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`Outsourcing from Europe looks strong' — Competition, language, legislation pose challenges

Our Bureau

Mumbai , Feb. 16

LARGE outsourcing opportunities are opening up in Continental Europe in areas such as infrastructure management, business process outsourcing and the public sector, says Mr Dominique Raviart, Senior Analyst, Ovum.

Speaking at a CEO panel discussion at Nasscom 2006 titled `Europe: The next big opportunity', he added that the European market for IT services remains fragmented, and user spends have been smaller in the application services area as compared to infrastructure support or BPO.

As there is no typical European user, the challenge for India-based players will be to compete with several international, regional and local players such as Capgemini, Logica CMG or Atos Origin with a broadbased set of serviceofferings.

The Indian vendors will have to choose their verticals carefully, with manufacturing opening up in France, financial services/public sector in the UK and automotive/retail/transport in Germany, he added.

According to Mr N. Chandrasekaran, Executive Vice-President & Head, Global Operations, Tata Consultancy Services, trend of outsourcing deals from Europehad been quite strong, with over 40 of the top 100 outsourcing deals coming from that region in 2004. He added that "the three key challenges facing Indian vendors are labour cost structure, complexity of assignments and the need to create a reference-able set of customers."

Highlighting the complexity in assignments, he says that a simple BPO assignment in finance and accounting in the US will be focused on US GAAP, but in Europe this multiplies into 20 different accounting standards.

Reinforcing the opportunity landscape in the UK, Mr David Leigh, Commercial and Strategy Director, Xansa Plc, said that the opportunities from the public sector were three to four times higher than from the private sector.

Mr Simon Fanning, Strategic Sourcing Programme Director, Deutsche Bank, however stated that language and employment legislation would remain significant barriers for Indian vendors vying for a European foothold.

Debating the merits of direct entry into Europe vis--vis sub-contracting from other international vendors, Mr Arvind Thakur, Chief Executive Officer, NIIT Technologies, said that acquisition could be a good entry strategy. Mr Chandrasekaran added that a direct regional presence with a strong India back-end would be an ideal growth route for large India-based vendors.

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