Brazil Information Technology Industry Update Quarter 4 2011

Includes 3 FREE quarterly updatesBMI View: Macroeconomic factors have led us to revise down our forecast for Brazilian IT spending in
2012; we now expect it to reach US$29.4bn in 2012, up 8% from an estimated US$27.3 in 2011. However
despite a slowdown in PC sales in Q112, the Brazilian IT market is easily the largest in Latin America
and spending in the IT market is forecast to nearly US$43bn by 2016. This makes Brazil one of the fastest
growing global markets and with household PC penetration at around 50%, a return to double-digit PC
market growth is expected. Brazil's hosting of the Olympic Games and FIFA World Cup is expected to
drive billions of dollars of IT-related spending. Meanwhile, growing small and medium-sized interest in
cloud computing will encourage more investment in data centres and IT services.

Headline Expenditure Projections
Computer hardware sales: US$11.8bn in 2011 to US$12.5bn in 2012; +5% in US dollar terms. Our
forecast has been downwardly revised due to analyst modification, following low single-digit growth
in Q112, as business delayed investments due to economic uncertainty.
Software sales: US$4.6bn in 2011 to US$5.1bn in 2012; +10% in US dollar terms. Our forecast is
unchanged with vendors reporting continued strong growth in enterprise software license sales. We note
that software is beginning to gain ground in Brazil despite high annual losses from software piracy.
IT services sales: US$10.9bn in 2011 to US$11.9bn in 2012, +9% in US dollar terms. Our forecast has
been downwardly revised owing to analyst modification, but the large number of multinationals setting
up headquarters in Brazil will continue to be an important driver of spending.

Risk/Reward Ratings: Brazil's score in our Q412 RRR for the IT sector is 61.8 out of 100. Brazil
ranks fourth in our latest table, behind the US and Canada, but ahead of Mexico.

Key Trends & Developments
- The biggest impact from the upcoming 2014 FIFA World Cup IT spending is expected to be felt
in 2013. Brazil's hosting of the world cup and the award of the 2016 Olympic Games to Rio de
Janeiro, are expected to drive investment of around US$5.7bn in IT related spending. This will
include not only spending on ICT capabilities directly associated with these events, such as
transmission of data and images they generate, but also indirectly related spending on IT for
transport and other infrastructure projects. The Brazilian government has formulated an
investment strategy to drive modernisation ahead of the events, with IT one key element.
- One driver for the IT services market will be the Brazil government's intention to develop
Brazil's capabilities in the business process outsourcing area and capture a larger global market
share. Brazil has an ambitious plan to become one of the world's top IT outsourcing destinations
through a joint initiative by the federal government and Brasscom, the software and IT service
export association.
- As local companies grow, they are aiming to use computing resources more effectively and
integrate investments made in hardware and software. IT procurements are becoming more
systematic as companies look to select the right IT vendor for a particular need, rather than
entrusting everything to a single provider.