Indian IT outsourcers want a bigger byte out of Europe
5 Indian player Tech Mahindra (TEML.NS), whose European clients include food giant Nestle SA (NESN.VX) and aerospace firm EADS (EAD.PA). “The customers are conservative in starting the initiative, but once they do, these are the customers that don’t just go back and forth or drop it, so what we’ve seen is that there is a lot more stability in the European customer,” he said. For graphic on acquisitions click link.reuters.com/hyr63v For European companies, many of them battered by a prolonged economic slowdown, Indian IT firms offer cost advantages to using local vendors or doing the work in-house. Global rivals such as IBM (IBM.N) and Capgemini (CAPP.PA) also have big operations in India that can take advantage of lower costs. Indian vendors are also taking on increasingly complex work. “To a certain extent, the skills shortage in continental Europe is driving the growth for offshore openness,” said Katharina Grimme, a principal consultant with outsourcing advisory Pierre Audoin Consultants (PAC) in Cologne, Germany. LOCAL CHALLENGES Indian IT’s progress in Europe comes at the expense of local vendors, which according to NelsonHall are seeing flat sales. In 2009, India’s TCS ranked just 21st in IT services revenue from Europe, the Middle East and Africa, but rose to 11th at the end of 2012, according to PAC. Indian rivals Wipro WIPR.N and Infosys ranked 18 and 23, respectively, in 2012, after not cracking the top 25 in 2009. To address labour issues and speed growth in Europe, Indian companies have been acquiring local firms. To win client trust, they hire locally for senior client-facing roles, but most of the grunt work can be done from India. Jef Loos, head of sourcing research at Whitelane Research in Brussels, said Indian vendors moving into Germany, France, Spain and Italy will use acquisitions given language barriers, a “limited” outsourcing culture, and stronger unions. Works councils are “very” influential in markets such as Germany and France, said Tech Mahindra’s Sharat Kumar, which is reflected in the makeup of project staff. In Germany, for example, relationship management staff tend to include Germans.
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