Brazilian firm Algar signs £34m outsourcing deal with Capgemini

Algar, one of the largest firms in Latin America, has extended a 13-year outsourcing contract with Capgemini to mitigate potential finance and tax compliance risks within Brazilian legislation, to the cost of £34 million (€43 million).

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Algar, one of the largest firms in Latin America, has extended a 13-year outsourcing contract with Capgemini to mitigate potential finance and tax compliance risks within Brazilian legislation, to the cost of £34 million (43 million).

Capgemini will be managing finance and accounting services including Record to Analyse, Procure to Pay, Credit to Cash and Human Resources Outsourcing. It will cover the group’s statutory reporting, tax returns, tax compliance as well as payroll processing, social benefits administration and HR compliance for 22,000 of its 25,000 employees.

The group has its own governance and contract department that acts as the gateway between suppliers, including Oracle, LG and Capgemini, and the business. The move to outsourcing is rare for home-grown Brazilian firms, Mauricio Lemos, director of Algar’s corporate solutions centre said this morning at the Capgemini headquarters in Sao Paulo.

The contract extension will take the burden of complying with complex Brazilian financial legislation from Algar onto Capgemini.

“Changes in taxation happens on a daily basis, municipal, federal and state legislation...We want Algar companies to be focused on core business and let the rest of it be performed by us [the corporate solutions centre],” Lemos said.

“We want to mitigate risks. Maybe I could do it cheaper internally, but that is not a risk we want to play, so we are dealing with a provider. If we hire someone that is a specialist on doing tax, then that company has risk.”

Algar, which reported a turnover of US$1.8 billion (£1.1 billion) in 2013, will be using Capgemini’s offshore resources from its business process outsoucing (BPO) India centre in Bangalore.

The group serves over two million clients in South America across its ITC, tourism and agricultural firms, its brands range from animal feed, food produce to civil aviation services.

Lemos said the firm has seen a saving of 25 percent since signing its first E31 million deal with Capgemini in 2011.

“On our outsourcing cost, if we projected it on previous scenario, we had a 25 percent saving on back-office outsourcing cost”, he told ComputerworldUK.

Making the most of the different time zone

Offshoring to different countries has also improved efficiency, Lemos added.

We can make use of the time zone difference; we have a time zone advantage for processing.”

Algar is assessing which services to take back in-house and which to give to Capgemini to improve efficiency and visibility.

“We are constantly looking at what we have done outside, what we outsource, things that are better to do internally and things that are better with Capgemini.”

However, it forecasts a ten percent growth on the contract for next year.

Future projects

Algar acquired IT services company Asyst at the end of 2013, and will be using Capgemini’s services to integrate it with the group’s systems. The group uses a centralised Oracle ERP and payroll systems as well as an internal intranet. Each of its businesses run its own CRM and business applications, each of which will be audited under the Capgemini contract.

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