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TRANSCRIPT
Analysis of the Latin American Information Technology (IT)
Infrastructure Outsourcing Services Market Maturity of the Latin American Market Drives New Investments in Outsourcing
NE2C-72
September 2014
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Contents
Section Slide Number
Executive Summary 4
Market Overview 9
IT Infrastructure Outsourcing Services Market -
• Drivers and Restraints 13
• Forecasts and Trends 21
• Market Share and Competitive Analysis 37
The Last Word 40
Appendix 43
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Research Team
Bruno Tasco
Senior Industry Analyst
ICT
Mauricio Chede
Research Analyst
ICT
Lead Analyst Contributing Analyst
Strategic Review Committee Leader
Jose Roberto Mavignier
Business Unit Leader
ICT
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Executive Summary
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• The study comprises the following countries—Argentina, Brazil, Chile, Colombia,
Mexico, and Peru.
• The IT infrastructure outsourcing services market in Latin America is becoming more
mature each day. Companies are understanding the benefits of outsourcing, focusing on
the core business, reducing costs, followed by the strategy of turning capital expenditure
(CAPEX) into operational expenditure (OPEX), where instead of investing money in
expanding capacity, it is turned into monthly-payment services.
• The Latin American market garnered $3,031.7 million in 2013, and is expected to reach
$5,216.8 million by 2019.
• Brazil represents 55.2% of the total market, Mexico 21.0%, Chile 7.3%, Colombia 7.0%,
Argentina 6.6%, and Peru 2.9% in 2013.
• The market in Brazil has seen a considerable number of mergers and acquisitions.
Furthermore, private equity funds have been buying participation in datacenter
companies.
• Peru has been receiving investments mainly from foreign companies starting datacenter
operations in the country.
• Interviews with market executives revealed that Chile, Colombia, and Peru are the most
mature countries in terms of adoption of outsourcing services.
Key Findings
Source: Frost & Sullivan
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Key Findings (continued)
• The Argentinian economy is not very stable at the moment and the government has very
protectionist laws. Moreover, due to currency problems it is expensive to import
equipment, as well as government has bureaucratized imports, which has impacted
growth on this traditional regional market.
• In the Latin American consolidated landscape, dedicated hosting was the most
demanded service in 2013, with a 42.6% share, followed by disaster recovery with
25.0%, storage with 22.0%, and colocation with 10.4%.
• In the Latin American landscape, verticals such as banking and finance, government, IT
and telecom, and manufacturing are the highest outsourcers. Although these verticals
are ahead in the share of outsourcing, others such as retail, healthcare, and education
are also increasingly resorting to outsourcing.
Source: Frost & Sullivan
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Compound
Annual Growth
Rate
9.5%
(CAGR, 2013–2019)
Market Engineering Measurements
Market Stage
Mature
Market Size for
Last Year of
Study Period
$5.21 B
(2019)
Customer Price
Sensitivity
7
(scale:1 [low] to 10 [high])
Degree of
Technical
Change
5
(scale:1 [low] to 10 [high])
Market Revenue
$3.03 B
(2013)
IT Infrastructure Outsourcing Services Market: Market Engineering Measurements,
Latin America, 2013
For a tabular version, click here. Stable Increasing Decreasing
Note: All figures are rounded. The base year is 2013. Source: Frost & Sullivan
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CEO’s Perspective
2 The market is demanding more value added
services, although there is still demand for
basic services in Latin America.
3
Cloud will become an important driver for
datacenter services; storage and disaster
recovery will be more common offerings in
the cloud.
4 The next generation of datacenters in the
region will be tier III, in order to meet
increasing customer requirements.
5 The Latin American market is concentrated;
however, strong competition and new market
participants will change this in the future.
1 Outsourcing services demand have been
increasing, as enterprises turn to third parties
to manage their information.
Source: Frost & Sullivan
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Market Overview
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Market Definitions
• The economies in Latin American countries present different levels of growth. Some countries such as
Peru, Colombia, and Chile present a growth of more than 4% in their GDPs and Argentina, Brazil, and
Mexico present a more moderate growth.
• IT services have been presenting a growth, as companies are understanding that IT can bring higher
levels of productivity and they can focus on their core business by outsourcing what is not their core.
This is the strategy of turning CAPEX into OPEX. Latin American countries also have been increasing
their connectivity, which is also a driver for datacenter services and, especially, for cloud computing,
where connectivity is crucial for accessing information.
• There are still some concerns among companies about outsourcing their information, but the market is
much more developed than before for this type of service, especially with the growth of other
datacenters services such as cloud computing that are causing a big revolution in the Latin American
market.
• The market is demanding more value added services such as dedicated hosting, storage due to the
increase of the data being generated, and disaster recovery due to contingency. The rise in demand is
because companies are aware of the importance of these service for their data and applications.
Source: Frost & Sullivan
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Market Definitions (continued)
• Although the colocation market has been losing participation, there is still a demand for this type of
service, especially in Brazil, where there are companies focusing on providing colocation. This service
can be a driver for the adoption of cloud computing. Companies that offer this business model provide
space for their clients inside the datacenter for racks, energy, and connectivity.
• Chief information officers (CIOs) face numerous challenges such as managing a bring-your-own-
device (BYOD) policy, ensuring network security, managing big data, creating a cloud strategy, and
keeping up with the perpetually changing needs of the modern worker. With these increasing needs,
CIOs are realigning their roles by availing the services of outsourcing companies and outsourcing what
is not their core business.
• Energy and connectivity are crucial for datacenters, but some Latin American countries such as Chile
have been suffering from energy transition and generation and some such as Argentina with poor
connectivity. These are two vital things for outsourcing services, and a lack of these might be
jeopardizing the company’s information access.
Source: Frost & Sullivan
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Dedicated Hosting 42,6%
Disaster Recovery 25,0%
Storage 22,0%
Colocation 10,4%
IT Infrastructure Outsourcing Services Market: Percent Revenue Forecast by Service Type, Latin America*, 2013
Percent Revenue by Service Type
Key Takeaway: Although there is still space for solutions such as colocation, the Latin American
market is demanding more value added services.
Note: All figures are rounded. The base year is 2013. Source: Frost & Sullivan
*Latin America is composed of Argentina, Brazil, Chile, Colombia, Mexico, and Peru
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*Latin America as far as this study is concerned, is composed of: Argentina, Brazil, Chile, Colombia, Mexico, and Peru
U$ 3.03 B
U$ 5.21 B
0
2
4
6
8
10
12
0
1.000
2.000
3.000
4.000
5.000
6.000
2013 2014 2015 2016 2017 2018 2019
Gro
wth
Rate
(%
)
Reve
nu
e (
$ M
illi
on
)
Year
Revenue Forecast
Key Takeaway: The CAGR of 9.5% from 2013 to 2019, indicates that the outsourcing market is in a
growing stage, and still has a lot of scope for demand to grow over the next years.
Note: All figures are rounded. The base year is 2013. Source: Frost & Sullivan
IT Infrastructure Outsourcing Services Market: Revenue Forecast, Latin America*, 2013–2019
Revenue CAGR, 2013–2019 = 9.5%
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Drivers and Restraints—IT Infrastructure Outsourcing
Services Market
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Drivers 1–2 Years 3–4 Years 5–6 Years
Maturity of the Latin American countries in
buying datacenter services H H H
Cost reduction and focus on core business H H H
High prices of energy and lack of high quality
connectivity H H M
IT complexity and new business models M H H
Increasing generation of data M M H
Growth of cloud computing services M M H
Impact Ratings: H = High, M = Medium, L = Low
IT Infrastructure Outsourcing Services Market: Key Market Drivers, Latin America, 2014–2019
Market Drivers
Source: Frost & Sullivan
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Maturity of the Latin American Countries in Buying Datacenter Services
• The Latin American market has become more mature in terms of buying datacenter
services. Companies of different sizes and verticals are now better understanding the
benefits of this business model and are increasingly trusting service providers` capabilities
to guarantee availability and service level agreements (SLAs).
Cost Reduction and Focus on Core Business
• Due to the dynamic nature of the market, companies must constantly update and be
ready to respond quickly to demand changes, competitor changes, or even regulatory
changes. For this to happen, companies have sought service providers to outsource
infrastructure management and monitor control. Thus, IT executives take on a more
strategic role within the company, assisting in the organization and optimization of
business processes, with lesser focus on operational work.
Drivers Explained
Source: Frost & Sullivan
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Drivers Explained (continued)
High Prices of Energy and Lack of High Quality Connectivity
• Lack of and high prices of energy and connectivity continue to be the major costs of
companies that keep information internally, whereas, companies that outsource don`t
need to worry about these two issues. Some Latin American countries have been
suffering from energy transition problems and poor connectivity. Energy and connectivity
are two vital things for outsourcing services, a lack of which might jeopardize companies’
access to their information. Therefore, outsourcing is a good alternative to overcome
these issues.
IT Complexity and New Business Models
• As new trends such as big data, cloud computing, and mobility are emerging in the
market, it is becoming harder and more complex to manage this new information.
Therefore, companies tend to outsource to keep focusing on their core business.
Source: Frost & Sullivan
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Drivers Explained (continued)
Increasing Generation of Data
• With the rapid increase in creation and analysis of internal and external data by
companies, Big Data is becoming an everyday part of companies. Therefore, there is a
need to store this information easily, while having easy access to it. For this, outsourcing
services such as cloud and storage can be the best solutions.
Growth of Cloud Computing Services
• Companies are adopting the cloud computing model, to increase productivity, reduce
costs, and change investments from CAPEX to OPEX. Cloud computing also gives them
the option the increase or decrease outsourced services and have access to information
anywhere at anytime.
Source: Frost & Sullivan
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Restraints 1–2 Years 3–4 Years 5–6 Years
Lack of, shortage of, or high cost of qualified
workforce H H M
Vertical and country restrictions H M M
Cultural Barriers M L L
Impact Ratings: H = High, M = Medium, L = Low
IT Infrastructure Outsourcing Services Market: Key Market Restraints, Latin America, 2014–2019
Market Restraints
Source: Frost & Sullivan
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Lack of, Shortage of, or High Cost of Qualified Workforce
• The Latin American landscape suffers from labor force problems. There is a lack of
qualified IT labor force compared to developed countries such as the United States (US)
and Europe. The churn is also elevated and salaries are high, largely due to the high
taxes that companies need to pay to have employees, especially in Brazil.
Vertical and Country Restrictions
• For some verticals, such as government, information is the main market asset. As a
result, some companies prefer to keep the infrastructure and managerial operations
internal so that monitoring is easier. This is usually due to the fear of theft or loss of
information. In Colombia, for example, the law number 1581 is responsible for defining
norms of protection of personal data. Similarly, Brazil has the Marco Civil.
Restraints Explained
Source: Frost & Sullivan
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Restraints Explained (continued)
Cultural Barriers
• Infrastructure outsourcing refers to loss of control for some IT executives. The fact is that
the management and monitoring of infrastructure under the responsibility of another
company can generate mistrust, especially in a market such as Brazil, which has a
cultural characteristic of centralized control. Moreover, a vast majority of IT executives
would have managed infrastructure and, once outsourcing is done, they would need to
take a more strategic role within the company.
Source: Frost & Sullivan
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The Last Word
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The Last Word—Predictions
2 Services such as storage and disaster recovery will be on offer in the cloud.
3 Software defined datacenter (SDDC) platforms virtualize multiple datacenter
components, and manage them as a cohesive unit.
1 The necessity to focus on the core business, cost reduction and new technologies
such as BYOD, Big Data, and cloud will have a big impact on datacenter outsourcing
market.
Source: Frost & Sullivan
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Appendix
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Market Engineering Methodology
One of Frost & Sullivan’s core
deliverables is its Market Engineering
studies. They are based on our
proprietary Market Engineering
Methodology. This approach, developed
across the 50 years of experience
assessing global markets, applies
engineering rigor to the often nebulous
art of market forecasting and
interpretation.
A detailed description of the
methodology can be found here.
Source: Frost & Sullivan
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