Europe has done a remarkable rescue act for Indian information technology (IT) companies in the September quarter.
Strange as it may seem, the market-beating performance of India’s top-tier IT companies came bundled with possibly their strongest growth momentum in Europe, a market still reeling from macroeconomic concerns and has traditionally been wary of outsourcing and offshoring.
The buoyancy in revenue growth and recent large accounts in the continent are pointing towards a healthy pipeline of deals across sectors in the coming quarters.
The trend was uniform among the software-services majors during the July-September period with TCS leading the pack at 11.7% sequential growth followed by Infosys at 5.2%, HCL Technologies 2.6% and Wipro recording 2.3% quarter-on-quarter growth in the region.
For the $108 billion-plus Indian IT-BPO industry, Europe is the second-largest market after the Americas, contributing over 25% to the overall revenue.
As the European economy wrestles with the slowdown, enterprises are looking to spend more on IT outsourcing to cut down on costs. ?With Europe now slowly coming out of recession, most of the customers are now understanding the value of IT outsourcing and offshoring. The corporates in Europe also realise that they can get the same benefits similar to their counterparts in the US,? V Balakrishnan, member of the board and chairman,
Infosys Lodestone, told FE, adding that the UK remains the largest market for the Indian IT industry, followed by France and Germany.
Given the diversity in the continent, Indian software-services players are now focused on establishing a strong local presence by employing people of countries they are based in. Balakrishnan feels the industry needs to look at acquiring small front-end companies that can offer a larger foothold in the market.
IT companies are taking the inorganic route to ramp up presence, the latest being TCS’s acquisition of French company Alti for R530 crore. The deal gave TCS 1,200 employees with a presence in France, Belgium, Switzerland and Algeria.
Even last month, Nasdaq-listed Cognizant, which has most of its employees based
in India, acquired French financial services company Equinox Consulting for an undisclosed amount.
From this acquisition, Cognizant expects about $40 million in annualised revenue. The other companies from India who have taken this route are Infosys, Wipro and HCL Technologies.
?Europe is seeing cost-driven play coming back. We have to do a lot more in terms of
penetrating Europe effectively and we need to become more
local in Europe as it is an important component for us,? said T K Kurien, chief executive officer and executive director, Wipro.
Earlier, the overwhelming percentage of revenue for Indian IT firms in Europe came from the UK, but this has been steadily changing over the past couple of years, reflecting the kind of presence these companies have built in Italy, Spain, Nordic countries, Portugal and Belgium. Companies have opened development centres in the continent, primarily in eastern Europe, given the specialised IT skills available in this region.
?We are recruiting freshers locally in Europe, training them for a period of three years, and we are going to
do that more locally. Ultimately the leadership has to be
local, the centre of the world is where the customers are,?
adds Kurien.
Besides the top-tier firms, mid-tier IT companies such as Mastek, L&T Infotech and NIIT Technologies have also been focused on Europe as they see it an easier market instead of competing with larger players in the US.
Industry watchers point out that there are opportunities in Europe but Indian companies need a long-term strategy to penetrate the market.
Given a choice, many of the Indian IT employees prefer to work in the US than in Europe as the cost of living is much cheaper in America.
?The European style of doing business requires a lot
of presence upfront and
they would prefer a more physical presence of their IT
partners, which is quite unlike the US where things can
get done through the phone,? said Pradeep Mukherji, president, Avasant, an IT-BPO advisory firm.
