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June 2013
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All the information contained in this report is obtained through proprietary technology aggregation algorithms, human experts, network of domain experts, discussions with industry leaders, public and confidential information sources believed to be reliable. Talent Neuron makes no representations or warranties regarding the errors, omissions or completeness of any information contained herein and shall have no liability for the same. The report is provided solely for informational and marketing purposes and opinions must not be construed as advice, recommendations or endorsements. The reader of the report is advised to conduct an independent evaluation and form conclusions with respect to the information provided.
Summary
Brazil is one of the emerging locations for data centers. This is driven by the rapidly growing internet consumer base, better telecommunication infrastructure and availability of low cost skilled talent Sao Paulo is the 1st choice for MNCs to establish data centers in Brazil. Over 80% of the data centers in Brazil are based in Sao Paulo. MNCs with multiple data centers in Brazil have at least 1 data center in Sao Paulo. The city has over 24,000 sq.mt. of rack space and over 2,000 people with data center related skills Presence of IT Companies: HP, IBM and Terremark have data center operations in Brazil for over a decade. These companies have more than one data center in the country. Key services provided from data centers in Brazil include Mainframe and Open Source Technologies, Infrastructure Support, Disaster Recovery Management and Cloud Services Other MNCs present : Capgemini-EMC, Tivit, Dell, Amazon Presence of Online Companies: Top online companies such as Google, Yahoo, Facebook, Twitter and LinkedIn have not set up data centers in Brazil. Google is setting up its first Latin American data center in Chile. This is expected to be operational by the end of 2013
Amazon Web Services is the only online company to set-up a data center in So Paulo in 2011.
Key Challenges faced in Data Center Set-Up: High Energy Costs: Energy or Electrical cost in Brazil is about 60% higher than that the US. Inadequate Data Security Policies: Data security concerns are higher in Brazil due to the lack of interoperability, portability and data security policies and standards in the country. Brazilian legislation also lacks a Trans-Border convention given the absence of general and sector-specific rules. The introduction of Brazil Data Protection Draft, 2011 is expected to alleviate most of the data security concerns in the coming years High Tax Rates: Compared to other global locations the cost of setting up a data center in Brazil is higher; Taxes account for about 25% of the total set-up costs
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Property Taxes
This is a For more information , Please contact us at info@talentneuron.com The Brazilian government reduced import duty on telecommunications and
computer products from 16% to 14% which will reduce new data center set up costs. However it must be noted that import taxes on routers were increased by 4% to 20%.
In 2012, the Inspection Operating tax on M2M equipment was reduced from 50% to 33% which will reduce operating costs of all M2M equipment used in datareport. centers summary
Import Taxes
Energy Costs
In February 2013, the electricity rates which were 16 per KwH in August 2012 were reduced by close to 30 percent for enterprises which has helped to reduce data center operating costs in the country
Compared to other global locations the cost of setting up a data center in Brazil is higher; Taxes account for about 25% of the total costs
Building a Tier III Data Center - Cost Comparison Total Data Center Cost Brazil Chile Argentina Mexico Columbia US
100% 115% 125% 155%
Tax Component
35 ~ 40% 13 ~ 18%
125%
110%
12 ~ 16%
0%
20%
40%
60%
80%
100%
120%
140%
160%
Due to high import taxes in Brazil, cost of data center equipment accounts for almost 40 percent of the total data center set-up cost
Note: Tier III data centers are data centers with dual powered IT equipment and have multiple independent distribution paths serving the IT equipment Source: Talent Neuron Analysis
Power Backup
Cooling Solutions
Air-side cooling : Data center circulates outside air which is cooled by passing is through a series of filters or heat exchangers Water side cooling: Data center circulates outside air which is cooled by passing is through cooling towers containing water or glycol
Free cooling techniques however are not very effective in Brazil as in some parts of the year Brazils hot climate and water supply shortages compel data center operators to opt for chillers and compressors
The new Brazilian Data Protection Draft (DPD), 2011 follows the current trend of several countries, European Union included, by adopting a data breach notification regime (1/2)
Data Security Issues prior to Brazil DPD
Prior to the introduction of the Brazil DPD*, Brazil had a minimal data protection framework. Companies found it difficult in processing personal data. Firm data processing legal basis were missing, which companies could refer to.
As per the bill a Data Protection Authority is to be established that would release a list of all recommendation measures. All companies, private or public, would have to follow its recommendations, and be liable for any security breach without a showing of omission or negligence.
Judiciary lacked experience in addressing issues such as data disclosures and data privacy on internet Companies were liable only when damages occur because of personal information they were storing
For companies with more than 200 employees and that process personal data, there This is a summary report. would be a new obligation to appoint a Data Protection Officer responsible for all data Due to legal uncertainties many processing in the company and who would have to report directly to the Data Protection For more information , Please contact us at technology companies gave-up investing in Authority. Brazil. info@talentneuron.comWith the bill, the mere data breach could make the company liable without the need to
prove omission or negligence, and that can be coupled with penalties as high as the closure of the business activity. The bill creates a National Counsel on Protection of Personal Data The draft bill guarantees a list of citizens basic rights regarding their personal data, such as the right to: Access ones data Correct inaccurate or wrong data and delete them Object to their processing Not be subject to purely automated decisions Be compensated for the misuse of ones personal data
Even if there was a security breach and personal data, such as credit card numbers and passwords, were leaked or lost, a business was only liable to the extent of the damages resulting from the misuse of that information.
The new Brazilian Data Protection Draft (DPD), 2011 follows the current trend of several countries, European Union included, by adopting a data breach notification regime (2/2)
Data Security Issues prior to Brazil DPD
Prior to the introduction of the Brazil DPD*, Brazil had a minimal data protection framework. Companies found it difficult in processing personal data. Firm data processing legal basis were missing, which companies could refer to. Due to legal uncertainties many technology companies gave-up investing in Brazil. Judiciary lacked experience in addressing issues such as data disclosures and data privacy on internet Companies were liable only when damages occur because of personal information they were storing Even if there was a security breach and personal data, such as credit card numbers and passwords, were leaked or lost, a business was only liable to the extent of the damages resulting from the misuse of that information.
This is a summary report. Data retention and the storage of connection logs Liability of Internet services providers For more information , Please contact us at of a judicial order for law enforcement authorities to obtain users info@talentneuron.com Necessity personal data, and the removal of illicit copyrighted material
Establishment of a minimum time to store the personal data
Brazil has a larger talent pool of IT Infrastructure talent when compared to the neighboring Latin American countries while cost of labor is lower than US. This helps in reducing data center operating costs.
Salaries of Tier-1 cities of Brazil (So Paulo and Rio de Janeiro) are around 40-50% of US salaries. Salaries of Tier-2 cities (Curitiba, Campinas etc.) are around 25% of US salaries*. Technology Zones and Clusters:
Software and Technology Parks in Brazil, offer multiple Tax and Financial Incentives to companies that are willing to set-up their development and service centers in the parks.
E.g. Porto Digital Technology Park, Recife. According to Municipal Act, IT businesses and associated services companies established in Porto Digital can obtain a tax reduction of up to 60% in local sales tax on services. Growing Consumer Market within Brazil: Brazil is witnessing a high growth in Internet users. This increasing consumer market has lead to the demand of cloud computing and related services which in turn is driving the growth of the Data Center market in Brazil
Note: * Salaries of talent deployed in IT Infrastructure field is considered; ~ The incentives offered vary from one technology zone to another Source: Primary interviews of Brazilian Software Promotion Departments, Government Organizations and Established Companies in the region
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39% 15.30%
34% 31%
Overall Payroll and Corporate Taxes are very high in Brazil as compared to other nations. High taxes on importing data center equipment and energy is a major deterrent for data center operations This is in a Brazil. summary report.
High Energy or Electricity Costs: For more information
, Please
China
Energy or Electrical cost in Brazil is over 60 percent more than contact us at that in US. Thus operating a data center in Brazil is not very cost info@talentneuron.com effective.
Data Security Concerns: Data security concerns are higher in Brazil due to the lack of interoperability, portability and data security policies and standards in the country. The introduction of Brazil Data Protection Draft, 2011 is expected to alleviate most of the data security concerns in the coming years
India
0%
20%
40%
60%
Source: Primary interviews of Brazilian Software Promotion Departments, Government Organizations and Established Companies in the region
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