European outsourcing customers prefer contract staff and local delivery, as per a latest Forrester study. Western Europe, which accounts for nearly $6.8-billion worth of India’s software exports, follows strict local labour rules and plans to avoid any move that could be viewed as anti-social, according to research firm Forrester.

After interviewing more than 30 vendor and user companies including Accenture, Capgemini, HP, IBM, Infosys, Tata Consultancy Services (TCS) and Wipro, Forrester reported that while global players such as ABN Amro leverage Indian providers for their global IT development and support requirements, Continental European companies send very little or even no work to India.

While Germany showed relatively solid growth in the past two years, locations such as France, the third-largest European IT services market after the UK and Germany, has sent less than 2% of its overall IT services budgets to India. This is even as Indians service providers offer the lowest rates and offshore scale.

Factors including organisational structures heavy on senior staff, historic preference for staff augmentation and traditional unwillingness to let work go off-site make offshoring from Continental Europe a peculiar market that has eluded almost all service providers Indians, regional Europeans, and even multinationals.

Companies in Western Europe aren’t in a hurry to cut costs by outsourcing overseas. Instead, their top priority is to be well integrated with the local social fabric, which includes avoiding cutting jobs in their countries, and adhering to local labour rules and other norms.

Indian companies, too, have been relatively inflexible in their approach in Europe. For instance, Infosys’ Poland facility (primarily for finance and accounting services) show how top Indian firms tend to limit their focus to select markets and offer narrow capability in one or two service lines. Moreover, they prefer to manage the staff themselves, and offer delivery from offshore locations.

Besides, most Indian firms see a challenge in ramping up onshore and nearshore resources as it directly impacts their bottom line. To capture more work in Europe, Indian outsourcers are making several moves and investments to become more relevant to markets such as Germany, the Netherlands, the Nordics, and Switzerland.

They are further recruiting local country-level or practice-level leadership, ramping up and opening new nearshore centres, starting language and cultural training centres offshore to train delivery staff and tweaking business models to accommodate lower offshore ratios, the report said.

Global delivery service firms such as Siemens IT Solutions and Services have been using Indian resources for low-cost labour for more than a decade. But, most Continental clients are still taking a cautious approach toward offshoring and show only a moderate growth of offshore initiatives.

Traditionally many believed that European firms typically prefer to send their jobs to nearshore locations such as Eastern Europe for the cultural proximity and similar time zones. However, the report revealed that more than 60% of European firms intend to send their work to India.

Source:http://economictimes.indiatimes.com/infotech/ites/Outsourcing-to-India-Europe-plays-strictly-by-the-rules/articleshow/5609881.cms