We had the chance to meet with Marco Stefanini, founder and chairman of Stefanini and with Mr. Ernst Vögtle, VP Sales Management EMEA and talk about their views on the global IT service industry and the expansion to the German market.
Marco, you have a very interesting career path from a geological student to building and leading the first Brazilian global IT company with 21.000 employees in 38 countries. You were also mastering several economical and corporate crises during its 28 years existence and possess with that an experience that may give you a bit different perspective of today’s IT markets and business dynamics.
Today I would like to talk about this perspective of yours, your experiences and also some insights of the expansion of Stefanini to the German market. Let’s start with the development of the global ITO/BPO service industry, the situation today and its characteristics. Could you please give us your perspective and a couple of points that are important to you?
Firstly, If you look at the general situation of today’s ITO/BPO service industry you see that it is very fragmented and that the market situation is very competitive – not only in some markets, but everywhere, in America or in the US, in Europe or in Germany.
We also have a very diverse situation on the business side – all sorts of companies compete on the global market – besides the giant companies one finds small companies and middle sized companies too, all offering their services, widely free from country boarders and continents.
I am coming from Brazil and I think when comparing our situation with the global market the circumstances here are even more difficult. The environment, the entire business ecosystem is more hostile because of the crises, because of a high level of bureaucracy, and because of a very high cost pressure.
Through the many crisis’s and difficult conditions under which we have build our business we have learned how to survive much tougher times and very competitive situations. Therefore we also think that we are very well prepared for the European and specifically also for the German market, but that’s just one aspect and I would like to extend on that later.
On my second point I would rather take into account the big transformations the IT service market went through, lets say over approx. the last five years. For example many years ago from mainframe to low platform client-server architectures, after that from client-server to internet, then the ERP appearance which changed the entire market from software development and now the IT is not longer seen only as a black box within companies, but embedded and included everywhere – in cars, in mobiles and in any device. This is a big transformation again, which has great effects on how IT and people work. You have to constantly follow, you have to be agile and you have to be flexible.
Said all that the underlying and most critical IT market characteristics are competition and its dynamics.
That brings me to my next question: Yesterday during our meeting with you, with other people from Stefanini, some CIO’s and a few consultants one aspect became very clear: that it seems to be very challenging for CIO’s and technology leaders to answer all the internal and external demands – demands for ensuring efficiency in the IT which includes maintenance of legacy systems, demands for development, for adapting new technologies, new processes and innovation and with all that also the need for managing the transformation of the management and the workforce to ensure the capabilities of IT.
What is your perspective on these challenges that CIO’s are facing today and what role play external service providers in that?
The challenges of the IT leaders have different sides. On one hand they need to ensure the level of quality, the level of services and challenges regarding legacy, serving and delivery. On the other hand they need to lead the company through big transformations like digitalization, automation, mobile and so on. But this is not an easy task at all, because IT-leaders have to balance between quality, legacy and delivery on one side and on future on the other side.
The other aspect is that CIO’s have to acquire a more business-orientated view and need to align technical and business expertise with each other. The challenge is to transform their own role and become future orientated business drivers, being aware of the impact the transformations and the adoption of new tools and technologies can have on the company. The difficult part here is to estimate / to measure the impact of these changes as this depends widely on other business factors too, why the business perspective is so important.
We as service partners find ourselves often in situations where our prospects are not very well prepared and I do fully understand the struggle to coop with these challenges. We see that IT leaders have sometimes only a fragmented understanding of what they want and what they need. So, to a certain extend we need to lead our clients to find opportunities and to define the best alternatives.
From my perspective the role of todays technology leaders within their organizations is defined by these three big tasks: Keeping the legacy, understanding and finding new technologies and leading the business into these new times.
If you take a look at our role as service provider, we experience that we can help both – the CIO’s and the organizations it self with these challenges in a way that ensures a sustainable operation, so that our prospects on client side can concentrate on the future. The chances to successfully handle all the issues, from legacy over transformation to the business are better with an external partner and of course that is a great opportunity for us too, which we must follow.
My next questions would connect exactly here. It is about your side of the business. We were talking about the client side so far, but these conclusions must mean that you actually face similar challenges. You work in a very dynamic industry, you are confronted with the same technological challenges and have to acquire and build all those skills, build capacities and also maneuvering on the global market is included. How do you keep up with that as a service provider, where you also have the pressure from the client side to be excellent in what you are doing and all that in the context of a company that is operating in 38 countries with more than 21.000 employees?
Of course as you mentioned one of the biggest challenges on our side is the development of thousands of people with these new skills. But that’s not the only aspect. The basic IT and support functions are as important as new technologies and systems. And further it is of utmost importance to understand the business, to acquire the business view. On the people side that means for us to mix young talent with a dynamic for new technologies and innovations with senior talent that carries a lot of experiences in the current and in legacy technologies, that are so important today.
Putting this into a more global and business context also means that we do all this under conditions, defined by cost pressure and a very competitive industry, which is not easy. Now this is very interesting as we still grow and I believe more challenging situations are better for us. Moreover we actually also see ourselves as challengers. We are new in the European market and based on our experiences, the development we went trough and the way we operate we think we are well prepared to take this role.
Now I would like to turn a bit more to the market side. We, as an independent association and media, still experience discussion on whether to work with external partners or not. What would be your argumentation on this question?
First of all I think for the German market the underlying fact is that companies must grow with external service providers and I don’t see other options in this regard. Why? First, companies need to keep the legacy while they need to prepare and adapt new technologies. Second, today we usually see that companies have good teams, but in the old technologies. But as I mentioned before what would be needed is a mix of senior and young talent and this seems to be rather a bigger challenge for the companies. Another point is the speed of the business with very fast changes and keeping up with those can be difficult with the same team. Because the variety of skills that are required for all the different areas and projects a company has to focus on in this fast pace environment is not only very big but also growing.
What we observe in Germany is that companies adopt more the opportunities of working with external partners and that companies found a good balance of in-house and external resources.
What are the functions that you as a business partner need most in the co-operation with clients? Is it project management skills or backup of the management board? What do you wish from client side?
What is very important for us, besides the basics like quality, delivery or a good management team, which are our obligations of course, are transparent and trustful relationships. Because in todays IT business environment companies and we as well sometimes face situations or challenges that none of the parties were able to predict, like changes in the company for instance. In these situations you can only work with a partner you can trust and who is confident, who is very transparent in the co-operation so the partner can participate in these challenges.
At our annual event in April, one of the participants of the panel discussions said “Germany is a hard nut to crack”. With your experiences in expanding to many different markets what is your opinion on this statement?
It is interesting. I learned a lot about the German market over the last couple of years. Generally a big part of the German mentality is based on the pride of creating everything in a very high quality and I respect and I like that. But because of this mentality it is more difficult to begin a relationship and to serve German companies. They are less open to the challenges, to new suppliers. I can also say that it is more difficult to initiate a co-operation with German companies compare to other markets. However, and this is interesting, once a co-operation is established and you have delivered good results, German companies are way more loyal to this relationship, which is of course in our interest. For us, with the way we grew and the way we operate, with our mentality as a privately owned family company, always with a long-term view, I think we are a very good match, specifically for the German market.
I would like to stick a little longer to your last point. One of the features of the German economy is its broad base of mid-market companies. With the way you operate as a company, with your mentality and with the fact that you as the person, Marco Stefanini give your name to it you say you are a good match for the German market. What is it exactly that you bring to the table for these companies and business leaders, who happen to be also the ones that are a little more reluctant to the concept of outsourcing IT and business processes?
I think we work very hard to get into the company and it is important to us to show, to demonstrate that we can do. In many cases we began small and then had the chance to grow together.
The second aspect is how we can deliver quality matching the German expectations, specifically also in correlations to the changes in today’s industry, which is not easy. Then after we have established a good, trustful and transparent relationship with the company, another aspect wins on importance – the questions of how much we can take risks together.
Because when we talk about innovations we are talking about new ways to do things, new use of technology for instance and so on. Naturally stepping on new grounds is connected to risks. One cannot expect to discover new things or gain advantage without taking risks. Of course sometimes this means to experience failure. In terms of our work and co-operation with clients it means that we are very transparent about the risks – we talk about and decide which risks we can take together.
It actually is a very interesting discussion in the market and I believe that we will face situations more often where we discuss in particular how to balance risk and innovation and quality, which I find very useful.
Now German companies tend to favor the big names, like the IBM, Infosys, Cap Gemini, Accenture and so on for the reason of minimizing the risks. What is your approach when talking to those companies that would on first attempt have these service partners on the short list?
As you said in the market today we have quite a lot of big names, giant competitors and I have the view that I respect the competition in general. From the German perspective it is understandable that companies look for features like diversity and also in particular a global presence, because the German economy is one of the most export orientated and global economies.
We must also understand the difference between a real global delivery and an outsourced delivery. We for instance not only have a delivery center in India, but we can provide localized delivery from where and under which conditions it suits the partnership best.
An other point is the size of the company. Our size is big enough to provide real global services, we are able to invest in new technologies for example, and we have the flexibility and agility that is needed to meet the requirements not only of German companies. For a much larger organization with hundreds of thousand of employees especially this level of flexibility is way more difficult to achieve and to maintain. I am certain that the balance of investment capabilities, flexibility and global delivery is very important in today’s markets.
And the last point – which I think is not so easy – is entrepreneurial spirit. We always try to implement and motivate our people to bring this sense of entrepreneurship, to think out of the box. Of course also here we need to balance again without compromising processes and procedures that ensure quality and global delivery capabilities.
But it is a very important aspect, because when we want innovations we need entrepreneurship and can’t have only strict rule/procedure driven people.
Also when clients deal with the big companies, the relationship is less individual and less prominent. In our case for instance clients get the attention of the owner, which gives a sense of value, appreciation and a stronger, more durable connection between us and our clients.
My last question is: how did you prepare for entering the German market?
Expansions are always a long journey no matter which markets we are talking about. For us expansions are a very important pillar of our strategy and the way we conduct business. Because of that we are able to deliver services from and to markets, like South and North America, Central and Eastern Europe and Asia.
There are a couple of aspects that I think are very important when expanding to a new market and were in particular important when we were preparing for entering the German market.
First is I think understanding and speaking the German language – not so much my self, but the company and the responsible people in particular. Second is to understand your market – understand the mentality, the thinking model of German business leaders. The third is always to prepare a good team.
An other aspect is focus. Give the market, its clients, partners and our team the needed attention.
With this we were able to create a good network of clients with very reliable relationships. We have learned a lot from working and from meetings with our clients. Now we are prepared to accelerate the growth, to talk to more people and enter into more business relationships.
Thank you for the interview!
This interview was done by Stephan Fricke, CEO and Head of the Advisory Board of German Outsourcing Association (Deutscher Outsourcing Verband e.V. for the Outsourcing Journal.
Marco Stefanini is the founder and CEO of Stefanini, a $1B global provider of IT outsourcing, applications management & consulting, and strategic staffing services and the largest Brazilian IT consulting company. He was named to the International Association of Outsourcing Professionals (IAOP) Hall of Fame in 2012. His company, which he founded in 1987, has been listed in the IAOP Global Outsourcing Top 100 three times. As CEO, Marco successfully led Stefanini through the recent enomic crisis. Competing with multinational giants and aware of the tough competition in the Brazilian market, he found ways for Stefanini to flourish through niche markets and expand operations in Brazil and abroad. Under his leadership, Stefanini has become a multinational company and the first native Brazilian company in the industry to have offices abroad. Marco is committed to operating Stefanini with a focus on social responsibility. He founded the non-profit Stefanini Institute, which provides opportunities to disadvantaged children in Brazil through education with a focus on technology. In addition to his work with Stefanini, Marco also plays an important role in promoting Brazil’s economic growth. He is a founder and vice president of Brasscom, the Brazilian Association of Information Technology and Communications Companies, which has been established with the objective of positioning Brazil as a key player in the global IT services market. He is also a member of the Brazil-U.S. CEO Forum, which consists of both private and public-sector members. The Forum brings together leaders of the respective business communities from the United States and Brazil to discuss issues of mutual interest, particularly ways to strengthen the economic and commercial ties between the two countries. Marco’s role in the Forum is to represent the IT Industry in Brazil.
You can read more about Marco Stefanini and the history of Stefanini company in his book “The Son of the Crisis: How Marco Stefanini Built the First Brazilian Multinational IT Corporation” > See on amazon.com