Logicalis’ local scale and investments in services transformation offerings position it well to withstand the COVID-19 headwinds in LATAM
Following one of the last in-person analyst events held in in Sao Paolo, Brazil, just before COVID-19 took over our personal and business lives, TBR had a chance to reconnect virtually with Logicalis LATAM CEO Rodrigo Parreira and Logicalis LATAM Director of Strategy Eduardo Harada. Expanding on our discussion at the analyst event in February, Parreira confirmed many of the regional market trends are still in place, although some initiatives have been paused, with COVID-19 forcing buyers to reorient their budget priorities toward run-the-business awards.
A spike in demand around supporting remote work, implementation and management of collaboration tools, and security plays to the strengths of Logicalis’ value proposition, particularly within the infrastructure services domain. Parreira is even more optimistic about a resurgence of opportunities in 2021 as regional buyers begin to solicit services in areas such as automation and AI, creating increased opportunities around IoT and connected devices. As Parreira positioned it, “The crisis accelerated automation.” He also highlighted that more than 50% of Logicalis new bookings have been geared toward services, accelerating the company’s efforts to become an IT services leader.
TBR is not surprised to hear there is an uptick in demand for automation considering the technology’s potential to lower the total cost of ownership, which is of particular importance to highly price-sensitive buyers in the LATAM market. We believe vendors that have experience adopting and scaling automation tools to drive down their own costs, improve remote delivery and retain savings will see immediate rewards. However, Logicalis may face an uphill battle educating regional customers on the value of AI beyond cost optimization, as many continue to see AI as a threat to their jobs. The company, however, is well positioned to capitalize on the trust it has built over the past six decades of operating in the region.
TBR previously wrote, “While the company’s business consulting unit spearheads outcome-based pricing initiatives, we believe Logicalis could further accelerate its value proposition transformation if it approaches every opportunity with scale in mind from the beginning. To execute on such a strategy, the company would need to further build out its consulting and application services capabilities, with acquisitions in these domains highly likely.” COVID-19 will likely fuel market consolidation, including in the LATAM market. Both Parreira and Harada believe consolidation in the LATAM market will be even greater as the challenging macroeconomic conditions will drive many smaller vendors out of business. Acquiring for capabilities, not for scale, would deepen Logicalis’ value proposition in both existing and emerging domains, including AI and SaaS. Larger global peers, though, including the Big Four and multinational corporations, are also scouting for price-competitive targets, possibly pushing Logicalis to take more aggressive action sooner.
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