The outsourcing model adopted by Indian IT service providers for the U.S. and North American markets is “not working” in Continental Europe, according to a recent survey of the industry in Europe conducted by Forrester Research. Although 60 per cent of those surveyed by the technology and business research consultancy said they still outsourced to companies in India, a large section of those surveyed said they separately sourced hardware, software and people from different locations, said Sudin Apte, Principal Analyst, Forrester Research. The survey was conducted among European companies in the last quarter and in the first month of the current quarter.

Indian exports of IT services and business process outsourcing (BPO) amounted to about €14 billion in 2008. Exports to the U.K., Germany and France accounted for about €11.7 billion. “Although Europe offers a lucrative opportunity, the success rate for Indian companies has been low and ramp-up of operations has been slow,” Mr. Apte said. He said Indian companies had to be “ready for the long haul, and be prepared to face increased pressure on their margins.” Most of the companies surveyed said they did not expect higher IT budgets in the U.K., France and Germany. “Even fewer are looking at India as an offshoring option,” he added.

The Forrester study pointed out that “the highly federated decision making process” in Europe, its complex procurement processes and language barriers are significant obstructions to the rapid increase in positioning India as an offshore option. “Most companies in Europe are more pan-European than global,” Mr. Apte said. “Many Indian IT companies confuse cultural compatibility with local presence,” he added.

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