Indian information technology services firms are making increasing headway in continental Europe, a lucrative market where several large corporations are turning to them for the very first time.
The opportunity to trim costs, especially in the current tight economic situation, seems to have pushed large enterprises in France, Germany and Switzerland to take a closer look at Indian IT companies instead of competing local firms which have dominated so far.
For the Indian companies, contracts from continental Europe-based companies are expected to help them report higher sales growth and establish their presence in these largely untapped markets.
This year, when electrical gear maker Schneider Electric decided to renew a $1-billion (Rs 6,000 crore) technology contract it had given to local software provider Capgemini in 2004, the French company had Indian outsourcers in mind.
Schneider, which has never before outsourced technology to an offshore service provider, recently sent a team of 14 executives to Bangalore to negotiate with India’s top software services companies and outsourcing advisory firms.
“Corporations in France, Germany, Switzerland etc, most of them firsttime outsourcers, are now looking to work with Indian IT firms,” said the chief executive of one of the top 10 Indian tech firms on condition of anonymity as his company is currently in a preearnings silent period. “We get a feeling that it is the beginning of a new shift.”
A Schneider spokesperson confirmed that the company is currently “preparing renewal of the Capgemini outsourcing contracts”, to bring in cost-effective delivery models but said she does not want to comment on vendors “until the end of the re-compete process”. The Rueil-Malmaison, France-based company said it plans to work with a set of suppliers; not one IT exporter.
At least three more such contracts, each valued over $100 million (Rs 600 crore), are in the final stages of negotiations with Indian IT firms, industry sources said. Interest from Continental Europe comes as Indian software services company are wooing enterprises in that market by setting up software delivery centres and hiring local executives who can win deals with local businesses and governments without the help of a translator.
Another company—one of the largest commodity traders in Switzerland—has never outsourced to an offshore service provider, but is in talks with IT services companies from India as well as the United States, according to industry sources with direct knowledge of the negotiations.
Further, Wallenius Wilhelmsen Logistics (WWL), a Norwaybased logistics company, plans to outsource portions of its IT work and is currently in talks with India’s top software providers. At least two automotive component makers from Germany, which are looking to trim costs, are in talks with outsourcing advisory firms that can help find a technology outsourcing firm. WWL did not respond to an email questionnaire.
Although Europe has been a leading destination for Indian IT services companies for two over two decades, for India’s leading software exporters TCS, Infosys and Wipro success in that market has so far been limited to the UK and Nordic countries, such as Denmark, Finland and Sweden. Indian companies say they often face trust issues with large customers in Continental Europe due to language and cultural differences.