Europe slow to embrace India

India's services boom has come mainly from large-scale outsourcing by U.S. companies aiming to trim costs. The U.S. accounts for about 65 percent of revenue for India's biggest outsourcers. U.S. companies like Oracle Corp, Microsoft Corp., Dell Inc. and IBM Corp. have also set up their own operations in India.

Europe, by contrast, accounts for about one quarter of India's outsourcing revenue, with a big chunk of it from the U.K. U.K. companies have also been quicker to set up their own operations in India. Continental Europe accounts for only 12 to 13 percent of India's outsourcing revenue, said Kiran Karnik, president of India's National Association of Software and Service Companies (NASSCOM).

Outsourcing is not as prevalent in Continental Europe as in the U.S. and the U.K., agreed Siddharth Pai, a partner at sourcing consultancy firm, Technology Partners International Inc. (TPI) in Houston, Texas. When companies in Continental Europe decide to offshore, they are more likely to look at Eastern Europe than India or China, he said.

European companies know that sending work to India can benefit them, but the IT departments at most companies there don't have enough experience with sending work offshore, said Rahul Patwardhan, chief executive officer of the global delivery center of LogicaCMG PLC, in Bangalore.

Language differences are clearly a problem for European companies. Communications between Volvo Information Technology AB and its contractor MindTree Consulting Pvt. Ltd. in Bangalore are in English, but the way an Indian speaks English is quite different from the way a Swede speaks the language, said Pär Forsberg, competitive sourcing manager at Volvo IT.

"It is not only a difference in language but in the way we communicate," he said. Volvo got around the communications problem by having some MindTree staff on-site in Sweden, and by staff from Volvo traveling frequently to India. "It is not a major obstacle," Forsberg said.

Indian outsourcing companies will find it difficult to win large deals in Europe, Patwardhan said. Outsourcing deals in Europe have to include the transfer of employees to the outsourcer, along with some form of security and continuity of employment. Hence European companies prefer a vendor with operations in the country, where it can absorb the customer's staff.

LogicaCMG attracted offshore deals from Europe because it could absorb staff into its European operations. "The good news for us is that we are growing, so we can do with more staff in Europe," Patwardhan said.

Indian outsourcing companies hope to forge a beachhead in Europe, and have in some cases taken on staff from customers. Tata Consultancy Services Ltd. (TCS) announced in October that it would absorb 950 staff from the U.K.'s Pearl Group Ltd., which outsourced its business processes to TCS. TCS employed the Pearl staff at a subsidiary in the U.K. focused on the life assurance industry.

Indian companies are also acquiring European businesses to get better access to the local market. Wipro Ltd. of Bangalore, for example, bought NewLogic Technologies AG, an Austrian semiconductor intellectual property and design services company, to get access to the semiconductor design market..

Indian companies also sell their services in Europe through consultancy firms, systems integrators and value added resellers (VARs) to gain market access. Satyam Computer Services Ltd., of Hyderabad, announced in May that it had tied up with a Danish IT consultancy, NNIT A/S, to provide services around SAP AG's software to the pharmaceutical industry. Infosys Technologies Ltd. has a banking product besides its outsourcing business, and sells the product through partners in some European countries.

See Also:
>>Outsourcing to India shows no signs of letting up
>>Setting up IT operations in India
>>Indian outsourcers flock to China
>>India, by the numbers