Indian outsourcers hit by downturn in European market

Europe has always been a difficult market for Indian outsourcers, because some of the countries on the continent have been slow to adopt offshore outsourcing. The market has however worsened this year for the Indians because of a weak euro and tighter IT budgets in Europe, according to Forrester Research.

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Europe has always been a difficult market for Indian outsourcers, because some of the countries on the continent have been slow to adopt offshore outsourcing. The market has however worsened this year for the Indians because of a weak euro and tighter IT budgets in Europe, according to Forrester Research.

Large Indian outsourcers currently earn less than 30 percent of their revenue in Europe. The figure is far lower if the UK, which has been faster in adopting offshore outsourcing, is excluded. The UK accounted for 16.2 percent of the revenue of Tata Consultancy Services (TCS), India's largest outsourcer, in the Indian fiscal year to March 31, 2010. The share of its revenue from the rest of Europe was far lower at 10.5 percent.

In some countries in Europe, the labor laws set limits on what can be outsourced by companies, Siddharth Pai, a partner at outsourcing consultancy Technology Partners International (TPI), said on Tuesday.

Cultural and language differences, and discomfort with sending work far away, have also made many European companies avoid offshoring to India, Pai said. These companies would prefer to outsource to European services firms like Capgemini and T-Systems, or to large multinational services companies like IBM and Accenture that have large operations in Europe, he said.

The ongoing debt crisis in Europe, and its impact on the euro and the economy, may now make the continent less interesting for Indian outsourcers, said Sudin Apte, principal analyst at Forrester. Indian outsourcers realize that their margins in Europe will be far lower, so they are looking only at some select deals, he said.

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