outsource issue 31 - (Page 98)
FROM EAST TO west
Will 2013 be the year when global delivery gains ground in Continental Europe?
NelsonHall’s Rachael Stormonth reports on the growing number of Indian-oriented
service providers looking to the west for their onshore and nearshore capabilities...
ndian-oriented service providers
are looking with great interest at
Continental Europe – and this
interest extends to acquiring to grow
their presence in the region. This
was one of the key takeaways from our
many discussions with vendors during the
NASSCOM Indian Leadership Forum in
Mumbai in February.
Increased interest by
firms in Continental
Europe in near/offshoring
for IT outsourcing
While discretionary IT spending has
not really recovered since 2008, there is
palpably an increased interest by firms
in Continental Europe in migrating more
outsourced activity (both current and new)
to lower-cost locations. Unsurprisingly,
in non-English-speaking countries this
means to nearshore locations where the
activity is voice-based (e.g. service desk),
extending to offshore, where feasible,
for non-voice activities. This stronger
appetite for global delivery is evident for
both IT infrastructure management and
In this respect, there is a clear maturing
in the IT services market in Continental
Europe, not just in the Nordics, but also in
the key markets of Germany and France.
Two obvious factors driving the increased
appetite for global delivery in Continental
A desire for lower-priced services in the
more traditional areas of IT services.
A perceived lack of available local IT
talent: particularly evident in Germany.
What does this mean for
In response to pricing pressure in the
more traditional areas in IT infrastructure
management and applications
outsourcing, the major offshore-centric
providers continue to work on improving
staff utilisation and productivity, doing
more work under fixed-price agreements
❛Larger firms such
as TCS, Infosys and
manager roles in
their major target
in order to sustain their operating margin.
But this can take them only so far. And
for a vendor such as TCS that is already
working at 81.7 per cent utilisation, there is
only so much this lever can be pulled.
The larger Indian-oriented service
providers (and indeed the global and
major European SIs) continue their drive
to reduce the cost of service in these
traditional service lines. The extent of
industrialisation, standardisation and
automation in offshore delivery “factories”
and the reuse of IP are becoming key
attributes that distinguish between those
vendors who can achieve and maintain
healthy operating margins in traditional IT
services such as applications development
and applications maintenance, and those
who will suffer from reducing margins.
In response to the demand for more
global delivery, NelsonHall has seen an
increased recognition by Indian-oriented
service providers that they need to
increase both their local onshore presence
in the key IT services markets in EMEA
and also their related nearshore delivery
capabilities. Larger firms such as TCS,
Infosys and HCL Technologies appointed
locals to country manager roles in their
major target countries some time ago, and
they have also been opening some level
of nearshore capability in Eastern Europe.
But in most onshore projects and also at
the front-end of outsourcing deals, a lot
of the work is still being done by Indian
nationals who have been flown over. And
this can pose language difficulties: Indian
graduate education has its strengths, but
teaching engineers to speak German (or
French, or Danish) is not one of them.
The actual onshore delivery capabilities
is still typically in the tens, rather than the
hundreds, let alone the thousands.
As various IT markets in Continental
Europe open up to near/offshoring,
so too does the attention of Indian-oriented
service providers to acquiring in the
region. Of course, setting up a nearshore
delivery capability is a classic chicken-
Rachael Stormonth is Senior Vice President, NelsonHall. She can be contacted at
firstname.lastname@example.org or on Twitter at @rstormonth
nelson hall APP.indd 98
Table of Contents for the Digital Edition of outsource issue 31
Keys to Driving Supply Chain Outsourcing Success
Biography of a Carve-Out
Culture and Values
Redefining the Law Firm Delivery Model
Sharing the Glory
Breaking the Outsourcing Conundrum
Back from the Summit
Losing the Race Before You Put On Your Trainers
Innovate to Accelerate
Making an Impact
Home or Away?
Dead and Buried?
So What Now?
The Legal View
The Deal Doctor
The Last Word
outsource issue 31