Where are the Europeans?
Top news on outsourcing is dominated by a handful of service providers: IBM, Accenture, Capgemini, TCS, Infosys, Wipro, and Satyam. CSC, EDS and HP occasionally creep in.
All of these, except perhaps Capgemini, are either American or Indian companies. Where are Xansa, Logica, T-Systems, SBS, Atos Origin, Xchanging — the European heavy weights that once were the providers of choice for European companies looking to outsource their IT and even BPO?
Their operating margins are down, their CEOs are stepping down, and they are becoming takeover targets by more robust companies
Xansa is being bought out by Steria.
Capgemini was rumored to be up for grabs (by Atos Origin) in 2004, and again this year (by Infosys) in June.
LogicaCMG was rumored to be a bid target by Permira, the private equity group. Two months ago, its CEO was sent off on early retirement.
Atos Origin was rumored to be a takeover target by Permira, Centaurus and Blackstone. After the company’s stock valuations fell consistently, its CEO finally stepped down a few weeks ago.
T-Systems also recently lost its chief.
So what’s plaguing the European providers? Our September issue Cover Story discusses why the IT and BPO services European providers are getting off the radar.
We’d like to hear your comments on the topic—and use them when writing the story. The story goes to press on the 21st. So do write in before that.
I find the opening paragraph of the original article fascinating and amusing to say the least. It certainly capable of starting a discussion but I wonder how fruitful such a discussion is.
The opening paragraph says: “Top news on outsourcing is dominated by a handful of service providers: IBM, Accenture, Capgemini, TCS, Infosys, Wipro, and Satyam. CSC, EDS and HP occasionally creep in.”.
Watch first how the article brings about three international companies and FOUR indians.
This openning remarks sound something like this “Top news on politics is dominated by America, United Kingdom, France, Germany. Egypt, Nigeria, Yemen etc occasionally creep in”. Interesting.
The article is asking where are the Europeans? May be the Eoropeans are busy building a new empire called the EU or making loads of money on high end, high value IT business. may be?
One thing also fascinates me, People talk about India outsourcing as if India is such a giant in this field. they may be large, but certainly not giants in the global IT Industry, far from it. May be one day in few years this will happen, but for now they are not.
Let me give you a clue on how big the Indian IT industry is (which is definitely dominated by low value IT business). the whole of the IT industry in India doesn’t even match 25% of the revenue of IBM Global services division, let alone the other companies or any of the European Giants. The list above omitted giants like Vodafone, Ericsson, Siemens and Fujitsu. The list above selectively with the exception of Capgemini chose smaller companies that are having temporary problems.
A clever article indeed aiming at promoting India IT outsourcing while completely ignoring China and the rest of the Eorpean IT Giants.
Juhi, I do not have any data on the % of European deals going to American or Indian companies. Your best bet would be Forrester or Gartner research.
But when we talk of companies buying services, we should not underestimate the importance of confidence and trust between the service provider and the customer arising from past relationships. So it is not surprising to me that a European company should prefer a European service provider for offshore work because the same European provider has delivered a lot of onshore services in the past and hence is familiar with the client company’s systems, key managers and working culture. For a client company with medium to low risk appetite, it would be more palatable to work with a ‘familiar’ and ‘more manageable’ European service provider than with an American or Indian juggernaut even if it means 5-7% lower savings.
amanda,
the magazine will be out on sept 1. we are read by american/european managers responsible for buying IT and BPO services from around the world. our mag reaches their desks–and we are not available on stands.
agree with your points, mohit. they are valid when viewed in terms of european companies not being open to sending work offshore (india or elsewhere). but what about them choosing to buy services from ibm and accenture rather than logica or atos?
we are trying to get hold of data that shows the percentage of outsourcing deals by european companies to european providers versus american or indian providers in the last few quarters. any leads?
I am looking forward to reading this article.
I think IT companies in France, Germany and Belgium have 3 problems in adopting offshore :
1. Their internal incentive systems do not encourage onshore managers to send enough work offshore.
2. The language and cultural gap between Continental Europe and India is much bigger than that between the Anglo-Saxon world and India. This makes it more difficult for Continental European companies to grow their operations in India.
3. Labour market inflexibilities and labour unions in Continental Europe make it even more difficult for these companies to run economically viable offshore operations.
I will be looking forward to read the article. when will your magazine come out? is it available on the stands?
But what’s hidden behind all this harry? What’s the reason that such Europe is seeing such a trend?Is there anything wrong with the way they function, are they too traditional in the way they operate…atleast that’s what I have found out upon talking to some industry experts!!!
So what is the point? Isn’t that true for all industries across Europe. What happened to Fiat? What’s happening to Land Rover and Jaguar? Do you remember Grundig? And how many European companies have really made it big and continue to grow? How many European brand names can you recollect? I frankly can not recollect any new or old European companies except a few that have grown significantly in the past decade and the fate of companies that can not scale will be the same as what is happening in the outsourcing industry.
Simple question: Why did IBM, Accenture, CSC came to India? Because, they were forced to, once their clients saw Infosys, TCS, and Wipro.
We generically say Europe. But I think it is three distinct segments (of course, among developed markets)–UK, which is fairly like U.S; France/Germany that are huge but not mature; and Netherlands/Switzerland etc that are open and they do not care about the origin of the service providers. It is in the second category of market that companies like T Systems, Lufthansa Systems, and to some extent SBS have traditionally held market share. In these markets with stringent labor laws, the effect of offshoring has not yet been felt. That explains their unwillingness to change.
Xchanging, while we may club it with Europeans, started the same time as Genpact and other offshore vendors started and is today world’s largest pure play BPO firm. Yes, bigger than Genpact.
Yes you are correct! At times even I really wonder on why these euro giants are not being able to make news or create waves in market or have they lost the vision of being in IT/BPO biz? Neither they are able to retain their old/core clients nor being able to rapidly add new ones or are they are just not able to fight on both these ends simultaneously. Their major revenue now comes from non-commercial contracts (Govt, Defense & public sectors). All these except Cap Gemini doesn’t have mass & effective presence in India (Logica has 2500 people, Xansa is just 3-4K, Atos is some what 1500-2K, Xchanging is 2k) they are really really going very slow in India, what is stopping them from doing so? If rising cost of operation, rising salary is a hindrance for them, they need to learn from US IT giants on going ahead with India strategy, India which is major center for IT/BPO outsourcing at these moment and definitely will be for another 5-10 yrs.
why their focus is on low cost centers in Portugal, Chezq, Poland, CCE etc only. On other way round most of Indian giants have made inroads in UK & German IT market and are giving tough fight to these euro giants and everybody else. True, it wont surprising if companies like Logica, Atos, T-system,Valtech, Getronics, Capita, Xchanging, SBS and other mid size players get acquired by Private equity, Indian Big 5(TCS, wipro, infy, HCL, Satyam) or Big 5(IBM, CSC, EDS, Accenture, Cap Gemini). The worst part is, fall in their mkt capitalization has made them vulnerable for possible takeover by competitors and skeptical about their future but on the other side their revenue per employee is still far far better than Indian IT companies.