European businesses are overcoming their reticence toward offshoring, and looking to India instead of homegrown providers to fulfill their needs.
Posted Apr 16, 2007
Indian offshore service providers are posing a challenge to continental European competitors as enterprises within Europe increasingly seek to take advantage of global sourcing, according to a new study by Gartner. Unlike enterprises in the United States or Great Britain, continental European countries have been historically more reluctant to engage with offshore providers to support their business needs because of political sensitivity, labor laws, language requirements, and cultural compatibility. Globalization, however, is spawning new competition that European companies can't ignore, according to the study, which Gartner analysts discussed at Gartner's Outsourcing & IT Services Summit.
In the last months of 2006, leading offshore providers in India released quarterly earnings announcements that signaled strong gains in Europe. Despite these providers not specifically disclosing major client wins in Europe, these earnings announcements show how Indian service providers have achieved traction in the traditionally difficult continental European market, according to Claudio Da Rold, vice president and distinguished analyst for Gartner's IT sourcing group. The announcements also demonstrate how, especially outside the U.K., few European organizations are comfortable with the idea of publicly announcing the use of offshore outsourcing. This is because European business leaders still worry about offshoring's effect on their company's workforce and image.
"The top notch Tier 1 Indian offshore providers, without exception, have recorded outstanding growth rates since the first quarter of 2006," Da Rold says, with the three largest (TCS, Infosys and Wipro) recording year-on-year growth of more than 40 percent, while Cognizant has enjoyed a 60 percent growth rate. "Although the U.S. is still the largest market for these companies, their European divisions have shown the strongest growth, thanks to strong acceptance in the U.K. and an increasing number of customers in continental Europe," he says.
These Indian offshore providers are also recruiting staff in the European markets they sell into--not just sales staff, but consultants, project managers, engagement managers and, in some cases, personnel to staff their new nearshore delivery centers, Da Rold says. "However, Indian service providers must tread cautiously and first deal with further challenges before they can compete on an equal footing with the major traditional providers."
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