Europe Opening to Offshoring of IT Services

There is an increasing buzz about outsourcing in Europe picking up in the recent months. For several years most of the offshore based service providers have focused on the North American continent for business. Over the years many also found themselves too dependent on the economy in the US and limited geo-politically. Some companies drove a mandate to spread their eggs across new baskets in Europe.

Europe is outsourcing and offshoring like never before. And increasingly, the beneficiaries are India based IT companies, unlike earlier when the preference was for Europe-based ones. Competitive pressures and cost pressures look to be forcing a change in the continent, which often in the past has been referred to as Fortress Europe for its inward looking policies. 

Many service providers were not looking at Europe as a target market with the same zeal as the US because:

1. With the exception of UK, the policies in most countries in mainland Europe and the general business preference was to be outsource to local players

2, In general outsourcing was not big and so offshoring as a next step was even further away from the agenda. Businesses still preferred local support staff even if it cost more money.

3. It has traditionally been difficult to run outsourcing mandates within European companies (like those in the US) due to their different labor laws which required much more business planning when work is displaced from existing European workers to other countries. The obligations on part of enterprises is much more than that in the US and this continues to be a key obligation for businesses.

4. The region is split (unlike US) into multiple operating units for many businesses and so it has never been a single entity as compared to US which is mostly a single business/country entity for most companies. This was an issue esp with companies with European headquarters

5. For some of the touch services and service desk services, the multiplicty of language that was to be supported outside of English made it difficult to have a set up with the same critical mass as was done with the English across the North American continent.

6. Data Protection Laws being different and in some cases more stringent in Europe/EU with restrictions on nature of work that could be done outside of the continent.

7. Strong local players from the continent and other global players stepped in the recent years with a near-shore centric model which was like a good middle path for most of the challenges. The cost efficiency was not as much as that from an offshore location in India but it provided cost reductions with good skills and language support from locations in East Europe.

Times have changed and with the new focus and in many cases with the leadership for many service providers in Europe coming in form of more aggressive leaders, they are gradually getting to decipher the local nuances and identifying regions and verticals to establish base and spread. Also since cost of operations are generally higher in Europe than in the US, the offshoring business case for the CFO is more alluring and they are looking at finding ways to enable these.

Interesting times ahead for both enterprises and service providers as Europe lowers its fortress walls.

 

Leave a Reply

Your email address will not be published. Required fields are marked *