Brazil IT outsourcing: change is inevitable

Dr Richard Sykes is a board member of the UK’s main IT trade association Intellect. He has written a book about the globalization of services and works as a trusted board level advisor to a number of organizations. In this Q&A, Richard talks to IT Decisions about his views on how IT employment is changing, particularly in Brazil.

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IT Decisions: If employment law has not been changed for nearly 70 years, so ideas like TUPE (acquired rights) and sub-contracting are all foreign then how can outsourcing work smoothly?

Richard Sykes: With such a tabula rasa to work with, a wise Brazilian government would use its diplomatic network (such as the Commercial Attaché in London) to quickly understand and explore what law and practice is in Europe, in India, and elsewhere. Not to just copy – but to understand the context of, for example, TUPE legislation and practice – and gain insight into its real relevance both for today and tomorrow.

ITD: Is outsourcing unavoidable in the present and future corporate environment?

RS: In my judgment, Brazil is already developing a strong two-way trade in (technology-enabled) services – as an offshoring location but also offshoring itself – depending on the industry, and context thereof. So the two key starting points should be  – ‘what best motivates indigenous Brazilian talent to be confident to be outsourced’, and ‘what best motivates Brazilian and foreign companies to source such (technology-enabled) services from third-party suppliers in Brazil?’

ITD: How do you balance employee rights and expectations against the need for corporate flexibility and ability to compete?

RS: At its heart, TUPE helps deliver a positive attitude to being outsourced. Brazil may not need the increasingly full-blown European version (pension rights adds complexity) but a Brazilian version of TUPE surely makes sense. From the employee’s point of view, the aspects of employment security it underwrites reduces the risk of union-led opposition. From the employer’s point of view, it helps ensure that it can gain proper value for the asset it is passing over.

ITD: Will the labor market naturally see more flexibility and contract workers in future?

RS: My analysis says that where work can be standardized and automated, it will be and business will increasingly source the standard stuff (back office stuff, infrastructural stuff) from highly automated service factories (Google Apps is an example). The talent focus will move to services where the human talent is really needed  – so front line call centre work, BPO work, specialized services – thus the FfastFill example I often use – they are growing fast!

So employment law needs to be rooted in the promotion of proven qualifications, expertise and experience – and a balanced protection of employee and employers rights – thus the Nasscom initiative to have a national roster of BPO staff whose qualifications are properly registered, and whose resumés have been properly checked and cleared – both qualifications and experience are demonstrated as real – that protects the employer.

Once registered, your negotiating position as employee is more securely underwritten and the ‘going rate’ in the market place for your blend of qualifications, expertise and experience is more transparent.

ITD: Having looked at our earlier article on the difficulties facing legislators in Brazil, do you think a change can come?

RS: I cannot comment on the local politicos – it sounds rather sad. But it aligns with some of the commentary I read on Brazil.

But I am clear that Brazil will – in time – have to increase its ability to effectively exploit its human talent – it cannot continue to grow sustainably wealthy on oil, gas, minerals and agricultural products alone. Human talent requires motivation to yield its fullest value – and can move around the world if it gets frustrated in any one location.

The OECD stats – a little old and rounded – suggest that Brazil’s two way trade in services is two way and is growing fast  – pre recession at around +25 per cent per year – or another way – tripled in the five years 2003-2008 – exports as well as imports.

Service exports $ bn    2003                2008                Average annual % change

Brazil                                10                     30                       24.6

Service imports $ bn    2003                2008                Average annual % change

Brazil                                15                     47                        25.7

Photo by Kelvin Lok licensed under Creative Commons