Offshore outsourcing in Europe

Wednesday, June 22, 2005

Offshore Outsourcing in Europe

Now global slowdown has gone from the screens of Indian offshore outsourcing companies. The days are back where supply is unable to meet the demands and margins are getting better and better. Again time is back, where offshore outsourcing companies are not able to hire enough despite the high bench strength. High margin in business is justifying bench strength which can be deployed on-demand.

Change in the Global scenario

The negative effect of weaker American economy on the wake of the 9/11 terrorist attack is now diminished. Companies are putting new plans for their technology improvement or buying. But the majority of companies are going for cost-cutting where offshore outsourcing becomes a very attractive option for them. Because of higher competition, companies are now being forced to look at offshore software development centers as a strategic step. Now, when the price market has gone down, Indian software outsourcing companies are becoming very attractive with their cost-effective outsourcing solutions for US customers. But the scenario in Europe is different than this. The majority of India’s software export is to US and the majority of ‘outsourcing to India’ companies are looking at the US, Europe accounts for a very small percentage of software export.

Why Offshore Outsource in Europe doesn’t have Significant presence like in US?

The popular perception is that, in Europe, Indian companies are facing language problems in offshore outsourcing. But it is not the fact. Language is not a big problem. But the fascination of the US market where it is relatively easy to get project and do body shopping business to make quick money has made Indian outsourcing companies concentrate more on US market. Unlike Europe, in the US it is easy to do body shopping or even subcontracting software project development, application development, or web development. Once the project is got, the company tries to close it as soon as possible and hunt for another project.

However, the market in Europe is totally different than the US for offshore outsourcing companies. Companies in Europe look for longer-term fruitful relationships. While Indian companies go with a look of ‘body shopper’. Which doesn’t suit the European market? Indian outsourcing companies have to show customers what they offer more to them can compare to the customer’s current supplier and then wait for the customer to understand his benefits. Because of this, Indian offshore outsourcing companies need to change their attitude. The European software market is $3 trillion and Indian companies have a very small stack in it. To get a foot in the European market, Indian companies require providing high-quality delivery in time and within budget. Along with that, they need to have a strong sales force that understands European culture and the European market and can take benefit of offshore outsourcing.

Is Offshore Outsourcing Vital for Business?

Offshore outsourcing has become an essential part of business strategy for companies who want to remain competitive in this age of globalization. American companies started outsourcing first before European companies. That’s why they have an edge compare to their counterparts. Before few years, textile mills in New England shifted their production to southern states to take advantage of low wages. And one famous shirt maker went as far as south as the Caribbean island. Now, with the rise of Indian offshore outsourcing companies, American companies have to outsource to remain competitive. However, for European countries, Poland, Hungary, Romania, etc. are more attractive offshore outsourcing destinations. Like siemens has shifted 2000 jobs to Hungary before some time. But companies like Spain, Italy, and Portugal are facing language problems when it comes to software outsourcing. So some are now exploring the possibility of outsourcing to Latin American countries like Brazil and Mexico.