"Now we're in an 'India-replacement' mode"

- Friday, January 28, 2011

In the annual State of the Union address this week, US President Barack Obama underscored the need to maintain an edge over new competitors, such as India. Although not mentioned during the speech, Latin America is now giving firms in the Asian country a run for their money in the same regard.

BNamericas caught up with Latin American IT consultancy firm Neoris' CEO, Claudio Muruzábal, who discussed shifts in client outsourcing expectations, as well as the company's 2010 results and international expansion plans.

BNamericas: How did Neoris wrap up 2010 and how much did company revenues grow year-over-year?

Muruzábal: We grew in excess of 26% on a global basis. During a year when the industry was still trying to get out of the woods in terms of what had happened in 2008 and 2009, it was a very good year for us. The highlights of that growth are clearly coming from two countries. In the US, we more than doubled our business. We're seeing a lot of traction around our integrated, nearshore-based offering into Fortune 500 accounts. We also more than doubled our business in Brazil. We're starting 2011 on a high note, and we expect another year of significant growth there.

BNamericas: Can you provide more color about business in the US and in Brazil? What were the main drivers?

Muruzábal: Let's talk about the US first. Our offering into the US is a combination of onshore and nearshore consulting, typically focused on large accounts such as Fortune 500 companies. Some of them are SAP-centric, but we also have a non-SAP offering into that market. During the last couple of years, there has been more of an interest not only in driving support services to a nearshore location, but also to look at firms that can provide implementation services in a combination of onshore and nearshore.

There's clearly a trend from companies that went from having all of their IT services performed in India to a strategy of "India plus one," where they were looking at an additional provider. More frequently now we're in an "India-replacement" mode. We've been asked by clients to take over chunks of IT business that they were doing with an Indian provider. In the US, we have people stationed around the country.

As for Brazil, the story is a little bit different. We've been in the country for 10 years, but we've had a focus in Brazil on SAP in the past three years. We've hired a sales management team, and we've started hiring a very significant group of SAP consultants. We're attracting business from start-ups, as there are a lot of new businesses in Brazil around oil and gas, infrastructure and other industries. We're also a key player among more established, large companies in the country, like Claro or Banco Santander. We have a significant focus on implementations, and we doubled our size there last year, and we're in the direction of doing it again in 2011.

BNamericas: In the US, there is opposition to the idea of outsourcing to countries like Mexico or India. Has Neoris encountered any opposition in that regard, and is it an issue in terms of gaining new business there?

Muruzábal: No. The market has been educated on the concept. Two or three years ago, we were spending a lot of cycles with clients trying to explain why [they should choose] Latin America compared with India or other places. Those discussions have pretty much gone away. There's very little reluctance on the side of the client to consider services from south of the border.

BNamericas: Sometimes outsourcing becomes a very political issue, with senators and representatives speaking out against the idea. I insist, is this an issue for your company?

Muruzábal: No, it's not. We haven't seen those things in the clients that we are working with.

BNamericas: Will there be any modifications in the 2011 strategy in comparison to past years?

Muruzábal: We are focused on building a global business. Our business is becoming 50% Latin America and 50% international, and that mix will show more growth in international than Latin America; we're growing faster in Europe, the US and the Middle East than we are in Latin America. That's our number one target - growing a global presence. We're doing that by focusing on large enterprises and the upper tiers of the small and medium-sized markets that we serve.

We also see a significant change in the way that large clients - more experienced clients - approach IT service decisions. The change that we're seeing is, in the past, the sourcing was a big component of the decision. Where is the work coming from? Are you doing it in India? Latin America? That was an important component because there was a cost impact in that decision.

What we're seeing is that trend is no longer the case. The more sophisticated clients are assuming that you will source the work with a consulting group that takes advantage of the best talent available on a global basis and also makes the best use of labor costs. Sourcing is no longer the key component of the decision making.

Large clients expect you to be the best at what you do. What really makes a difference is how close you are to the client, what is your understanding of their business and how willing you are to adjust your model to the way they run their business. We are convinced that the trend will become more mainstream in the future, and we're investing to make sure that we are close to clients.

BNamericas: How much emphasis will Neoris place on the non-SAP offering this year?

Muruzábal: You will see us continue to focus on other technologies aside from SAP. We are strong in software development, and we've had a consulting division around process design and change management. We've done some work with Oracle. We are successful in the SAP space, but our client needs come first.

BNamericas: I understand that most of Neoris' work with Oracle has been in the telecommunications sphere. Do you expect that trend to continue in 2011?

Muruzábal: We have clients that have asked us to support them not only in the telecommunications space. We also do some Siebel work, and we've done some ERP work and support.

There is another element that is also very important to our strategy. We are fully convinced that business process management [BPM] is a key component of IT efficiency and the right use of IT. We derive some of our BPM strength from some Oracle work. We support and work with other BPM providers, such as Software AG.

BNamericas: I understand that the agreement with Software AG is largely confined to Brazil. Are there plans to extend the alliance to other countries this year?

Muruzábal: We're doing work with Software AG beyond Brazil. We have people trained in the technology in almost all of Latin America. We're seeing people doing BPM work around Oracle, Software AG and SAP. We have consultants trained in different technologies around our global network.

BNamericas: Will Neoris include solutions from other providers in its offering?

Muruzábal: We are always looking at new products and new concepts that we can bring on board. We made the Vistex announcement some time ago. Although that product is connected into the SAP world, we believe it is very attractive for clients. We pay a lot of attention to industry directions and what is becoming attractive to our clients.

BNamericas: Is there any other technology provider that Neoris will be adding to its offering in 2011?

Muruzábal: There is nothing significant at this point.

BNamericas: What are Neoris' priorities in terms of geographic expansion in 2011?

Muruzábal: We continue to focus on growing our market share in the markets where we have already made commitments. You've heard about our story in the US and Brazil. We are the largest IT consultancy company in Mexico, and we plan to continue to be the largest player there. We're making significant investments to upgrade our capabilities in Mexico.

Beyond those markets, we have a significant presence in the Southern Cone, both in Chile and Argentina, and we're growing in Europe. Despite the market challenges there, we will continue to make progress. We have Neoris consultants working on projects in almost all countries in Europe. We have our European headquarters in Spain, and are growing our solution center in Budapest.

BNamericas: Several months ago, I spoke with [director of Neoris' global SAP business] José Antonio Hernández, who said the company was going to open offices in the Philippines and was also considering direct operations in Australia. What has become of those plans?

Muruzábal: We follow our clients where they have needs. The same thing will be true in Asia. You will see us making commitments in Asia in the near future. We already have clients that we're supporting there, and you will see us make announcements around that in the future.

BNamericas: To confirm, in the Philippines has there been any concrete announcement?

Muruzábal: We have resources stationed there supporting clients in Asia.

BNamericas: About a year ago, Neoris opened a center in Monterrey, Mexico, that was aimed at providing services to healthcare and education sectors. Is Neoris going to open similar centers in the near future?

Muruzábal: We have trained resources in healthcare and higher education in Argentina, Chile and Spain, and there is growing opportunity in Brazil. You will see us expanding our capabilities in these two segments in all of our geographies.

BNamericas: What are Neoris' overall growth expectations for 2011?

Muruzábal: We're not committing to a specific figure. We've been growing at a CAGR of more than 30% for about the last five years. Though we're not releasing a number, you can expect the performance around those lines.


AboutClaudio Muruzábal

Claudio Muruzábal has more than 20 years of experience in the IT industry. Before joining Neoris, he held various positions in US ATM and self-service solutions provider NCR, including vice president for financial sector solutions in Latin America and the Caribbean, Mexico country manager and Argentina country manager.

The executive has an undergraduate degree in business administration from Universidad Católica Argentina and an MBA from Duke University.


About the company

Neoris is a privately owned firm that offers services such as systems integration, custom application development, IT consulting, and software deployment and support solutions.

Founded in Mexico but headquartered in Miami, Florida, Neoris has operations in the US, Europe, Latin America, Africa and the Middle East.