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Doing Business in Europe – Opportunities and Challenges
Dr. Mukesh Aghi
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The dichotomy of Europe
Europe, the second largest market for IT services At US$ 205 bn, Western Europe accounts for 37% of the world IT services
market
… still only 31% of India’s IT exports vs. 60% for US UK has the dominant share at 19% compared with the Continent at 12%
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Is Europe still holding
back in offshoring to
India?
What lies beneath?
Are Indian offshore providers ready for Euro
entry?
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14.80%
33.20%
53.40%
73.90%
27.40%
30.50%
47.40%
76.80%
2007 2009
Top objectives of European clients for 2009
Source: Gartner online survey of clients, 2007 and 2009Note: 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?
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51%
18%
47%
53%
37%
40%
42%
70%
2008 2009
Top challenges facing their IT organisations
Source: Gartner online survey of clients, 2008 and 2009Note: 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?
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Key trends – Europe 2009
EMEA TCV* down 15% QoQ and 45% YoY to €15 bn in Q1, 2009 Smaller contracts more
prevalent
Increased interest within midsize businesses and across vertical markets towards outsourcing
More business managers involved in decision making for IT sourcing
Interest in alternative delivery models on the rise
Outsourcing plans of European organisations surveyed by Gartner
(December 2008)
60%
7%
33%
Will Outsource More
Will Outsource Less
Others
Note: *For large deals i.e. Contracts with TCV > €20 mnSource: Gartner, TPI
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Key Vertical Trends
EMEA - Number of Contracts Awardedby Vertical Industry Segment (2Q08-1Q09)
45
29
23
22
19
16
16
11
0 5 10 15 20 25 30 35 40 45 50
Telecom
Banking
Diversified Financials
Insurance
Transportation
Consumer Durables
Utilities
Retail
Contracts withTCV > €20 mn
Source: TPI Index, 1Q09
Steady flow of contract awards during the past three quarters
But, decline in large contract awards
Priority given to near-term cost impact through ITO
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Recession likely to stimulate European offshoring
The economic climate is driving more outsourcing (Equa Terra survey*) pipeline levels up 27% quarter on quarter
Europe is starting to view offshoring as a tool to remain competitive Western Europe market for BPO to increase by 10% to touch $18.5
billion by 2010 (PAC**)
“The IT industry is a lucky exception”
- Gartner, May 2009
Note: *EquaTerra survey of service providers in April 2009
**Pierre Audoin Consultants
“Outsourcing and services will increase”
- Gartner on EuropeFeb 2009
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But this game is different…
Think outside traditional verticals and offerings
Develop deep relationships over a period of time
Think Nearshore
Alternative delivery and engagement models
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Think outside traditional verticals
The UK aims to save $10.6 billion annually by lowering costs of back office and IT operations across its
state-owned departments … Government IT spending in the UK estimated to be circa $36
billion every year
Transportation Steria systems supervise more than 70% of the French
motorway network
Others include airport management, police force automation, hospitality, manufacturing, etc.
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Develop deep relationships over a period of time
Europe is more about trust, understanding and cultural compatibility Capability can be built in a shorter period of time
Steria has relationships extending over 20 years
“We don’t see large deals happening immediately… once a small deal is up and running, clients are willing to negotiate more services”
- Gartner
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Think Nearshore
Nearshore important for: Client comfort Circumventing language barriers
Centres like Poland, Morocco, Czech Republic becoming popular Provide multiple language capabilities relevant to Continental
Europe Cost advantage
But can they provide the scale?
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Increasing interest in alternative delivery models and industrialised services
% Responses indicating 'High' or 'Very High' interest
32%
47%
44%
52%
57%
24%
34%
41%
43%
56%
0% 10% 20% 30% 40% 50% 60%
Cloud computing
Business Process Utility
Remote Infrastructure Management
SaaS
Infrastructure as a service
2009 2008
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Explore customised engagement models
Different engagement models may suit varying needs of client organisations
Explore models like join ventures, higher onshore mix, etc. Meet less political and union resistance May be more amiable for cultural compatibility, client control,
etc.
The success of NHS-Steria partnership has encouraged the UK Government to bring more services under its fold
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Thank you for your attention
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