NelsonHall recently visited the Capgemini BPO center in Campinas, Brazil, about 100 kilometers to the northwest of the city of São Paulo. Capgemini’s Campinas center is part of a network of BPO centers in Latin America, the others being in Guatemala City; Santiago, Chile; and, most recently, Blumenau, also in Brazil. We had had the privilege several years before to visit the Guatemala BPO center and see for ourselves the keenness and quality of U.S. accented English of the associates, a command center infrastructure that had been introduced, and also to meet two happy clients: Coca Cola Enterprises and Unilever.

Capgemini first developed a BPO capability in Brazil through the transfer back in May 2008 of a Unilever shared service center in São Paulo as part of a multi-process F&A BPO contract (which also involved the transfer of a SSC in Santiago). We were keen to see what has happened in the last five and a half years: has Capgemini succeeded in transforming a client SSC to a multi-client operation?

The first thing of note is the level of expansion: from an initial 250, Capgemini BPO Brazil’s headcount has quadrupled to nearly 1,050 FTEs, representing 7.5% of Capgemini’s global BPO delivery capability. This expansion has come from providing, mostly F&A, services in the Portuguese language to both multi-national and local clients. Since 2008, Capgemini BPO is servicing an additional eight clients out of Brazil, and also providing support to Capgemini group: a total of ten clients. In most cases, Capgemini is servicing the Brazilian operations of multi-national clients such as Syngenta, Avon and Nokia Siemens Networks (the latter for supply chain operation services). Capgemini BPO won its first domestic deal in Brazil in 2011: a 13-year multi-tower contract with conglomerate Grupo Algar covering F&A, HR and supply chain operations. Capgemini was tasked with standardizing processes across two Algar business units and nine companies covering agribusiness, aviation, security, technology and media, with a remit to increase productivity by over 45%. Earlier this year, Capgemini won its second domestic client: White Martins Gases Industriais Ltda (the Latin American subsidiary of Praxair).

This headcount growth has been accompanied by an evolution in the delivery location strategy. Soon after winning the Unilever Brazil contract, Capgemini opened a center in Campinas (a lower cost location than São Paulo), to which around 250 positions relocated. Then in January 2010, Capgemini acquired Sonda Procwork's BPO facility in Gaspar, Santa Catarina state, which had ~200 employees providing F&A and HR support to clients such as Bunge; Capgemini bought the assets to service Bunge, with whom it had secured an F&A deal in 2009. That center is no longer being actively used by Capgemini for BPO delivery.

The Campinas operation has seen signifcant growth; in 2010 Capgemini opened a new office within the Technopark campus, and it now has nearly 700 employees in the center. Campinas has a well-educated labor market (for example, Campinas University is one of the most prestigious in Latin America) - but it is also the 10th richest city in Brazil and there are many other cheaper locations in the country. Having sought a suitable cheaper location, in 2012 Capgemini opened a site in Blumenau, in the south west of the country, in a €2.2m investment to expand its BPO delivery capabilities in Brazil.  The Blumenau site currently houses nearly 350 employees and has the capacity for ~600; it also offers the potential for further expansion. With Blumenau, Capgemini can offer clients in Brazil a lower-cost alternative delivery location to Campinas.

In addition to this evolution in its location strategy, Capgemini BPO Brazil is also working on portfolio development, with an offering specifically for the Brazilian market: tax management.

This is an offering that meets a real local need. The Brazilian fiscal environment is notoriously complex - the World Bank claims Brazil's tax code is the most complex in the world. Companies have to comply with a plethora of federal, state and municipal taxes, some of them overlapping, plus new taxes being introduced, and existing ones regularly being changed – all this makes accounting errors easy. This year Brazil’s federal government has increased its focus on corporate tax collections because of reduced tax revenues (the economy grew less than 1% in 2012, less than the government had budgeted). Non-compliance can be very expensive, as companies like mining firm MMX (faced a fine of R$3.8bn, ~US$1.87bn, equivalent to around 80% of its market value at that time) and cosmetics producer Natura (fined ~$380m) have found out. Other companies targeted by Brazil’s federal tax agency have included pulp producer Fibria, logistics firm Santos Brasil Participações (fined R$2bn in total), even partly government-owned mining company Vale and state-run Petrobras. Even if fines are successfully protested, the damage, to share price, management disruption, can be considerable, and legal fees expensive. And tax processing consumes resources: Capgemini Brazil estimates that in some of its F&A BPO accounts, around 30% of the delivery staff are deployed on tax processing.

Capgemini’s new offering, about to be piloted by a major account, combines preventive controls (for example, checking the right filings and obligations are being done on time and documented), with detective controls, checking compliance at the transactional level, such as the results of calculations. Capgemini is partnering with a local software vendor for the software for the detective control elements. Expect to see this launched as a formal offering in 2014.

Capgemini shared its ambition is to double its Brazilian BPO operation by end 2016, with expansion focused on Blumenau.

Clearly the new tax management service, which it will offer on a standalone basis, will drive part of this growth, presenting new opportunities in the local market. As before, Capgemini will continue to target is multi-national F&A BPO clients that have operations in Brazil: it has just signed such a contract with one of its oldest clients. We also expect to see a new focus on cross-selling with the client base of the former CPM Braxis, acquired by Capgemini in 2010; this will mean an increased focus on the financial services sector.

And finally, more client acquisition activity is a possibility.