Lack of Scale and Global Presence
Why are the European service providers falling off the global IT and BPO services radar, a screen that’s being dominated by the likes of IBM, Accenture, Cognizant and TCS?

“We are fine,” is what most European players suggest, shifting the blame to external circumstances — a fragmented European market and labor-market inflexibilities. Some of this may be true — after all, these companies have been getting a steady, though of low contract value, flow of outsourcing deals. Yet, the fact remains that at a time when having a true global service-delivery model is critical to compete for larger and cross-border deals, European providers have made unsteady moves toward a global model, remaining entrenched mostly on the continent.

When Accenture plans to have 35,000 people in Asia this year (taking its headcount in the subcontinent higher than in the U.S.), Atos Origin currently has only 2,500 and Steria (after the acquisition of Xansa) has 5,000 in the region. Capgemini, on the other hand, seems to be leading the European pack in global delivery capability — after its recent acquisition of Kanbay, it has 14,000 people in India.

“The issue is around capabilities. European providers have not yet created sufficient scale from an offshore perspective, which is something that their American and Indian competition has already done,” says Siddharth Pai, Partner, TPI, India.

One reason why these companies are slower in building their offshore capabilities is that they still believe in operating in their core geographies. For instance, Atos Origin is active only in France, Netherlands and the U.K. (two thirds of its CRM revenue comes from these countries, according to Gartner) while Steria is concentrated in France.

Though the IT and BPO services sectors cannot be compared, as they operate on entirely different models, the BPO picture is not as bad as in the IT-services space in Europe. “Unlike IT services providers who work on Six Sigma, we operate on zero errors,” says David Andrews, Founder and CEO, Xchanging. With customers in 34 countries across the world, Xchanging operates successfully as the only “international” pure-play BPO company in Europe.