Indian IT firms look to Europe to diversify business

NEW DELHI - With an anti-outsourcing tirade in America rising, Indian software giants like Infosys and Wipro are planning to expand their businesses in Europe through new ventures in a bid to reduce their revenue from the United States to 40 percent in five years from over 60 percent now.

“The focus of these companies is shifting to continental Europe, particularly Germany and France,” Eric Isabey, Chairman of Pierre Audoin Consultants, who is advising the Indian IT firms on European ventures, told IANS in an interview.

He said Indian software outsourcing firms like Infosys, HCL Technologies, Mahindra Satyam and MindTree were looking for local partners in the two countries to expand their business in Europe.

“Some Indian IT companies are looking for mergers and acquisitions in Europe, which is largely untapped market for them,” said Isabey, adding several deals were likely to be announced soon.

Isabey, who met top executives of Indian IT companies recently, said most firms realise that the US was a saturated market for outsourcing business and they need to diversify their income away from it.

The $50-billion Indian IT industry gets over 60 percent of its revenue from the US. Nearly 20 percent of their revenue come from Europe and rest of the world accounts from 20 percent.

Isabey said in the medium term (in five years time) Indian companies would move to 40-40-20 ratio for their revenue from the US, Europe and rest of the world, respectively.

“Getting a balanced portfolio is key for sustaining business growth. I think 40-40-20 ratio would be ideal,” he added.

The Paris-headquartered Pierre Audoin Consultants is facilitating several deals between Indian IT firms and the companies in Europe.

A series of protectionist measures announced by the US recently is likely to negatively affect the business of Indian outsourcing companies.

Increase in visa fee is estimated to put an additional burden of $250 million annually on the Indian IT firms. The US government has increased visa fee by $2,000 for certain H-1B and $2,250 for L-1A and L-1B.

In yet another protectionist measure, a US state of Ohia recently banned offshore outsourcing by government departments.

India has strongly criticised these measures saying it would prove counterproductive and might affect the recovery of global economy.

Isabey said Indian IT firms should hire more local people to resist protectionist tendencies. “Outsourcing companies need to change their strategy. They should recruit more local people and engage more in local businesses,” he added.

He pointed out that Indian IT firms needed an image makeover. “There is a general perception that outsourcing companies are creating 2,000 jobs in Bangalore for every two jobs created in New York. This has to change,” said Isabey, adding the companies should convince the local authorities that they would create enough value for local economies in terms of employment and business activities.

On Ohio’s decision to forbid outsourcing of IT services by government departments, Isabey said it would not affect India IT companies much as most of their businesses were with private companies.

(Gyanendra Kumar Keshri can be contacted at gyanendra.k@ians.in)