ACAO Informatica: IT Solutions Distribution in Latin America

Interview with Enio Issa, President of AÇÃO Informática

In a few years, the IT sector has witnessed a huge development. What do you think about the IT sector in Latin America and Brazil itself?

In the framework of the emerging countries classification, we’re going to see different realities. The European and American developed markets grow, in technology, in percentage close to their GDP and the emerging markets – like the ones in Latin America – grow 4 times the value of their GDP. That shows us the capability for growth and investment of the IT sector.

Can you tell us a little bit more about the general ideas and strategy of AÇÃO Informática?

There are what we call the sales channels, the formation of an “eco-system” in which all the sales and distribution channels form a network between the manufacturers and the client. There are several types of distribution: the volume distribution where AÇÃO Informática focuses on PC and tablets sales, the Value Added distribution where the distributor helps, along with the reseller, to sell solutions: financing, technical support, etc. The “big” client has the need for solutions and this need for solutions is growing every day. This need for solutions leads to cross brand, which implicates someone who can navigate between several brands and manufacturers to provide the client with complete solutions. That means a new classification on distribution; besides the volume and the Value Added, we now have solutions distribution. AÇÃO Informática started working on the subject in 2005 and our competence in the sector has grown exponentially. That’s our great growth differential, geographically and in terms of the market.

Do you also sell tablets?

No, we don’t sell tablets. AÇÃO Informática sells technology solutions and technology infrastructure solutions in Latin America with regard to servers, storage, network appliances and software, which is a more middle market or high-end technology solutions for even private or governmental corporations.

Which is the percentage between private and government clients?

AÇÃO Informática has tried to keep the balance between them: 50% private and 50% governmental clients.

What about your internationalization strategy? What are you already doing and towards what is AÇÃO Informática heading?

Our idea was to develop a growth plan until 2014 to reach a turnover of $1 billion in Latin America. We are rigorously complying with our growth goals in Latin America. AÇÃO Informática strategic plan considers geographical expansions. AÇÃO Informática has today reached the second phase of the plan since a great part of Latin America is already covered and we are preparing to go into the Andino (including Mexico) and Caribbean markets. AÇÃO Informática is covering these markets by acquisitions and growth.

The brand that exists in Brazil is “AÇÃO” and, for the Spanish speaking countries, it is “AKTIO”.

Can you provide some numbers which reflect your global level?

AÇÃO Informática closed 2011 with a turnover of approximately $500 million, including the whole group in terms of gross profit.

In the next 3 years, if maintaining the growth level at 30%, AÇÃO Informática will reach the planned $1 billion at the end of 2014.

In your internationalization strategy, have you been considering joint-ventures in order to attract investments?

AÇÃO Informática is open to all alternatives. We have hired an advisor from Credit-Swiss who is permanently analysing our fusion, acquisition or incorporation offers. In the case of Argentina and Uruguay, the internationalization was made by acquisition and in all the rest, it was made by the opening and conquest of a niche market because there were no companies with the skills we were looking for to start our work.

In your opinion, which are the real challenges for the Brazilian IT? Can the Brazilian technology be exported?

The Brazilian technology has a potential capacity for some software development which is already beginning, but it wouldn’t have an immediate capacity to compete with India or China. In my opinion, the difference between Brazil and the others lies in the area of services. With Cloud Computing Services and Solutions Selling and Hosting Brazil can be at the center of these technologies thanks to its great geographic location.

Why would you not compete with China or India? Is it due to the labor which is, of course, more expensive here in Brazil?

That’s a challenge we have had for years. Syndicalism has grown and today the Brazilian employees may not earn a lot of money but their maintenance is very high. There are a lot of charges related to the labor and that’s an impeding factor for Brazil. The government has stated that they are going to correct the flaw, so that we can be as competitive as India, for example.

Brazil has achieved a balance between the internal and the external market. Some countries do not have such a well-developed internal market and, many times, the external market alone cannot equilibrate the investment. So, although Brazil has higher charges related to the labor, its capacity to balance the internal and external market is very attractive.

AÇÃO Informática greatest challenge is to compete with big international players in this segment. One of the biggest difficulties for a Latin American company is to have access to cheaper capital. In the USA, this type of business is already well-structured, so it’s very easy for them to propose to analysts any kind of new initiative and to have access to cheaper capital. It was easier in the past, but it’s still possible.

Here in Latin America, you depend on banks, private investors and some investment banks, and the cost of money is very high. The investment must be very well-planned because, if you go along with this type of growth and if you are not only investing your profits, you can have difficulties in performing it.

What about the foreign investments?

If you go to other countries seeking investment, for example those in Latin America like Argentina, Venezuela or Colombia, the money is still expensive. We could go for internationalization and establish the head-office of the company outside Brazil. That’s a possibility. AÇÃO Informática is probably going to try it in the USA. In this way, AÇÃO Informática could become an American company.

In that case, is it possible to be listed on the stock market?

Of course it is. Our initial idea was to make an IPO and then enter the American stock market. But, with the 2008 crisis, we decided to postpone it. We believe that in the next 10 years the markets will be more appealing.

What do you think the future of Brazilian IT will be and how does it differ from the US or China?

In Brazil, the Personal Computer sector is booming, and in the United States, it has stabilized. Theoretically, Brazil has one of the biggest markets for personal computers, right behind Japan and the USA. It’s obvious that, when this market grows, internet access grows and the corporatist operations grow to make the network area available.

Brazil has a very high potential for growth. Brazil has to improve the area of taxes and charges related to the labour. If the country can balance these two things, Brazil will turn into China with a better quality – but more proximate and easier to understand for the US market. An American has a better understanding of Brazil and Latin America than of Asia.

Giant companies like IBM and ORACLE are in the Brazilian market. Do you think that, in the future, there will be space for medium-size IT companies?

Most of the big manufacturers are going to be always present; however, the product access work will be increasingly done by third-parties. Companies like AÇÃO Informática/AKTIO and other more than 3000 resellers, that we have in Latin America, will be always needed.

The great difference of AÇÃO Informática lies in the evolution of the distribution model called “Value Added” to a “Solutions Distribution” that makes it possible for us and for the “eco-system”, that we are part of, to go to all markets with complete IT solutions for all industry segments.

Which are the products/solutions AÇÃO Informática is going to offer in the future?

The focus of the AÇÃO Informática group is on the technology infrastructure: hardware (servers, storage and all necessary network), software (from a database to a BI or a CRM), and important services for the development and implementation of this type of product.