Small is big in Brazil.

• Nearly 99% of Brazilian companies are small and medium-sized businesses (SMBs), with annual revenues less than $20 million, reports the Instituto Brasileiro de Geografia e Estatistica.
• Brazil has almost 4.9 million SMBs, or 1 for every 38 people, according to the SMB trade association Servico Brasileiro de Apoio as Micro e Pequenas Empresas (Sebrae).
• More than 445,000 new companies are launched each year.

Business usage of IT has risen more slowly. Sebrae reported in November 2005 that 53% of Brazilian SMBs use little or no technology. Brazil also has very low broadband penetration: Only 2% of the total population as of March 2006 according to the Cisco Broadband Barometer, an ongoing survey conducted by IDC and sponsored by Cisco Systems.

But the federal government is increasing its IT support, and more SMBs are realizing that they can increase efficiency and cut costs by using technology strategically. Interest rates are falling and credit availability is higher than in previous years.

"The prices for technology are dropping. In addition, the Brazilian government is trying to stimulate technology usage by citizens and businesses," says Rafael Steinhauser, director of operations, Cisco Brazil. "Established SMBs are upgrading to IP network technology, and new SMBs are increasingly deciding to base their business processes on IP technology from the outset."

"The time to use technology in small and medium companies has definitely arrived," says Silvio Genesini, managing director of Oracle Brazil.

In Tune on Technology Adoption

Three recent government initiatives support IT adoption by SMBs:

• The first sets a goal of 10 million broadband connections by 2010.
• The second eliminated a 9.25% tax on purchases of desktop and laptop computers priced up to $1500.
• The third is the Innovation Law of 2006, giving tax breaks for business investments in technology and allowing the federal government to give monetary grants to SMBs for IT investments that increase their competitiveness.

Technology adoption is also rising in the government sector. IDC expects 2006 IT spending by the government sector to increase 14% over 2005, to about $2 billion.

Financing and Purchases Begin to Flow

Perhaps more important than the federal initiatives, according to Genesini, is that financing for Brazilian companies has become simpler and more accessible. Brazil's state-owned development bank offers better rates than private banks, but SMBs find it difficult to apply and qualify for its financing programs. Technology vendors such as Cisco Systems, Microsoft, and Oracle have stepped in by offering lines of credit.

IDC reports that in 2005 Brazilian companies invested $13.8 billion in IT, 15% more than in 2004, and SMBs accounted for half of that amount. SMBs in manufacturing, telecommunications, retail, and financial services account for the largest increases in IT investment, according to Peres.

Coffee Exporter Perks Up Network

One SMB investing in technology is Cafe Pele, a division of Grupo Cacique founded in 1959 that processes, distributes, and exports Brazilian coffee to more than 60 countries. Cafe Pele decided in 2005 to replace its PBX system with an IP network, realizing that it had an opportunity to try a new technology that could reduce costs and increase productivity.

"It was a little revolution here," says Paulo Ferro, Cafe Pele's technology manager. The 1,350-employee company has locations in seven Brazilian cities, New York, and Moscow, all of them integrated on a converged Cisco IP voice and data network. The sales force uses mobile phones as IP extensions.

Constel Tecnologia, the systems integrator, installed 450 IP phones in Cafe Pele's locations. The entire project took about six months from the date of decision to final installation.

Employees were impressed with how quickly and easily they could place international calls, according to Ferro.

The company has also already realized a large cost savings. "By renegotiating with the carriers, we achieved a 45% reduction in telecommunications costs," says Ferro.

Switching to an IP network has positioned Cafe Pele to be more competitive in the world market.

New Business Opens to IP Cost Savings

Veracel Celulose S/A, a pulp producer with about 800 employees, wanted to start out with an integrated IP network for data, voice, and video. Veracel, a joint venture, started its operations in Bahia state in May 2005 with a new Cisco IP infrastructure. The IP network connects the company's pulp mill, offices, and logistics division, all in the same Bahia location.

Nexa Tecnologia, a Cisco Premier Certified Partner, designed and installed the system for Veracel and continues to manage the process. "Within a year after the implementation, Veracel got a 100% return on its investment," says Luciano Barcellos, director of Nexa Tecnologia.

For employees, "the process was so transparent that the employees never even noticed that there was something different" about the company's new phone system, says Roberto Carlos Mantovani, Veracel's IT manager.

The major advantage is the integration of voice and data services and management, Mantovani says. Maintenance costs are low.

Companies like Veracel and Cafe Pele demonstrate that taking IP steps, small or large, quickly benefits their businesses. With growing technology access and financial support, SMBs in Brazil are speeding up their competitive tempo locally and globally.

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About the Author

Based in Sao Paulo, Brazilian journalist Tais Fuoco specializes in technology issues and is an IT reporter for Valor Online.

iQ Magazine, Third Quarter 2006