software outsourcing

A blog related to software development company and offshore software outsourcing

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

Negative effect of weaker American economy on the wake of 9/11 terrorist attack is now diminished. Companies are putting new plans for their technology improvement or buying. But majority 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 price market has gone down, Indian software outsourcing companies are becoming very attractive with their cost effective outsourcing solutions for US customers. But scenario in Europe is different then this. Majority of India’s software export is to US and majority of 'outsourcing to India' companies are looking at US, Europe accounts for a very small percentage of software export.

Why offshore outsourcing in Europe doesn’t have significant presence like in US?

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

However, market in Europe is totally different then US for offshore outsourcing companies. Companies in Europe look for longer term fruitful relationship. While Indian companies go with a look of 'body shopper'. Which don’t suit European market. Indian outsourcing companies have to show customer what they offer more to them can compare to customer's current supplier and then wait for customer to understand his benefits. Because of this, Indian offshore outsourcing companies need to change their attitude. European software market is of $3 trillion and Indian companies have very small stack in it. To get a foot in 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 who understand European culture and European market and can take benefit in offshore outsourcing.

Is offshore outsourcing vital for businesses?

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 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 problem when it comes to software outsourcing. So some are now exploring possibility of outsourcing to Latin American countries like Brazil and Mexico.