Background Globant is a growing information technology (IT) enterprise that was founded in Argentina in 2003 by four engineers. These founders now make up Globant’s management team. Martin Migoya is the company’s CEO, and has an extensive background in business management, sales and marketing. Guibert Englebienne is Globant’s CTO, with experience in IT and communications. Martin Umaran is the COO, and has a background in executive and business management for technology companies. Lastly, Nestor Nocetti is the VP of Corporate Services, with experience in the IT industry. The four engineers saw an opportunity to start their company with the rapid growth of the IT outsourcing industry in India and China. They recognized that Latin America’s advantages in labor quality, labor supply and time zone would give them a leg up on their competition, even though both India and China have lower labor cost. By exploiting these advantages, they were able to grow at a rapid pace. By 2009, Globant had over 1500 employees and was generating three million dollars per month in revenue. Despite their success, Globant found themselves at a crossroads. For four years the founders pursued clients that needed IT expertise in anything under the broad spectrum of IT services. However, the management team recognized that Globant needed to target specific industries to remain competitive in the market. The team therefore, narrowed their scope to four very distinct market segments for further analysis: high-tech, telecom, travel and financial services industries. Globant recognized that their diversified client portfolio was spreading resources too thin, and top clients began choosing IT service partners that focused on a specific industry where they could demonstrate a deep and wide understanding of a particular sector of the market. In order to avoid becoming a marginalized player in the IT services industry, Globant must develop a focused and tactical approach towards further business development. Primary Issue
The main issue facing Globant is market competitiveness; to become competitive among top tier clients, Globant needs to focus on a particular IT service market segment. Since their client portfolio is currently diversified; they need to specialize in one or two segments.
Analysis
To begin the analysis, we identified the pros and cons of Globant’s four market segments. We will first analyze the high-tech segment. EMC, Globant’s first client, is in the high-tech industry. Globant has maintained a very strong relationship with the high-tech firm and could rely on them in the future for referrals. Next, Globant has an office in Palo Alto, California where 30 percent of the high-tech United States market is located. This provides Globant with easy access to new customers. In addition to this, 80 percent of prepackaged software companies outsource their application and product development, and high-tech manufacturing is concerned with cost, and tends to need SAP and Oracle customization expertise. These factors are ideal for Globant’s current services.
However, there are some negatives within the high-tech segment that Globant needs to consider. For one, there are many established competitors focusing strictly on the high-tech segment, and the majority of these competitors are much larger than Globant. Also, with the data processing high-tech segment, data security is a major concern. Companies specifically in IT services spend less than two percent of their budgets for outsourcing, which could limit opportunities for Globant. We then analyzed the travel segment of the market. This industry is undergoing a shift to online sales, which could bring new clients. Globant already has two large clients, OAG and lastminute.com. These clients could provide a platform for expansion in this market. Travel also boasts an 11 percent growth rate; since the industry does not have the long standing partnerships, this growth will lower Globants barrier to entry. Specializing in travel will further increase Globant’s ability to penetration the market.
Travel also has some drawbacks. While the industry is quickly growing, it is still the smallest of the four segments Globant is examining. There are only 174 target companies and 149 million dollars annually in the potential market for outsourcing. Since Globant boasts a monthly revenue of $3 million, this market may not be sufficient to satisfy their growth prospects. Globant also needs to provide 24 hour support to focus their services in this segment, and they would need to adjust their culture to fulfill this need. Next, we analyzed the Telecom industry. The CTO, Englebienne, has experience in this industry which currently has the second largest potential market for outsourcing, at 493 million dollars, and is expected to grow between 30 and 50 percent over the next five years. However, while potential market for outsourcing is high, there are only 229 target companies in the industry which ranks second lowest on our list of possible industries. Furthermore, India currently has a strong hold on the Telecom market, and the competition for Telecom market share is very high. Expertise both in telecommunications and the specific client technology is required, which will make this market difficult to enter. Lastly, we looked at providing IT support to financial service firms. Martin Umaran, Globant’s COO, has experience in the financial services industry which could prove useful when contacting new clients. This industry is the largest of the four that we are examining with 747 target companies and 1.34 billion dollars in potential market. Globant also has a time zone advantage over India and China, which is favorable in financial services. There is only a two-hour difference between Globant’s headquarters in Argentina and New York, and only a three hour difference between Argentina and London. Additionally, Globant already has offices in New York and London, and these two financial hubs constitute a large portion of the financial services market.
Unfortunately, there is stiff competition in this market, and most large financial firms have already established long-term relationships with their IT service providers. Since data security is a major concern in financial service, firms are less likely to switch IT service providers based on cost. This barrier to entry will pose a significant problem if Globant chooses to specialize in financial services. After compiling the advantages and disadvantages for each market, our group conducted a Porter’s Five Forces analysis on each industry. In each case, the five variables are rated as either low, medium or high depending on Globant’s difficulties and advantages within the sector. For high-tech, the threats to new entry is medium, supplier power was rated as low, buyer power was rated as high and the threat to product substitutes, and competition within the market were both rated as high. In travel, we rated the threats to new entrants medium, buyer and supplier power were each rated as medium, the threats to product substitutes were rated high, and the competition within this market was rated low. In telecom, we rated the threats to new entrants low, the supplier and buyer power medium and high respectively, the threats of product substitutes as low, and the competition within the market as high. Finally, in the financial services industry, the group rated threats to new entrants low, the buyer and supplier power medium, the threats to new product substitutes low, and the competition in the industry medium. Please see Exhibit 1.
Using the previous analysis, we came up with the following four criteria to guide the final recommendation. The criteria are as follows, and have been ranked in order of importance: first is low barriers to growth; second is expertise in the industry, including large current clients they plan to focus on and use to grow; third, they must have had extensive technical expertise and success in the field; finally, there should be a large market opportunity.
Recommendation
After aligning our analysis with the criteria, we came up with the following three-part recommendation for Globant. First, they should focus on the travel industry. While the potential market is currently small, it is growing, and based on our analysis, we believe that low barriers to entry, paired with positive past experience in the field will lead to a competitive advantage in the industry. Globant should also focus in the high tech industry. Medium barriers to entry and a sizable potential market, combined with positive past experiences, will lead to additional revenue and growth for Globant. To support this recommendation, we suggest that Globant create a 24-hour support team. Second, we recommend that Globant continue providing IT services to their current clients. By keeping their current clients, they will avoid burning bridges in the IT industry, and continue to grow their monthly revenue. Finally, Globant should partner with smaller IT firms in Argentina and India. Since labor costs are lower in India, this will reduce Globant’s costs, allow them to remain competitive on price, and supplement additional labor should the need arise.

Exhibit 1 Criteria | High-Tech | Financial Services | Travel | Telecom | Potential Market | 0 | + | X0 | 0+ | Need for Tech Expertise | 0 | X | 0 | X0 | Barriers to Market Entry | 0 | X | + | X0 | Past Experience | + | X | + | 0 |