Brazilian Software Market
Brazil is currently among the top ten software markets in the world, surpassing other economic powerhouses like China and India. This article shows an overview of this market and analyzes possible forecasts for the years to come.
Bigger investments in Information Technology and the proliferation of mobile devices are some of the factors responsible for the average recent growth of 20% per year. There is still a big dependence on foreign software, though, and the number of exports in this branch is lower than desired by this sector.
The Market Chain
The companies that compose the software industry can be basically categorized as:
- Developers, responsible for producing programs and technological solutions
- Distributors, responsible for delivering products, importing software, and acting on the supply chain
- Service providers, responsible for diverse activities, like consulting, support, outsourcing and integration of systems
According to the Brazilian Association of Software Companies, known as ABES, the biggest amount of businesses deal directly with distribution. The entity, which has over 1,500 associates, is responsible for almost 85% of the market. ABES estimates that more than 50% of its partners are distributors. Around 25.6% would be related to services, like outsourcing and support, and 24.1% are developers.
Exports and Imports
ABES estimates that around 77% of all the software commercialized in Brazil is developed abroad. The sector defends, however, that importing three quarters of everything used in the country is not necessarily a bad thing.
According to Jorge Sukarie, president of ABES, “the import number is always close to 70%, while something close to 30% is developed here”. The main justification would be the fact that widely-diffused software — e.g. Microsoft Windows, antivirus programs, entertainment products — all comes from other countries, not only in Brazil.
The number of exports and national developers has grown, even though below the desired level of the software industry. From all the revenue generated from this market, around 2% is sold to foreign nations.
National Production
Nearly 44% of the companies related to software development in Brazil is classified as “micro”, with less than 10 employees. This number is almost bigger than the nearly 50% of legal entities classified as “small”, with a number of employees between 11 and 100.
ABES affirms that the number of national developers is growing, much due to the popularization of the so called “third platform” — which involves mobile devices, cloud computing, social networking, and Big Data analytics. For the president of ABES, “we have been really successful with the entertainment area, especially with games and apps designed for smartphones.”
The entity declares that several areas in Brazil are rising as poles for this industry, joining traditional centres like Florianópolis and Blumenau, in Santa Catarina. This frequently happens close to universities with strong technology courses. Some of the new developing areas are:
- Salvador, in Bahia
- Recife, in Pernambuco
- Campinas, in São Paulo
Main difficulties
Pretty much like any other industry in Brazil, the software market claims for strategical changes in order to attract more investments. Jorge Sukarie listed some of the main complaints.
- Lack of specialized manpower. The entity estimates that there is a shortage of around 70,000 professionals in this area.
- High cost of labor benefits and of manpower in general.
- Tributary problems, like the discussion between cities when charging the ISS tax.
- Support for micro and small business.
Forecast
Even with all the difficulties and the, relatively, low number of exports made by the Brazilian software industry, this market is optimistic about the next four or five years. According to the president of ABES, in this period, the Brazilian market will keep having “double-digit growth”.
The main reasons for it would be the continuous rise of the “third platform”, and also the alleged capacity of the software market to keep growing even when the economy, as a whole, is not so good. For Jorge Sukarie, “Brazil has entered an era where productivity will be a requirement for industries to keep growing. To have productivity, you must maximize processes and rely on Information Technology, software, and services.”