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| | While much of the focus of India’s information technology boom has been on the US-led North American market, somewhat quietly, the country’s software service majors have conquered Europe and in 2008, are set to deliver a knock-out punch to the continent’s IT service players. Value Leadership Group Inc, a consulting firm promoting offshore ventures to help Europe’s IT firms, estimates the top five European IT service companies to generate €5 billion in revenues in 2008, up from €2 billion in 2006, with a combined headcount of 115,000 employees. That would pale in comparison to India’s Tata Consultancy Services (TCS) and Infosys, which between them already have more workers, critical in an industry driven by skilled high-tech employee, and revenues to match. A telling statistic: TCS and Infosys, the country’s top two players, made a combined net profit of $1.7 billion in 2006, more than the entire European IT service industry.
“Under any scenario, European IT services are in for a major shakeout,” Peter Schumacher, chief executive officer of Value Leadership, said in a study presented at the technology industry’s pivotal CeBIT fair in Germany last month. “A highly disruptive competitive dynamics will develop in Europe by 2009.” Schumacher, who made available his study to Hindustan Times, says 92 per cent of German firms still do not feel the need to step up offshore presence in India despite reports by investment bankers like Goldman Sachs as far back as 2002 that a shakeout was likely. In a sign of the crunch, European leader Capgemini last year acquired Nasdaq-listed Kanbay for $1.25 billion, mainly to get access to 5,000 India-based workers. A key factor is that after being hit by a slowdown in the US economy in 2001, Indian companies have aggressively courted business in Europe, taking on local rivals, which have been forced to step up presence in India. But these European majors have had to compete for talent with US giants such as IBM and Accenture, in addition to entrenched Indian giants, making their task more difficult. Infosys, which had European revenues of only €18 million in 1999, is set to increase the figure to €1.4 billion in 2008, up from 950 million this year, showing a compounded average growth rate of 62 per cent over nearly a decade. Wipro has acquired niche companies in Europe to get access to juicy customers. Last month, the top five European IT service companies- Capgemini, LogicaCMG, AtosOrigin, Indra and Tietoenator, had a combined market capitalisation of only $23 billion, whereas Tata Consultancy Services, Infosys, Wipro, Satyam and Cognizant (US in incorporation but India-centric in work) had a combined value of $100 billion. The top three separately overpowered the European top five. |
