipeline, which uses an automation system developed by IHM Engenharia, a Stefanini company. The system was designed to make operations safer along the 529 km pipelineAnglo American

New paradigm
The Stefanini Group’s innovation structure and operations are decentralized: each incorporated company develops its own projects and has its own staff dedicated to the research and development of products and services. The nucleus led by Breno Barros is responsible for coordinating the work and creating synergy between the various units. The team is composed of about 140 researchers in total, all working full- or part-time on the group’s innovation projects in Brazil and abroad. In addition to TECNOPUC, the company has partnerships with the Getulio Vargas Foundation (FGV), the University of São Paulo (USP), the Massachusetts Institute of Technology (MIT), the National University of Singapore (NUS), and Singapore Management University (SMU).

Prioritizing innovation represents a significant paradigm shift for Stefanini. The company was founded in 1987 by Marco Stefanini, a geologist who graduated from USP and worked in the field of banking technology. The company’s initial objective was to provide professional training and courses for the financial sector. In the early 1990s, it established itself as a provider of outsourced IT services.

Support and maintenance services accounted for 74% of Stefanini’s revenue in 2016, supporting a payroll of more than 21,000 employees across 65 offices in Brazil and 40 other countries in North America, Asia, Latin America, and Europe. These foreign branches account for 40% of revenue, making Stefanini the fifth most internationalized Brazilian multinational enterprise, according to the 2016 Ranking of Brazilian Multinationals produced by the Dom Cabral Foundation (FDC).

In the business world, however, these activities are classified as “commoditized”; there are no significant differences between market options, and profitability depends on large sales volumes. Global demand for these services is declining. “The digital revolution is changing the concepts of support and maintenance, and will eventually render field service engineering expendable,” says Barros. It was this realization that led Stefanini to seek a new path.

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