Europeans prefer staff suppliers to outsourcers: Forrester
In accordance with a report delivered by Forrester Research, a preference by companies in Western Europe for contract IT staff is cutting into the business of outsourcing companies in these countries. Sudin Apte, a principal analyst at Forrester, said on Friday that Western Europe companies (except the U.K., where outsourcing is popular) preferred to hire people who were supplied by outside contractors but based in their facilities. According to Apte, companies in Western Europe don’t want to hurriedly outsource overseas in order to cut cost. On the other hand, the first thing on their agenda is to be well integrated with the local social fabric, including avoiding cutting jobs in their countries and complying with local labor rules and other norms, Apte added. India exports a total worth of €5 billion (US$6.8 billion) of IT services to Western Europe (U.K. not included), which takes up about 5 percent of the total IT services market in the region, said Forrester. It is Apte’s opinion that Indian outsourcers prefer to independently manage their staff and offer delivery from offshore locations, which has not help them win much European business. Eastern European countries, which attempted to benefit from their geographical proximity and cultural similarity with Western Europe, also haven’t gained much business from the region. Less than €500 million was collectively exported to Western European countries (excluding the U.K.) by near-shore locations in Eastern Europe, said Forrester. Though many companies avoid outsourcing, large multinational companies in Europe who have experience in operating in many countries, already outsource to offshore locations like India, Apte said. The reason they are outsourcing is that they have to compete with large U.S. companies which already make use of low-cost offshore resources. However, the trend is falling behind the companies which have their operations primarily in Western Europe, Forrester added. Some Indian outsourcers have begun to pay more attention to their business in Europe, and they have made a big progress because of the recession in U.S. which led to a slump in their revenue. Some of them, such as Infosys Technologies and Wipro, have also set up near-shore facilities in Eastern Europe. Even so, Indian outsourcers only received limited benefit in Europe. In the quarter to Dec. 31, Tata Consultancy Services, India’s largest outsourcer, won 18.5 percent of its revenue from the U.K., and 10.7 percent from the rest of Western Europe. However, the U.S. accounted for 52 percent of its revenue. In order to obtain a “foot-in-the-door” with these accounts, some of their competitors, including multinational services providers, hire out staff to companies in Western Europe, said Apte. Then, they move to outsourcing projects in near-shore locations step by step, and later move some of these projects to offshore locations, he added. Nevertheless, Indian companies haven’t flexibly changed their methods in their approach in Europe, Apte added. Even if Indian outsourcing companies change their approach, they should not expect a rapid boom in business from Western Europe, except the U.K. In the next three to four years, exports from India will still account for about 12 to 15 percent of the total IT services market in Western Europe, excluding the U.K., Apte said. [Source] Software Outsourcing Blog Section: http://www.unisoftchina.com
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