Interview with Daniel Wagner, Executive Director of Itelios

Could you give us your overview of the technology development for internet projects sector in Brazil?

This sector, in Brazil as in all countries, is growing very quickly. In Brazil particularly, at the moment there is a lot going on in this sector. The sector is growing particularly quickly for corporations and small companies. There are several things that are particular to Brazil; when we compare with projects that we see internationally, whether in France or in the United States, projects over there are much more mature. Here in Brazil we don’t have the culture of developing web projects yet. Normally when you see projects from abroad they are very well structured. The companies have project managers and they know precisely what they want. One of the challenges here in Brazil is that the projects are not well defined. Clients here have an idea of what they want but they don’t know exactly how it can be done. Even though the sector is thriving, one of the challenges is that our clients´ demands are very difficult to understand. Another issue is that there are many big projects that are done by web agencies, so there is still the vision that the agencies have a 360° concept which is something that they had in Europe some years ago but not as much anymore. Even some big projects for e-commerce are led by agencies, whereas abroad usually you have the agency that does the communication and specialised companies like Itelios who do the portals. Even though it is a sector that is growing very quickly and one with lots of opportunities there are still some differences here in Brazil.

Could you tell us a bit about your company?

We have been working in Brazil for a few years now. We were officially founded in 2005 but we started operating in 2008. Currently we have about 50 employees here in Sao Paulo. Our main sectors are web development for medium to large companies so we work with Saint-Gobain, Pão de Açucar, Casino in Brazil and Claro, which is another of our big clients. Our main development here is web portals and content portals. We are also doing a lot of internet projects right now in terms of internal communications, which is a slightly different sector from those that our headquarters in France mainly deals with. The company was created in France in 2003. I worked there between 2004 and 2005. In 2005 we decided that we should create something here in Brazil. I finished my university studies and we officially started here in Brazil in 2008. Since then we have grown from having one employee to having 50. Also in France the company started with just 2 people and now they are about 80 employees.

Why did the company choose Brazil?

Well, for many reasons. The concept of Brazil was a big deal at that time in France. In 2004 it was the year of Brazil in France so there were a lot of exhibitions and events that were to do with Brazil that year. Therefore the company took a natural interest. They also had one big client in France that was talking about potentially going to Brazil. They thought it would be a good opportunity to go there first and be there for when the client decided to go also. Additionally, as I was going to return to Brazil anyway we wanted to see if we could make the business work offshore and chose to do so here. The trial was a success so in 2008 we decided to really go ahead with the company here. Now we can see that there is a lot of market opportunity in Brazil for this sector. The e-commerce sector is growing a lot. There are a lot of opportunities in the areas that we work in right now and also in the areas in which the head office in France specializes in.

Could you tell us a bit about the big projects that you are working on at the moment?

One of our major clients today is the Pão de Açucar Group which is the Brazilian subsidiary of the French company Casino. We are working on their new internet portal; the objective is to create an internal communication system for the employees. We are targeting about 1500 employees and the idea is to make information inside the company flow better, whether it be information from human resources, information about events or communications about product information, etc.

We are also doing an e-commerce switch for Saint-Gobain. We have developed a software that makes a connection between the vendor and the ERP system.

We also have many upcoming projects that I can´t disclose just yet. Mostly our large clients either come to us through agencies or directly to us. The two clients I mentioned are our direct clients but we also work in partnership with agencies such as OUV which won the prize last year for most creative agency in the world.

I imagine you have lots of competition, so what makes your company stand out?

We have a lot of small competitors who have about 5 or 15 employees. We also have other competitors who are very large companies with up to 2000 people. There are a few companies in the sector that are the same size as us so our differential is that we are big enough to take on big clients but as we are still a relatively small company we are able to offer our clients faster solutions at excellent prices. We are positioned really well in the market at the moment because we can address corporate demands but we don’t have all the costs that are associated with being a very big company. We also have a very strong commercial team. We are very well known in comparison to the other smaller companies which is a great advantage. Now as of last year we have clients coming directly to us.

This market offers a lot of investment opportunities, could you tell us a bit more about these opportunities and also whether your company is interested in creating partnerships?

This market is growing very quickly and as such there are many investment opportunities. The market needs companies that are able to address very large clients. We already have some large clients but we would like to gather bigger projects still. I would say that it is very hard to start a company here without local support. When we first started here with just 5 or so employees, I would go to meetings and people would be interested in my solutions but would ask me about our previous experience in Brazil, for example how many of our solutions are up and running in Brazil, etc. This made it hard to enter the market, we had to start with some very small projects to slowly become known to be able to win some larger contracts. I would therefore say to investors if they are interested in investing in Brazil the first step is to acquire an existing company that already has a portfolio here because that will greatly speed up the process. In the last year several agencies have been purchased by international investors and also Brazilian investors who wanted to acquire a smaller company to be able to have a portfolio.

Our company is very much interested in partnerships with foreign companies that could open up new markets for us, and we are interested in clients who want to invest in Brazil so that we can achieve bigger projects here. We currently have 50 employees but we would like to be 200 soon. Our plan is to grow organically which is going to take time. However we are interested in hearing from international investors, either if they want to conquer markets abroad with our help or if they want to bring their brand or products here. We are interested in hearing about new products and services.

This sector is changing very quickly, how do you see it in two years?

We can see that there are two very different trends. There is the open source initiative that started a long time ago with Linux systems and there are some very big actors coming here with Hybrid SAP and IBM, etc. We are seeing that the Brazilian government and some big companies are investing a lot in some open source projects because they are cheaper and you don’t have any intermediaries so the money can be invested in services. For instance Pão de Açucar could have used proprietary technology but the licensing costs would be very high and so they chose to use an open source solution. There are a lot of large companies that are investing a lot in Brazil such as Hybrid SAP who is investing a lot in offices here and also Google is investing a lot in local solutions. Therefore there are both open source solutions and big private vendors here.

In the next few years we are not sure what will prevail. As we have just 50 employees right now we are going to move in both directions. We are working with the open source community. We have partnerships with their associations and we try to develop modules for them and for the open source market. At the same time we are keeping our eyes open and hope to get into a partnership with some of the big vendors that are coming to Brazil. I think that both can coexist. The big corporate markets will use the big vendors I think. We are a mid-sized company and we want to work on bigger projects but there are some projects that we are still too small to get. To ensure that we can be the best at both technologies we have a research and development department that really specialises in studying new technologies, testing new solutions and making contact with new vendors. We are always looking at new opportunities in the market in both sectors.

What is your vision for the company in the next 5 years?

5 years is a long time, we have only been open for about 5 years. We would like to be leaders in a few specific sectors in 5 years. We would like to reach 200 employees in 2 or 3 years´ time. When we reach that size we will be able to get some bigger contracts and to directly approach some of the largest companies in the sector. I would like to be known as the best in the sector. We are exploring a lot of technologies and we will eventually choose a few that we prefer to work with and that we think offer a better competitive advantage. We would like to be recognised as the leaders in these chosen technologies in about 5 years. We would like to reach a situation where if a client decides to go with a competitor it is because although they know we are the best, they are not able to afford us at that time.

What would be your message to a national or international investor that is interested in investing in Brazil, in your sector or perhaps even in your company?

Brazil is a complicated country. We have some complexities that are tax related. The system is different here than it is abroad. The huge majority of countries work with VAT, where you calculate how much you buy and how much you sell and you pay the tax over the difference. In Brazil it doesn’t work like that. We have taxes that are quite complex to understand. There are studies that say that Brazil is the country where companies spend the most time working out their taxes. I would advise investors to be very careful about taxes because it can be very easy to get confused especially with import licenses and so forth. It is important to hire specialized services in Brazil. I have also seen that many foreign companies here in Brazil don’t fully understand how salaries work here. In France where labour rules are very specific, if the company is in a crisis you can lower the salaries if you are not able to pay them. Here it is the law that you have to increase salaries by about 8% every year. All unions here are working to get salary increases that are above inflation. It can be hard to explain to foreign companies that you have to increase salaries even if the company is not doing well or if the country is in crisis. What happens here now is that some long term employees are being let go, not because they are not good at their job but because the company can’t afford their salary any more after many years of increases.

My main advice would be to work with someone who already has good knowledge of the market. Either work with a local, successful company or hire someone with experience in the field. It is a tricky market but it is a very interesting one too. There are a lot of good opportunities here. The market craves a lot of solutions.

You are also part of the Young Executives Committee, part of the French-Brazilian Chamber of Commerce, can you tell us a bit about this?

I am responsible for this committee. I was invited to work for them at the end of 2012. This is a new committee and it was created with the purpose of finding younger people to go to the French Chamber of Commerce. There are a lot of interesting things going on in the Chamber of Commerce but the younger generation are not really aware of this. The idea is to find young people in the market who are interested in relations between Brazil and France and to set up events to attract the younger generation. We have only had a few meetings so far and unfortunately we still have not managed to attract as many young people as I would like. We are trying to find new topics and subjects that hopefully will attract more people. It is a very interesting challenge and I am very happy to be a part of it. We are targeting people who for example have perhaps studied abroad or who have experience working in a French company. The committee is there for anyone who wants to explore the connection that we have with France here in Brazil.

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