Europe, an attractive destination for Indian IT services

MUMBAI: Europe presents an attractive market for India's services-dominated

software firms as it has maintained its IT spending growth. This is in sharp

contrast to the US which has seen a slowdown, a leading industry expert said on

Wednesday. "European growth is looking far more robust than the United

States," Michael Finney, head of European Technology Services Research of S

G Cowen Securities told an IT seminar in Mumbai. "And Europe as a market is

far more attractive," he said.

India's software sector, which has been growing at annual rates of 50-60 per

cent, derives more than 60 per cent of its revenues from exports of services. In

1999-2000 (April-March), the United States and Canada accounted for 62 per cent

of exports, followed by Europe at 23.5 per cent.

While the slowdown in United States' spending on IT initially raised some

concerns about the sustainability of this growth, realization has begun to dawn

that India's cost-competitiveness could actually help attract more business.

Indian companies, lead by Wipro, are increasingly looking towards Europe to

spread their markets.

Europe currently accounts for 28 per cent of Wipro's revenue. Finney said the

important markets for IT services in Europe were France, Germany and the United

Kingdom, adding that Spain and Italy were also growing fast. India currently has

a very small share of the global services market but its advantage was cost and

it could use this competitive advantage to increase market share, he said.

Finney said the global outlook for software services were strong and the

industry could be worth half a trillion dollars by 2003. Things could start

improving by the second half of 2001 and "we will start seeing decent

projects coming back on stream," he said. "IT spending is no longer

voluntary. If you want to stay competitive, you have to spend on IT," he

said. The trend for outsourcing services from countries like India will continue

and strengthen, he said.

Emerging trends



Finney cited IT services like security services, Internet services and
wireless technology services as the emerging and profitable segments for the

industry. "All companies with exposure to security services have exceeded

analysts forecasts," he said, adding that he estimated a compounded annual

growth rate of 27 per cent over the next five years.

There was a big market for Internet services in Europe where spending would

be higher than the United States as it was playing catch-up, he said, adding

that a growth rate of 47 per cent over the next five years was quite feasible.

Finney said that unlike the United States where Indian companies had a fair

idea of the end-user, the European market was quite different and it would be

better for companies to look for partners. He however cautioned Indian companies

from pursuing the outsourcing model too aggressively lest they lose sight of the

end-user and his needs.

(C) Reuters Limited 2001.