Software developers turning to Europe with better strategy

Especially, the European customers are becoming far more comfortable with frequent travel to India and maintain an effective working relationship. The European mid-sized companies are shying away from setting up their captive offshore units and prefer to transfer their high-end architectural work to their OPD partners in India, says Manas Fuloria, executive vice-president of Gurgaon-based Nagarro Software.

To penetrate the European market, Fuloria says, Nagarro is following a multi-pronged strategy. First, it is investing in public relation to make sure that the target market is well acquainted with the company before customers are approached. Second, it is putting up offices in cities such as Frankfurt, Stockholm and forging partnership in Copenhagen. Finally, the company is trying to gather efficiency in non-English languages by using a mix of language training, local resources and extensive translation.

"The last strategy is allowing us to service many German firms whose business is conducted totally in German. At present, the contribution from Europe in terms of run rate is 30 per cent with Scandinavia and Germany being our biggest markets as of now. The rest from the US. With our multi-pronged strategy, revenues from Europe are expected to grow to 50 per cent in the next two years," he adds.

The global OPD market is estimated at about $10 billion at the moment and is expected to double by 2010. Europe currently offers about $4 billion worth of addressable market to OPD companies. However, a little more than $2 billion of this is actually going to India. The European OPD market is expected to double to $8 billion by 2010 and the share of this business that comes to India will surpass $4 billion.

According to Sunil JNV, vice-president (delivery) of Chennai-based Aspire Systems, considering the growth potential of business from Europe, the company has formed a dedicated marketing and sales team for this region.

"We have already made inroads into Europe with a few client wins in the UK, Germany and Italy in the recent past. Going forward, we have plans to set up an office in Europe. However, typical to Europe is the cultural and linguistic diversity. To handle software development that requires localisation to multiple languages, we have tied up with language specialist firms in Europe and India," he says, adding Europe is expected to contribute about 15 per cent revenues this year with the current customer base. The company plans to increase this to 30 per cent.

However, Rajul Garg, senior vice-president (corporate and people development), GlobalLogic Inc, feels the equalisation between the European and US outsourcing markets has come through dramatic growth in Europe and not by any decline in outsourcing in the Americas.

"European firms realised they cannot continue to compete effectively on a global scale without utilising increased efficiency and flexibility they can gain on global outsourcing," he adds. It is the US which accounts for the majority of GlobalLogic's revenues. The current contribution is around 7 per cent and it sees it growing to 15 per cent in a few years.