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Brazil can stop being a country of commodities, believes the manager
“The IT sector is a differentiating lever, in a horizontal way, which benefits the entire economy”. This is the assessment of Gérson Schmitt, vice-president of the Board of ABES and president of the Board of Directors of Paradigma Business Solutions. The ABES Portal interviewed the executive for the series of articles commemorating the association's 30 years of existence, celebrated in 2016. Schmitt spoke about the process of renewing the role of ABES initiated during his administration. Check out the changes made and a detailed analysis of the Brazilian software and services sector:
During his term (2010 -2012) as president, the entity underwent a process of renewal. Could you comment on how this process took place?
ABES had a consolidated and recognized work in the Brazilian sector, mainly in the fight against piracy and, during this period, we decided to promote a repositioning of the association with the opening of new work fronts, aiming at the development of the sector, promotion and innovation. We renewed our portal, promoted the renovation of the headquarters, updated the visual identity, implemented the innovation department, established partnerships with regional entities, among other activities. In this management, we maintained the entity's services, renewed the mechanisms of approximation of the association with various segments, so much so that we grew a lot in the number of associates. In other words, we achieved a renewal of ABES' role and performance.
In this period, the Startup Brasil Program was also launched by the Federal Government, however, since 2014, no new classes have been launched. How do you evaluate the Brazilian ecosystem of incubators, accelerators and startups?
This ecosystem has been fundamental, as it has replaced a good part of the governmental action, which should be promoting this type of project. Who ends up doing it are entrepreneurs and investors. I believe our ecosystem could be bigger. We have very successful projects and I will give the example of my city, Florianópolis (SC), an island that has an association that brings together about 600 IT companies, half of which are represented by startups and incubators. These programs really bring development and innovation, so they could have much more public support and funding. Brazil will only have productivity when it has the technology and innovation to become better than other developing countries and get closer to the developed ones.
In Brazil, there is a large representation of service companies in the software market. What would be, in your opinion, the ways to expand the development of national software?
We will leverage the development of national software as we have a differentiated tax treatment for companies that sell services and for those that work with the commercialization of applications, software, whether delivered in physical form or as SaaS. In Brazil, currently, large companies hire software to order, but this work does not have long-term results, there is no replication. We could also have a possibility, for example, of different tax treatment for those who buy domestic software compared to those who buy services, in order to stimulate the sector. Replication is the foundation of all major international companies such as Oracle, Microsoft and Google. All of them have software that can be commercialized at scale. It is much more advantageous for the economy to bet on software.
What are your management tips for new entrepreneurs who are structuring technology and software startups?
There is no business that is not based on the tripod of management: the combination of a good strategy, a visionary leadership that understands the market needs, and an organization capable of putting the business on its feet, because it doesn't have a good idea that survives the bad management. The fundamentals of management need to be present in start-up companies to be successful.
What are the main challenges that entrepreneurs in the sector will have to overcome in the coming years?
The main challenge is the recovery of the economy as a whole, because it affects everyone. This is a collective challenge and not just for IT companies. Despite this, our sector continues to grow, even with lower rates than in the past. Other major challenges are the qualification and quantity of professionals, both because of the poor quality of education and the lack of manpower. The service-focused model of the IT industry needs more people. If Brazil moves towards the model of replicated software, the better use of existing professionals will be. The influence of the industry model on these issues is very large.
A third aspect is export, as the one that has the most economic importance, the one that offers perceived value, is software. In service exports, Brazil will compete with players like India, where they charge less than US$ 20 an hour. Compete in a market commodities not very smart. The replicable software, which can be exported, also contributes to improving the trade balance, which has been in deficit for decades. We are the world's seventh largest market for software and IT services, but we are not the seventh largest software industry. The public area has not contributed to the development of national software, as in other countries, because of the preference for self-development of programs or free software.
How do you assess the role of the IT sector in the Brazilian economy?
The IT sector is a differentiating lever, in a horizontal way, which benefits the entire economy. Once it has a correct policy of incentive for the development of software and innovative technologies, whether embedded or replicated, Brazil will be able to leave the position of hostage, of a country of commodities, for an internationally competitive country in cutting-edge technology areas or in sectors where technology makes a difference. So, it is very important to support the growth of the IT sector and ABES has this argument on its agenda as one of the main arguments for changes in Brazilian policies in this area.
During his term (2010 -2012) as president, the entity underwent a process of renewal. Could you comment on how this process took place?
ABES had a consolidated and recognized work in the Brazilian sector, mainly in the fight against piracy and, during this period, we decided to promote a repositioning of the association with the opening of new work fronts, aiming at the development of the sector, promotion and innovation. We renewed our portal, promoted the renovation of the headquarters, updated the visual identity, implemented the innovation department, established partnerships with regional entities, among other activities. In this management, we maintained the entity's services, renewed the mechanisms of approximation of the association with various segments, so much so that we grew a lot in the number of associates. In other words, we achieved a renewal of ABES' role and performance.
In this period, the Startup Brasil Program was also launched by the Federal Government, however, since 2014, no new classes have been launched. How do you evaluate the Brazilian ecosystem of incubators, accelerators and startups?
This ecosystem has been fundamental, as it has replaced a good part of the governmental action, which should be promoting this type of project. Who ends up doing it are entrepreneurs and investors. I believe our ecosystem could be bigger. We have very successful projects and I will give the example of my city, Florianópolis (SC), an island that has an association that brings together about 600 IT companies, half of which are represented by startups and incubators. These programs really bring development and innovation, so they could have much more public support and funding. Brazil will only have productivity when it has the technology and innovation to become better than other developing countries and get closer to the developed ones.
In Brazil, there is a large representation of service companies in the software market. What would be, in your opinion, the ways to expand the development of national software?
We will leverage the development of national software as we have a differentiated tax treatment for companies that sell services and for those that work with the commercialization of applications, software, whether delivered in physical form or as SaaS. In Brazil, currently, large companies hire software to order, but this work does not have long-term results, there is no replication. We could also have a possibility, for example, of different tax treatment for those who buy domestic software compared to those who buy services, in order to stimulate the sector. Replication is the foundation of all major international companies such as Oracle, Microsoft and Google. All of them have software that can be commercialized at scale. It is much more advantageous for the economy to bet on software.
What are your management tips for new entrepreneurs who are structuring technology and software startups?
There is no business that is not based on the tripod of management: the combination of a good strategy, a visionary leadership that understands the market needs, and an organization capable of putting the business on its feet, because it doesn't have a good idea that survives the bad management. The fundamentals of management need to be present in start-up companies to be successful.
What are the main challenges that entrepreneurs in the sector will have to overcome in the coming years?
The main challenge is the recovery of the economy as a whole, because it affects everyone. This is a collective challenge and not just for IT companies. Despite this, our sector continues to grow, even with lower rates than in the past. Other major challenges are the qualification and quantity of professionals, both because of the poor quality of education and the lack of manpower. The service-focused model of the IT industry needs more people. If Brazil moves towards the model of replicated software, the better use of existing professionals will be. The influence of the industry model on these issues is very large.
A third aspect is export, as the one that has the most economic importance, the one that offers perceived value, is software. In service exports, Brazil will compete with players like India, where they charge less than US$ 20 an hour. Compete in a market commodities not very smart. The replicable software, which can be exported, also contributes to improving the trade balance, which has been in deficit for decades. We are the world's seventh largest market for software and IT services, but we are not the seventh largest software industry. The public area has not contributed to the development of national software, as in other countries, because of the preference for self-development of programs or free software.
How do you assess the role of the IT sector in the Brazilian economy?
The IT sector is a differentiating lever, in a horizontal way, which benefits the entire economy. Once it has a correct policy of incentive for the development of software and innovative technologies, whether embedded or replicated, Brazil will be able to leave the position of hostage, of a country of commodities, for an internationally competitive country in cutting-edge technology areas or in sectors where technology makes a difference. So, it is very important to support the growth of the IT sector and ABES has this argument on its agenda as one of the main arguments for changes in Brazilian policies in this area.
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