19th September 2011

With so much being made of the cloud computing industry’s emerging markets, BCN is kicking off a new series of articles focusing on the development of three key cloud regions – Brazil, India and China. First up, Brazil, and a look at some of the key issues affecting cloud adoption among the country’s many fledgling SMEs.

In the coming months, a number of significant trade shows and events will be held across Brazil addressing the progression of IT in the region (TI, in Portuguese). While some conferences, such as The Economist’s ‘Brazil 2022: Ordem e Progresso’, promise to provide insight into Brazil’s technological future, other shows, such as the Cloud Computing World Forum Latin America, will give clear indication of the country’s true technological position, as of now.

With this in mind, what’s in the Brazilian cloud, and why does it matter?

Well, to begin with the basics, Brazil’s population currently stands at just over 200m, making it the fifth largest country on the planet. That’s a lot of people. And cloud computing is one of the global technology industry’s hottest topics, with high adoption rates of cloud and SaaS products being seen in businesses throughout the developed world. Put these two points together, and the potential market for cloud in Brazil is huge.

Of course, there are a number of issues to consider beyond this 1+1=2 approach, but it’s a good place to start, and part of the reason so many forecasters are predicting the Brazilian market to explode.

But does the country have the capabilities to move to cloud? And more to the point, are Brazilian businesses interested in adopting?

The answer to the first question lies in the obvious - the availability of broadband. Especially in business, where cloud computing is delivering the most potential.

According to a report conducted by the Brazilian Association of Telecommunications earlier this year, Brazil’s fixed broadband numbers amounted to around 14m. Which seems like very little in a population of 200m, but with the rate of fixed and mobile internet adoption up by over 50% on the 2010 figures, it’s evident that the high-speed internet movement is taking shape in the region and will only continue to grow.

More important is Brazil’s IT industry, which, backed by the Brazilian government, is taking great strides in pushing itself as a global innovator.

As the Global Technology Forum is quick to divulge, “Brazil is by far the largest information technology (IT) market in Latin America, with an industry producing computer and telecoms equipment worth over US$30bn. Computer penetration has tripled from a very low base in the past five years, and internet penetration has also risen strongly, although both remain low by international standards.”

Outsourcing is a key component of Brazil’s IT market. Last year, JDJ’s Christian Gallegos published an article on cloud computing in Brazil, stating an estimated IT outsourcing figure in Latin America of around USD $9 billion market.

However, as Gallegos also specifies, “faster growth is expected to occur upon the accelerating adoption of IT solutions by small companies, fostering demand for new applications and creating a virtuous investment cycle that is extremely beneficial for the country.”

Brazil’s new wave of smaller companies has been a key component in the country’s recent economic growth, with the number of SMEs in the country thought to be over 6m in 2010, a figure that has risen dramatically since 2005, when it was estimated there were only around 4m small to medium-sized companies.

And with many of these companies becoming increasingly reliant on IT and the internet to do business, as in other major countries, a number of IT providers have risen to prominence in the country, grappling for a stranglehold of a market currently being shared with US companies such as IBM and Intel.

Among them, Brazilian-based companies such as Locaweb, Tecla and Ci&T have grown to become major players not just in the local region but across Latin America and the globe, and have started to follow North America and Europe’s lead by utilising regional data centres to offer their customers SaaS and ‘cloud services’.

Ci&T recently announced a new cloud platform in Brazil built on Amazon Web Services and designed to help businesses of all sizes utilise Google Apps via a subscription-based service, while Tecla and Locaweb have already provided cloud platforms to around 4,000 virtual servers, respectively.

The security issues affecting the adoption of cloud in other developed countries, are not as big a cause for concern in Brazil, with a recent survey stating cost and availability to be the chief barriers for adoption among many SMEs.

Indeed, interest in adopting cloud is definitely not an issue in Brazil, but availability is. Despite great strides by regional companies such as Tecla, as Sao Paulo-based Anglogold Ashanti’s IT Manager, Pedro Augusto M de Oliveira, believes more needs to be done among the country’s telecoms companies to continue improving internet connections beyond the country’s major cities:

“In Brazil, the telecommunication infrastructure is robust in the metropolitan cities such as São Paulo, Rio de Janeiro, and Belo Horizonte,” he states.

“But there are a lot of big companies with headquarters in smaller cities and those kinds of companies cannot move to the Public Cloud as the telecom is not performing.”

However, this will only change as more and more cloud specific companies move into the Brazilian market to tap into its 6m SMEs. One such company, OnApp, based in the UK but with data centre capabilities across the globe, are already using next week’s Cloud Computing World Forum Latin America in Sao Paulo as a base to size up business in the region. And as Pedro de Oliveira continues, the Brazilian market is open to new products regardless of where they come from, as long as the cost and infrastructure on offer is right:

“Many Brazilian companies are starting to focus on Private Cloud and beginning to understand the benefits the cloud offers them. The use of SaaS based in Cloud will be, without any doubt, the best solution for many companies in the near future here…but it doesn’t matter if the applications are based in say, the US or on Brazilian sites.

“My feeling is, in the next five years, the most important applications from Brazilian big companies will be based on Public Cloud but it is very possible that in ten years data centres will not be part of the assets of the companies as, probably, everybody will be based in the Public Cloud.”

If this is the case, it will be interesting to see what is taken away from events such as the Cloud Computing World Forum Latin America in the coming months, and just how many other companies such as OnApp follow suit and further target the Brazilian cloud market.

Chris Ward, Editor, Business Cloud News

Next stop for BCN's series on emerging markets - the Indian cloud.
To register for the Cloud Computing World Forum Latin America, visit www.cloudcomputinglive.com/latin-america

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Tags: software as a service | platform as a service | applications