Reverse Outsourcing: Brazilian Company Finds Affordable Hosting StatesideBy Pedro Pereira | Posted 2008-09-23 Email Print
Atitude Digital Media's partnership with The Planet is costing the company about five times less for hosting services.
For anyone who still thinks outsourcing only means sending jobs overseas, here’s something to adjust that perspective: A Brazilian company has tapped U.S.-based hosting services provider The Planet in what both companies are calling a "reverse outsourcing" arrangement.
The customer, Sao Paulo-based Atitude Digital Media, is using The Planet’s hosting services to provide Webcasts to its own clients, mostly pharmaceutical companies, such as Pfizer and Novartis, and medical organizations.
The Planet’s relationship with Atitude illustrates how a U.S.-based channel company providing hosting, managed services or SAAS (software as a service), can reverse the pattern of sending tech services contracts overseas by enticing foreign companies stateside for reliable and affordable service.
Under the contract with Atitude, Houston-based The Planet manages five Windows-based servers running SQL Server, Web hosting and Windows Media.
From the Brazilian company’s perspective, tapping U.S.-based hosting services was by far its best option for the Webcasts, which are used for training and corporate meetings, says Atitude CTO Helder Conde.
Brazil’s Web infrastructure, while solid, isn’t yet robust enough to handle the broadband demands of Webcasts, which often involved hundreds of people, requiring stability and security. In addition, the cost of setting up the servers needed for the technology in Brazil is too high, says Conde.
While vendors such as Dell sell servers made in Brazil for the consumer market, Conde says, the equipment required by Atitude would have had to be imported from the United States. And that’s where things get expensive: Brazil’s protectionist policies on trade call for tariffs on imports of computer goods that tack on as much as 75 percent of the equipment’s price to the total cost.
While the buyer can work out financing with the seller for the goods, such is not the case with the tariffs.
"When we purchase from a foreign country, we have to pay the tax all at once," Conde says.
You add that to the costs of hiring a staff to operate the equipment and of building the necessary infrastructure, and it’s easy to see how reverse outsourcing makes sense for companies such as Atitude. Working with The Planet allows the company to spend about five times less, according to Conde.
The Planet was only too happy to oblige. After all, the service provider does about 40 percent of its business outside U.S. borders, so setting up the services for Atitude didn’t exactly call for reinventing the wheel.
"We can provide these technology services much more cost-effectively," says Urvish Vashi, The Planet’s general manager for dedicated hosting. "We service customers all over the world."
The cheaper dollar and the availability of infrastructure in the United States, he says, is becoming attractive to an increasing number of companies abroad.
To be sure, IT channel companies that provide network hosting, managed services and SAAS have the ability to extend their reach outside U.S. borders, but typically that happens when a U.S.-based client needs the services at its locations abroad.
But the devaluation of the dollar in the last couple of years and the lag in infrastructure development in growing economies such as Brazil is making it more cost effective for companies in those growing economies, or even European customers looking for a bargain, to look stateside for some of their technology services needs.
Buying affordable services isn’t the only way foreign companies are investing in the U.S. economy. Taking advantage of exchange rates, companies abroad also are looking to gobble up U.S. companies for lower prices than they would have to pay if the dollar were higher.
For The Planet, a company whose name is indicative of its intentions to criss-cross the globe with its offerings, the Atitude relationship was a perfect fit. Vashi says The Planet has invested considerably in its South America infrastructure. The company manages 48,000 servers for some 22,000 customers worldwide.
Pointing to infrastructure limitations in South America, Conde noted that trying to get connectivity for clients in Chile, next door to Brazil, requires going through Miami, anyway, because there are no direct lines between the two countries. And that’s one other reason it makes sense to let The Planet handle the connectivity, he says.
Helder adds that while Brazil eventually will have a robust broadband infrastructure, at least in the next three years it will make sense for companies there to seek arrangements identical to Atitude’s contract with The Planet.