Doing Business in Europe – Opportunities & Challenges

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The Dichotomy of Europe: some idea of the market and the opportunities that lie ahead In the Indian context, Europe was really the second largest market for IT services At US$ 205 Bn, Western Europe accounts for 37% of the world IT services market However the continent still only accounted for 31% of Indias IT exports vs. 60% for US UK has the dominant share at 19% compared with the Continent at 12%

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<ul><li> 1. Doing Business in Europe Opportunities and Challenges Dr. Mukesh Aghi Steria </li> <li> 2. The dichotomy of Europe 10/06/09 <ul><li>Europe, the second largest market for IT services </li></ul><ul><li><ul><li>At US$ 205 bn, Western Europe accounts for 37% of the world IT services market </li></ul></li></ul><ul><li> still only 31% of Indias IT exports vs. 60% for US </li></ul><ul><li><ul><li>UK has the dominant share at 19% compared with the Continent at 12% </li></ul></li></ul></li> <li> 3. What lies beneath? Is Europe still holding back in offshoring to India? Are Indian offshore providers ready for Euro entry? </li> <li> 4. Top objectives of European clients for 2009 Source: Gartner online survey of clients, 2007 and 2009 Note: The survey is not representative of the entire market Reduce cost, reduce assets or improve cash flow Access to capabilities and competencies that you don't possess Improve company / customer service level Improve flexibility Gartner survey responses by European client organizations What are your company's three basic objectives for outsourcing? </li> <li> 5. Top challenges facing their IT organisations Source: Gartner online survey of clients, 2008 and 2009 Note: The survey is not representative of the entire market Budgets/cost containment Aligning IT with the needs/requirements of the business Supporting business growth and change Getting more productivity or value from existing applications, systems or services Gartner survey responses by European clients on their IT organizations What are the top three challenges facing your IT organization in the next 12 to 18 months? </li> <li> 6. Key trends Europe 2009 <ul><li>EMEA TCV* down 15% QoQ and 45% YoY to 15 bn in Q1, 2009 </li></ul><ul><li><ul><li>Smaller contracts more prevalent </li></ul></li></ul><ul><li>Increased interest within midsize businesses and across vertical markets towards outsourcing </li></ul><ul><li>More business managers involved in decision making for IT sourcing </li></ul><ul><li>Interest in alternative delivery models on the rise </li></ul>Note: *For large deals i.e. Contracts with TCV &gt; 20 mn Source: Gartner, TPI </li> <li> 7. Key Vertical Trends EMEA - Number of Contracts Awarded by Vertical Industry Segment (2Q08-1Q09) Contracts with TCV &gt; 20 mn Source: TPI Index, 1Q09 <ul><li>Steady flow of contract awards during the past three quarters </li></ul><ul><li>But, decline in large contract awards </li></ul><ul><li>Priority given to near-term cost impact through ITO </li></ul></li> <li> 8. Recession likely to stimulate European offshoring <ul><li>The economic climate is driving more outsourcing (Equa Terra survey*) </li></ul><ul><li><ul><li>pipeline levels up 27% quarter on quarter </li></ul></li></ul><ul><li>Europe is starting to view offshoring as a tool to remain competitive </li></ul><ul><li><ul><li>Western Europe market for BPO to increase by 10% to touch $18.5 billion by 2010 (PAC**) </li></ul></li></ul> The IT industry is a lucky exception - Gartner, May 2009 Note: *EquaTerra survey of service providers in April 2009 **Pierre Audoin Consultants <ul><li> Outsourcing and services will increase </li></ul><ul><li>Gartner on Europe </li></ul><ul><li>Feb 2009 </li></ul></li> <li> 9. But this game is different <ul><li>Think outside traditional verticals and offerings </li></ul><ul><li>Develop deep relationships over a period of time </li></ul><ul><li>Think Nearshore </li></ul><ul><li>Alternative delivery and engagement models </li></ul></li> <li> 10. Think outside traditional verticals <ul><li>The UK aims to save $10.6 billion annually </li></ul><ul><li><ul><li>by lowering costs of back office and IT operations across its state-owned departments </li></ul></li></ul><ul><li><ul><li>Government IT spending in the UK estimated to be circa $36 billion every year </li></ul></li></ul><ul><li>Transportation </li></ul><ul><li><ul><li>Steria systems supervise more than 70% of the French motorway network </li></ul></li></ul><ul><li>Others include airport management, police force automation, hospitality, manufacturing, etc. </li></ul></li> <li> 11. Develop deep relationships over a period of time <ul><li>Europe is more about trust, understanding and cultural compatibility </li></ul><ul><li><ul><li>Capability can be built in a shorter period of time </li></ul></li></ul><ul><li>Steria has relationships extending over 20 years </li></ul><ul><li> We dont see large deals happening immediately once a small deal is up and running, clients are willing to negotiate more services </li></ul><ul><li>- Gartner </li></ul></li> <li> 12. Think Nearshore <ul><li>Nearshore important for: </li></ul><ul><li><ul><li>Client comfort </li></ul></li></ul><ul><li><ul><li>Circumventing language barriers </li></ul></li></ul><ul><li>Centres like Poland, Morocco, Czech Republic becoming popular </li></ul><ul><li><ul><li>Provide multiple language capabilities relevant to Continental Europe </li></ul></li></ul><ul><li><ul><li>Cost advantage </li></ul></li></ul><ul><li>But can they provide the scale? </li></ul></li> <li> 13. Increasing interest in alternative delivery models and industrialised services </li> <li> 14. Explore customised engagement models <ul><li>Different engagement models may suit varying needs of client organisations </li></ul><ul><li>Explore models like join ventures, higher onshore mix, etc. </li></ul><ul><li><ul><li>Meet less political and union resistance </li></ul></li></ul><ul><li><ul><li>May be more amiable for cultural compatibility, client control, etc. </li></ul></li></ul><ul><li>The success of NHS-Steria partnership has encouraged the UK Government to bring more services under its fold </li></ul></li> <li> 15. Thank you for your attention Steria </li> </ul>