NEW DELHI, INDIA: The uncertainties in US market coupled with the not so comfortable noises from the new US president about offshoring, means Europe for the time being finds itself finally perched atop the agenda for many Indian service providers, who hitherto hadn't worried to fish in troubled waters.

However, outsourcing market in Europe, is  not going to be low hanging fruit like it was in US and Indian service providers have to work hard to capture market.

Apart from UK, which is predominantly English speaking, continental Europe calls for a calibrated strategy for business environment presents extremely complex and difficult set of challenges.

Europe as a continent, though bound a common currency, isn't a single monolith like US with each country within the continent having different culture, language and business environments.

Not to forget, every country has their own stringent regulations, labour laws and trade unions, who have been touchy about the word outsourcing and harbour deep fears about security of their data handled by Indian companies some hundred thousand kilometers away.

Add to that the fierce fight, that traditional European local or multinational providers who have been enjoying greater mind share among European buyers, would put up for market share, these Indian IT vendors have tough jobs on their hands.

Tough market, very difficult to penetrate

Says Market Research firm, Gartner, "Unlike enterprises in the U.S or U.K, continental European countries have been historically more reluctant to engage with offshore providers to support their business needs because of political sensitivity, labor laws, language requirements and cultural compatibility,"

Adds Gartner, European service providers long-term presence and investments have demonstrated a commitment to each of the European countries and have underlined a European strategy. Until recently, with the exception of the U.K., many European companies believed the Indian providers had an opportunistic approach to Europe,"

Says Mukesh Aghi, chairman and chief executive officer, of Europe based IT services company,  "You have to understand that while US makes no issues with having to let go people off  in order to bring more efficiency, but in Europe, because of labour, union issues it is challenging.

"In continent Europe, there is lack in trust in offshoring. Germany and France are apprehensive bout off shoring either due to lack of understanding of offshoring or because of union, labour or government issues.

"The European market is very different, very complex, very territorial, very suspicious about my data is going to far away in some Indian company and we don't know what happens. US has gone through the process and is fine. Europe hasn't gone through that process," adds Aghi.

Steria offers customers integrated services including consulting in core business processes and development and operation of their information systems to clients globally, though it major focus is Europe.  The group employs around 18,000 staff in 16 countries.

In India the company has three delivery centers and has unveiled its plans to set up Center of Excellence and tap the Indian domestic market. The company had in October 2007 acquired  British firm Xansa. On December 31, 2007, Steria revenue amounted to €1.4 billion.

Too little, may be too late

Analysts believe that apart from major Indian companies, like TCS, Wipro, Infosys or a Mindtree, Indian  IT companies for long have depended too much on US and hadn't focused much on the European countries to assuage their feelings on outsourcing.

According to a recent study published by IDC, the top 50 services players accounted for 53.4% of the IT and business services market in Europe in 2007. Most of largest vendors are still U.S.-based companies, though number of Europe- and India-based companies have shown an increase in ranking.

However the higher ranking can only be attributed to Tata Consultancy Services (TCS), Infosys, and Wipro continued their aggressive double-digit revenue growth, with 37.4%, 42.1%, and 48.5%, respectively. TCS won a billion-dollar outsourcing deal with the Nielsen media group in the Netherlands. These three offshore companies continue to win in the application development and maintenance areas primarily, but are also beginning to be seen in the infrastructure area.

The report also pointed out that European service players Logica and Orange Business Services (OBS) grew at 38.6% and 48.5%, respectively, due to acquisitions.

Never planned for rainy days

However beyond these three players players, there is not much to talk and report about.

Nasscom president, Som Mittal contends, "You have to understand that Indian IT companies had a low fruit hanging around in US, so naturally companies were going for that.

Mittal adds, Nasscom as parent body for Indian software vendors was encouraging companies to push for Europe. "But over the last few years, we are seeing effort from Indian service providers to tap that area as well," adds Mittal.

Adds Aghi, Indian companies were growing 30-40 percent purely on US environment only so why bother focusing on someone else. "That growth is so fast and they were not able to handle the that and why would they need to open another front," he contends.

However, with recession in US which hit hard among others the Banking and Financial sectors, which analysts calculate form 25 percent of revenues of Indian IT companies, looking for other pastures is but natural.

Sliver lining in dark clouds

Ironically for Indian IT companies , these tough times that forced them to look beyond US is also actually welcoming them to Europe.

" Recession is blessing in disguise for both Indian service providers as Europe itself in recession needs cost effective ways to get out of that

" Now with economic crisis in Europe we are seeing a  renewed interest in offshoring to India. Continent European countries are on project basis offshoring to India as a BPO or IT services," says Aghi.

Gartner adds, globalization, is spawning new competition that European companies can not ignore.

Europe with over 22% of its total spending on outsourcing is beginning to catching up . By 2008, its outsourcing spend was expected to reach Euro 129 billion.

Currently, Europe accounts for nearly $3 billion of India's IT/BPO exports. UK and Ireland alone ac­count for about 45% of the market, while Germany, Switzerland and Austria account for a 20% share.

Twenty six percent of our business is in public sector and suddenly the order has gone up substantially. This is because governments are spending money either to revive the economy or make sure there are better services for the citizens and better security for the citizens. We are seeing that happening," adds Aghi.

Needed: A calibrated Strategy

However, Aghi adds the Indian companies interested in Europe have to be really serious and calibrated in their approach in tapping this market so as to assuage the feelings of the countries that they are not here for stop gap arrangement,

"If you want to work in France, you cant have an India country manager working there trying to sell solutions to a French company. You need to have French face to make a customer feel comfortable,"

"This is where Sterai has an advantage. We have been there for last 40 years and have 14000 people and we very strong long terms of customer relationships

CEO,  Mind Tree, Ltd , Krishnakumar Natarajan, is ready for the challenge as the company has a long devised strategy that, Natarajan feels, gives Mindtree a distinct advantage over rivals and build company strength in European market in long run.

Do in Rome what Romans Do

"See the our approach has been pretty straight forward. You need a horses for courses approach and adopt a different approach for the each of the markets based on what is relevant for that industry and individual country. Go local, build your own team, and ensure you can provide end to end services to the client", says Natarajan

"For example, UK is highly penetrative market. There are close to 200 IT services company present in UK and most of them target financial market as that market is quite a huge market.

"So MindTree approach for UK has been pretty clear. One we will grow our team in UK as understand the language, we understand the culture and will operate directly with our own team"

Second,says Natarajan, we look at the segments which are under penetrative in UK. Like the travel segment. We have done leading edge work for travel aggregators in UK.

"So clearly for a market like UK the differentiated strategy was focus and build scale through under penetrated industry groups. Go local and sort of build your own team because language and culture is something that you understand and look at you can ensure you can provide end to end services to that stockiness with the client," adds Natarajan.

Natarajan says , however for Netherland, Mindtree too a different route all together.

"If you go to market like Netherlands, we don't understand the land, neither the culture. So went in with a premise that we need to have a local company which knows and understands the local culture and customers and partner with them together.

We tied up with local company Jetronix and that model has survived for last six years," says Natarajan,.

He adds that while Jetronix has has been at the front end, both companies go to the customer.
"We both work together as one seamless team and together we deliver the value of understanding both the customer business and its language coupled with cost effectiveness of doing work in India", Mind Tree CEO adds.

Be best from rest

Explaining further his strategy, Natarajan says that the third element, Mindtree  applied as a differentiation in Europe was the value proposition and focus we offer to our clients.

"Companies which are embarking first time to off shoring outsourcing see MindTree as a lot more value add partner that being one of the hundredth customer of a big large entity

If you see north America as a market and Europe as a market, the first starting difference that comes to mind is that while 90% of the fortune 500 companies in US have adopted off shoring as a key activity, the same cant be said about Europe. Many of the key companies have not adopted approaches like outsourcing and off shoring as key part of their strategy which is happening now".

"Our value preposition to these clients is that they are while they are embarking upon a very unique as well as important programme for your company strategy. We are a mid size company which is very hungry for your business which has the ability to give you the attention and which has the flexibility to work with you to make your initiatives success

"Target large enterprise who haven't gone for off shoring and outsourcing and be valued partner by which you build scale," he adds.