outsource issue 31 - (Page 98)

This issue: GLOBAL DELIVERY 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... I 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 service delivery 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 applications outsourcing. 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 Europe are: 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 vendors? 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 HCL Technologies appointed locals to country manager roles in their major target countries some time ago ❜ 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 rachael.stormonth@nelson-hall.com or on Twitter at @rstormonth 98 ●● ● nelson hall APP.indd 98 wwwoutsourcemagazine.co.uk 22/3/13 11:56:47 http://wwwoutsourcemagazine.co.uk

Table of Contents for the Digital Edition of outsource issue 31

Upwardly Mobile
Keys to Driving Supply Chain Outsourcing Success
Biography of a Carve-Out
Culture and Values
Redefining the Law Firm Delivery Model
Sharing the Glory
Norn Ironman
Breaking the Outsourcing Conundrum
NOA Round-Up
Back from the Summit
Losing the Race Before You Put On Your Trainers
Innovate to Accelerate
Comparing Clouds
People Power
Making an Impact
Home or Away?
Dead and Buried?
So What Now?
The Legal View
Top Ten
NelsonHall Round-Up
Sourcing Sage
Online Round-Up
The Deal Doctor
Inside Source
The Last Word

outsource issue 31