Can Europe offer a new window of opportunity to Indian IT?

BANGALORE, INDIA: During 2012-2013, many Indian IT exporters reported healthy growth in Europe. Few of them also closed some interesting M&A deals. Although many European countries are still facing recession, technology spending hasn't been seriously affected.

Should Indian IT and BPM exporters take a fresh look at the European continent? Can Europe offer a new window of opportunity during 2013-2014? I will provide some answers in a series of articles.

During much of 2012, business media reports in the US and UK speculated on a possible exit of Greece from Euro zone. In mid 2013, this appears unlikely. The crisis in Cyprus also turned out to be a storm in the teacup.

The landscape of European BFSI is changing due to multiple reasons: the Euro zone crisis, changes in regulations, the LIBOR (London Interbank Offered Rate) scandal and global competition. These affect investment banking as well as retail banking businesses. As a result, many European banks are taking a fresh look at old business models and how technology can make them more successful.

After the 2008-2009 global financial crisis and the 2011-2012 Euro zone crisis, technology spending had slowed down in Europe. This under investment in the past means there could be challenges as well as opportunities during 2013 and beyond.

Large MNCs based in Europe are trying to improve their competitiveness and also expand their global footprint. European banks are struggling to "catch up" in areas like mobile banking and use of analytics. Today, executives in every MNC and every global bank view technology as a key enabler to the business. Many also consider technology as a differentiator in terms of global competitiveness.

In May, France's leading bank, BNP Paribas announced that it will be spending 80 million Euros to launch a Europe-wide online bank during 2013. SAP AG is expecting revenues of $ 2.5 billion from Financial Services providers during 2013. Although this figure represents global revenues, a significant part of it will also come from the European continent.

Indian IT and BPM exporters are still "under penetrated" in continental Europe. In the past, they have relied on doing business in the US and UK. This could be due to many reasons: language, visa or immigration related challenges in some European countries; the "comfort zone" and growth offered by clients based in the UK.

During 2013-2014 and beyond Europe looks interesting due to multiple reasons. Global competition could force European companies and European banks to consider options like outsourcing more seriously. Recent developments in UK could affect the future landscape of European BFSI. The popularity of mobile banking among Europeans could drive fresh investments. Given the uncertainty related to H-1B visas in the US, it  makes sense for many Indian IT exporters to look at other geographies.

 

(The author is a Bangalore based management consultant. He can be reached out on e-mail:kashyap.krishnappa@gmail.com)