For IT, deals from Europe hasten

- TCS just won a contract with TDC, Denmark’s largest telecommunication company, the loser being Computer Sciences Corp, a local vendor

- Mahindra Satyam recently won a multimillion dollar contract from a chemical company in Germany

- Wipro won a large deal from pharma giant Astra Zeneca deal in Europe in the last quarter

- Two large deals Infosys won in the last quarter were from Europe

- TCS has been selected by Europcar as strategic IT partner in France

Instances of Indian software companies winning contracts in Europe, especially the so-called continental Europe comprising Germany and France, have increased of late.

It’s a tailwind that India’s coders are desperately seeking to keep cranking up the growth rates.

French and German companies, known for their conservative approach to offshoring, seem to be veering to the view that the Indian offshoring model has immense cost and efficiency benefits, especially in times of sovereign crises.

Not surprisingly, analysts estimate the share of revenues from Europe to increase to 25% from around 18% by the end of next fiscal.

“European customers are finding that Indian companies are more transparent and easy to negotiate with compared with delivery teams from American and local vendors,” said an analyst with a foreign brokerage, who did not wish to be named.

Giving an instance, he said, an American vendor’s onsite team had a loose relationship with its Indian counterpart due to which there was lack of proper communication and transparency. “The client received different communications from the local and offshore operations of the same vendor, which increased his costs,” he said.

Anirudha Bhosale, analyst with Deutsche Bank, said this is because organisational structures of multinational vendors are aligned by geography unlike Indian vendors who prefer the verticals schemata — such as telecom, financial services and manufacturing.

“This helps top-tier Indian firms strengthen relationships with European customers by delivering homogeneous solutions,” Bhosale said.

The work delivered by Indian vendors is also being adjudged topnotch. For instance, TCS recently received a top technology award after being adjudged for its work by an expert panel of CIOs and industry leaders in Belgium.

Vaibhav Dhasmana, assistant vice-president, Barclays Securities (India), said such awards and deals are the result of Indian firms pitching for more and being active in these markets.

“The basis of offshoring is cost arbitrage. Indian companies have focussed on the US and western Europe traditionally. However, since the demand in these markets has begun to taper off due to financial pressures recently, Indian companies are increasingly looking at continental Europe and eastern Europe. Such awards and deals are basically the fallout of IT firms pitching more aggressively and being more active in these geographies,” he said.

Even Cognizant Technology Solutions in its recent forecast said Europe seems to be moving away from discretionary spends to outsourcing spends — from capex to opex — and this emanates from the financial stress.

Some say Indian vendors also have world-class application development capabilities and shown great progress in package implementation as well, an area where IBM and Accenture are known to excel.

A recent Deutsche Bank report on continental Europe, authored by Bhosale, said for Oracle implementation, Infosys is considered to be on a par with IBM and Accenture, while Wipro, TCS and Cognizant are said to have made good progress too.
Rajan Kohli, chief marketing officer, IT business, Wipro, said for the No. 4, Europe is the second-largest market accounting for 28.2% of revenues in the third quarter.

“We have been witnessing growth across industry sectors. The growth has resulted from our strategy to focus on going local, an important aspect for anyone to be successful in this region. By this, I mean that we do not see Europe as a single market, but look at each specific country,” Kohli said. “We are willing to make investments ahead of the market in our focussed geographies and we have been rewarded with industry leading growth rates in these respective markets.”

That could quite be the story of the next two years for India’s software companies — if they get their localisation right. The massive revenue skew towards the US could be derisked significantly, at least by the Top 5, then.