The top three India-listed software vendors, Tata Consultancy Services, Infosys and Wipro, seem to be getting better at capturing the European market despite the economic challenges facing the continent.

They have successfully capitalised on rising interest among European firms to leverage offshoring (as a means of cutting costs), by acquiring firms that can speed up the process and hiring local staffers for client-facing roles.

Tata Consultancy Services is ahead of the pack with a 20.3 per cent rise in European revenues in the fourth quarter of the previous fiscal (as compared to Q4 of 2012) and a 19.5 per cent increase in full-year revenues in fiscal 2013 (vis-a-vis fiscal 2012).

Infosys and Wipro have seen their revenues from Europe increase by 18.4 per cent and 6.2 per cent, respectively, during the fourth quarter ended March 31, 2013. For the full year, Infosys and Wipro recorded revenue rise of 11.5 per cent and 6.1 per cent, respectively, compared to the previous fiscal.

Low-cost option

“The downturn in the European market has compelled large European companies to cut costs across the board. Since Indian firms provide low cost IT options, there is increasing interest from the client’s side. As such, offshoring is growing at a faster clip as compared to the pace at which domestic IT markets are expanding in Europe,” said Alok Shende, Principal Analyst of research firm Ascentius Consulting.

The small revenue base from which these companies have grown in the continent (the Indian IT story in Continental Europe is less than 10 years old), help in amplifying the growth rates. Sudin Apte, Principal Analyst and CEO of Offshore Insights, an advisory firm, is of the view that the demand is country-specific, and that it should not be construed as a geography-wide trend in Europe. “The up tick is visible in UK, Germany and some Scandinavain states,” he says.

Shende believes that the time is not far when other countries in the region too take to offshoring. “A German automobile vendor competes with a French automobile company in the European Union’s common market. Thus, if the German company is able to reduce costs through offshoring, it will just be a matter of time before its French counterpart also takes to offshoring.”

IT companies are preparing for this wave by acquiring companies that not only give access to new clients and geographies, but also provide a pool of local staffers. Infosys’ 2012 buy of Swiss consulting firm Lodestone (for about $350 million), helped the company to augment its weak organic revenues in Europe and bring it in line with rivals TCS and Wipro. Earlier this month, TCS made its first acquisition in France by buying out Alti SA for €75 million (about Rs 533 crore).

> adith.charlie@thehindu.co.in

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