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BPO: Europe is a tough nut to crack

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CIOL Bureau
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BANGALORE, INDIA: BPO, in Europe, might have clocked a nine per cent CAGR (06-07) but the scene there is everything but rosy. It harbors a wide span of challenges ranging from deal structures, scale, mindset issues and acceptance. Or at least, hands-on players think and experience so as it turned out at a discussion in the NASSCOM-ITES BPO Summit.

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There is a lot of client interest but also an equally high degree of reservations. "Labor laws, perception of returns, multiple cultures in Europe, negotiation and visibility are main roadblocks. The competitive landscape, moreover, is wide and strong. There are a host of local rivals from various backgrounds offering everything from software, support services, engineering and offshoring already," opined Samad Masood, analyst and research co-ordinator, Ovum.

Deals are coming but they are difficult to win in Europe, thanks to both social and political angles. Amitabh Chaudhry, CEO and MD, Infosys BPO, which has recently bagged a Philips deal in Europe, explained the scenario as, "Unless the partner has a demonstrated commitment and scale for Europe, business does not come easy. The scalability of language capabilities is very vital for sustaining business."

He also admitted that profitability horizons, consequently, are relatively low in Europe as labor challenges, negotiation pressures and technology investments on a small scale keep coming up as hurdles.

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Legacy challenges and high fragmentation are two other big hurdles to leap over. "EU is a reality but there are still lots of disparities in this region that is also reflected in the process diversity. Social contracts in Europe are deeper vis-à-vis the US. Labor pools are limited. High sensitivity for data security and data residence are of course, intense here." observed Paul Abraham, MD, ABN Amro Central Enterprise Services Pvt Ltd.

But he added that growing M&A action in the region is creating more needs of cross-border integration. Also the number of deals coming out of Europe has increased. UK, incidentally, makes up for 63 per cent of this market and local governance, F&A, regulatory compliance have come up as hot spots, pointed out Masood.

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As a well-noted case study of the BOT model of offshoring from UK, Aviva Global Services' CEO Rajnish Virmani, shared some lessons that Aviva garnered since it set out for offshoring three years back. "Tackling cultural gaps, attrition, information security concerns and most importantly, setting of metrics on processes were the prime areas of focus. The way forward for offshoring here is that service providers should not be mere instruction takers but change to change catalysts."

So, what can BPO vendors do to iron out the problems that Europe as a potential market throws up?

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Do not wait for customers to come to you, chase them, be proactive, is what came out to be Masood's tip. "Client empathy, economies of scale and understanding the business context will be the clinchers."

Another good idea would be a change in the near shore-offshore mix. "Some work on the client side not only gives customer insight but also helps demonstrate better. A five to ten per cent near shore work with 20 per cent in European centers, while the balance is done out of other low-cost centers, works well as a strategy. Our Philips deal fits well with all these benefits," added Chaudhry.

Arun Seth, chairman, BT India left with a piece of advice for aspirants of this market, "Don't go after big players, especially when it comes to platform opportunities where mid-sized companies are better targets. And, have lots of patience if you want to succeed here."

Others too seconded the sentiment for patience. "One has to have a longer pay back period acceptance and thus loads of patience," said Abraham. He added that scale, near shore capabilities (especially where language requirements are prime), and planting resources in Europe itself will be the right toolkit to tap this emerging market.

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