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| Old World becoming the New Frontier for Indian IT |
| Pallavi Aiyar / Brussels Oct 07, 2009, 00:50 IST |
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Historically Europe may be of the Old World, but when it comes to IT-related offshoring it is the new frontier.
“Ten years ago Europe contributed 15 per cent of our global revenues, five years ago 21 per cent and in the last fiscal, 30 per cent,” says Abhinav Kumar, Tata Consultancy Service’s director for marketing and communications in Europe.
After years of sniffing suspiciously at the Anglo-Saxon model of business and the outsourcing/offshoring road it has increasingly taken, continental Europe finally seems to be experiencing a shift in mindset.
“We see a change from the belief that offshoring is a temporary phase whose advantages are not sustainable to a mindset that sees it as an emerging trend that will continue to expand further,” explains Hemakiran Gupta, country manager for TCS Belgium.
After 16 years of operating in Belgium the Indian IT major today accounts for some 7 per cent of the country’s IT pie. It may not sound huge but a disproportionate percentage of TCS’ European revenues come from this small country of 10 million people.
“After Germany and the Netherlands, Belgium ranks third in terms of our continental European operations,” says Gupta.
The company already has 700 consultants working with Belgian clients — 200 located locally. Out of Belgium’s top 20 firms, eight are TCS clients including the telecom heavyweight Belgacom, retail giant Colruyt and the world’s largest maker of beer, InBev.
A recent report by outsourcing advisory firm Quantum Step put the source-able IT sector in Belgium at $6.5 billion for the coming year, claiming that customers in the country will spend $1.8 billion on infrastructure management outsourcing, almost $2.6 billion on application development and maintenance and nearly $2 billion on BPO.
Gupta agrees that this is a significant opportunity for Indian IT although he stresses that the competition is stiff. He says that of the $6.5 billion, $1 billion has already been sourced. That leaves $5.5 billion, but Indian companies still account for a relatively small portion of the market. TCS’ main competitors include Accenture, Capgemini and IBM.
Given Belgium’s modest size local competition is limited. This is not the case in other European countries like France for example. According to Kumar, 70 per cent of France’s $30-billion IT market remains controlled by local companies.
“Europe,” he explains, “is still very domestically oriented.” One reason is linguistic. Indian companies pride themselves on their English but in France or Spain, English is not enough.
“In Europe the social sector is very sensitive,” adds Gupta. Sensitivity to job losses due to offshoring is much stronger in Europe than the US or UK he explains. “They are used to doing things a certain way here and they need to be convinced that an Indian company can adapt to their way.”
Indian companies have found it tough going in part because they are “very revenue-focused and so don’t prioritise getting into the social fabric,” which is necessary according to Gupta.
“We are aware that in Europe we need a different strategy to that in the US. Pure offshoring can never work here. On the other hand, pure localisation which is feasible in Latin America and other emerging markets is not appropriate for Europe either, due to financial reasons. In Europe we need a middle-path between localisation and offshoring,” concludes Kumar.
Gupta and Kumar agree that the economic recession has been a mixed bag for TCS in Europe. The majority of the company’s clients are in the banking and financial sectors. TCS has consequently suffered from the deferral and cancellation of new projects.
On the other hand, the financial crisis has also forced companies to look at new models of operating and saving costs. “Companies are increasingly convinced of the cost-effectiveness of a project-mode rather than a staff augmentation-mode,” says Gupta.
“In Belgium we are seeing non-top 20 companies also becoming interested in outsourcing for the first time,” reveals Gupta. He says TCS is bullish on the market, with ambitions to transform itself from the leading Indian IT service provider, to the clear number one IT service provider, in Belgium. “It’s very achievable. We only need to triple in size,” he grins confidently.
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