Thursday, November 19, 2009

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Europe is still distant for Indian IT

Indian IT firms have been beefing up their focus on the European market in the wake of the US downturn. While this potential market, especially continental Europe, is large, it won’t generate proportionate opportunity in the next three years, according to Forrester Research.

Sudin Apte, principal analyst, Forrester Research, said that at present Europe appears to be a lucrative opportunity which is not achieving its targets vis-à-vis the traditional offshore sales story. “It is a huge challenge and only providers who are culturally fit have a better chance to succeed,’’ the analyst added.

A study conducted by the analyst firm — Continental Europe: Growth opportunity or never ending sales cycle — highlights the fact that for Indian service providers European business is difficult to realise. The issues they face include highly federated decision making in European firms, complex procurement processes and contracting terms, language barriers and political relations with India, including the visa policy.

Apte said that there are possibilities of work alliances coming from Europe, but the business is dominated by the UK, which is more like the US market. Offshoring from continental Europe is still in a stage of infancy with only companies with global operations willing to pursue it.

India’s IT/BPO export figures with Europe is presently about $14 billion with UK accounting for $9 billion and continental and nordic regions contributing $5 billion. It has a small base and the deal sizes are very small, said Apte.

According to him, the advantage that US majors like IBM, Accenture and HP have over Indian firms is that they have been in Europe for a longer time and have invested heavily in setting up development centres offering broad-based solutions in several countries.

“Indian firms have started to set up near-shore and local centres, but most have capabilities in particular services or verticals,’’ said Apte. He argued that Indian companies and their sales model will have to redefine the cost structure, their value proposition, and cultural affinities to become successful.

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