The mission of Going Global, which appears on ePrairie on most Tuesdays, is to educate and inform Midwest technology companies on what local technology companies are doing internationally so other firms can learn from the successes of like-minded peers.
CHICAGO Ė Prior to establishing Daitan Labs, James Bergamini was employed for 20 years at Lucent Technologies.
At Lucent, he held various executive positions including vice president of international sales and marketing for voice messaging systems and convergence solutions in Latin America. While heading Lucentís Central America and Latin America switching solutions group, he served as president of two telecom companies in Brazil called Batik and Zetax Tecnologia.
Prior to living in Brazil, he served as director of Lucentís switching joint ventures in India, Taiwan and Indonesia. He also lived in Japan and managed a number of wireless and wireline projects. In part two of a three-part Q&A, Bergamini sat down with international expert Michael Muth to discuss Brazilís version of Californiaís Silicon Valley.
Michael Muth: This is found on the Daitan Web site: ďBrazil is the top country worldwide in terms of retention.Ē Retention of what and why is this important?
James Bergamini: Brazil has been named No. 1 in terms of retention of employees. People arenít opportunists who go across the street for 20 percent raises.
We work in an environment whereby we manage the IP of our customers. When working with the crown jewels of others, we must ensure minimum employee churn. The combination of both country characteristics and our management style lends to a very high retention rate (99 percent).
Furthermore, high retention minimizes ongoing training costs. Brazilian engineers are paid well. They have this history that they want to stick with the company. If I open my source code and an employee walks across the street with it, thatís bad and I have to train someone else to replace that person.
MM: Why Campinas?
JB: Campinas is 45 minutes north of Sao Paulo. The proximity to the U.S. is phenomenal. Campinas is the Silicon Valley of not only Brazil but all of Latin America. Unicamp University is within four miles of our offices. All the big companies are there (Motorola, LME, Siemens, Cisco, Qualcomm, HP, Lucent, Samsung, NEC and Nortel).
Thereís an infinite talent pool of best-of-breed engineers as well as world-class contract manufacturers like Sanmina, Celestica and Solectron. It has all the necessary infrastructure and it even has wonderful weather. Theyíre only a couple hours ahead of us, too. The local airport is the largest cargo export facility in Latin America because of best weather.
The Brazilian government may expand the airport in Campinas to an international passenger airport. When that happens in the next year or so, this will be wonderful for our customers and for us. Imagine having direct flights from major cities in the U.S. (Chicago, San Francisco, Dallas, Boston and New York) to Campinas.
MM commentary: I must admit I found it much easier flying overnight and arriving in close to the same time zone rather than having to deal with a minimum six-hour time difference when flying to Europe or Asia. Hard travel takes its toll.
MM: What American region most closely resembles Campinas?
JB: Californiaís Silicon Valley, Highway 128 in Boston, the Plano-Richardson Texas Technology Corridor or the I-88 Technology Corridor in the western suburbs of Chicago. Brazilians come to Naperville, Ill. and they canít tell the difference (except, of course, Chicago weather is much harsher).
You compound that with Unicamp and the University of Sao Paulo (where they mint more than 2,700 people with doctorates a year in the sciences). Compare that with Stanford, MIT, UCLA, the University of Wisconsin-Madison and the University of California at Berkeley and those five kick out the same number combined. We feed off this environment.
MM commentary: Letís be clear here: Thereís only one Silicon Valley. Campinas is a tech center like many others.
MM: How and why are your resources better than India, Eastern Europe or China?
JB: Weíve delivered telecom carrier-grade hardware and software development for more than 10 years now. Others canít say this. Most companies focus on ITO, BPO or call centers. This is what you typically read about rather than delivering carrier-grade telecom solutions.
From a leadership team and the engineers doing it, we feel we are a cut above. We know the protocols, we know the systems engineering and we know how to integrate disparate switching platforms. Having been on the service provider side of the house, we understand the business model, which means we donít just crank code but we develop product that makes money for our customers.
MM: There appears to be quite an Asian influence in Brazil. How and why? Whatís the impact?
JB: Yes, Brazil has a large Japanese population. Its borders were open after World War II. Two of our partners are Japanese-Brazilian. Where else can you find quality engineers who can speak Japanese with customers like Fujitsu when they only cost 40 percent on the dollar?
MM commentary: Unlike those arriving in the U.S., itís interesting to note that Brazilian second-generation immigrants apparently still speak the tongue of their parents.
MM: Is your office in Brazil a wholly owned subsidiary, a branch, a joint venture, an LLC or a contract partner?
JB: We are a limited liability company. There are no differences of which Iím aware. We are like a subchapter ďSĒ corporation with articles of incorporation. We are regulated by the government as a tax-paying entity. There are no material differences. The financial structure is the same.
MM: What incentives do Brazil and Campinas offer to do R&D there?
JB: Weíre a services company so we donít pay a lot of the taxes that a products company would pay. There are a lot of taxes in Brazil. iIn order to create incentives for more R&D, the informatics law says we will give you R&D credits based on levels of revenue achieved.
Itís a nice incentive, and if managed properly, it provides a nice economic incentive for elevating the amount of R&D done in Brazil. We pass cost savings onto our customers as well. We are petitioning for tax holidays, too.
MM: How help or hurtful is the Brazilian Institute of Industrial Property (INPI)?
JB: Theyíve been helpful. They may fund some of our training programs for our customers.
MM: Has Brazilís immigration reciprocity affected Daitan?
JB: Any immigration concern is a bit more bureaucratic. We help customers get visas. We expedite the process. We also manage the process when we bring Brazilian engineers to the U.S. for training. While it can be a bit of a minor headache sometimes, we understand the system quite well.
MM commentary: Brazil is one of the few countries in the world to reciprocate U.S. policies. We fingerprint and photograph foreign visitors coming here. Theyíre doing the same to us when we enter Brazil.
MM: What corruption problems have you run into when working with foreign governments?
JB: With Daitan Labs, we havenít. In other business lives, we have. I havenít seen any government corruption in Brazil.
While gangs and organized crime have made the press in the U.S., it hasnít impacted us directly. I never saw it from living there for 25 months. When things happen, itís in the bowels of Rio. Weíre in the Silicon Valley of Campinas. Itís a very bucolic. Perhaps the biggest thing in business is tax evasion. Expatriates had some issues.
MM commentary: Though I believe organized crime is the biggest concern, I donít think Daitan is currently big enough to garner that kind of attention.
MM: How do you protect your intellectual property in South America?
JB: Brazil has very clear laws on protection of intellectual property. They are in line with international standards. They give the necessary support for the businesses established in the country. If compared to other countries such as India and China, Brazil has much less issues with IP protection.
All the major players in Brazil have been realizing huge investments in R&D for many decades. Some have been present in Brazil for more than 80 years. There is no known issue regarding IP impropriety. We also abide by international standards of the Foreign Corrupt Practices Act.
MM: What recourse do you have in an IP dispute?
JB: If there is any degree of arbitration, itís under the U.S. court system.
MM: In 2000, 56 percent of all software in Brazil was pirated, according to a study from the ABES (Brazilís software association). Do you buy that?
JB: That surprises me. We pride ourselves in being very rigorous in managing the IP of others. Customers share their source code and go through great pains to ensure that itís absolutely protected. It goes back to our retention. High retention means people with knowledge stay with us.
The IP doesnít go out the back door for someone else to access. Additionally, every customer is given a secure and exclusive environment where only authorized personnel have access. While my partner read the same 56 percent number in Brazil, that same report said there is 70 percent piracy in China. Itís all relative. I donít see that in Brazil, but then again, I didnít see it in India and China either.
MM: Who takes on this risk?
JB: The risk is on Diatan Labs and is subject to the laws of the U.S. Our lifeline is building confidence with a tremendous degree of privacy. If there is the slightest hint of impropriety, we wouldnít survive. Weíve positioned ourselves as understanding the value of IP. We ride on that. Clients always want to talk about the crime and piracy first. We have to address it.
MM commentary: We yet havenít seen any earth-shattering breaches of IP. If we do, much of this could change. Retention helps, yes, but IP can be lost even while retention is good.
MM: How do you interact with client sales forces and other sources of information?
JB: Thatís what makes us unique. Weíve worked in the U.S. We understand carrier infrastructure vendors and service providers in the U.S. This is our background. We donít just bring coders. We understand what it takes to make money for our customers.
Weíre only Brazilian because our legal entity is in Brazil. We know whatís needed to be successful. We can be a lightning rod in our customerís upfront planning process. We donít just take requirement documents. Our mantra is ďwhere innovation sparks opportunityĒ. We stand by this.
MM commentary: By outsourcing your R&D, you might miss some insights that result from internal relationships between sales and service.
Tune back in next Tuesday for part three of this three-part Q&A.
Michael Muth is managing director of GATA, an international business development consultancy that helps technology companies build international partnerships. He can be reached at firstname.lastname@example.org.
Click here for Muthís full biography.
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