IT market recovering in Europe: Steria CEO
Goutam Das February 13, 2013The European IT (information technology) services market will recover in 2013, said Francois Enaud, Chairman and CEO of Paris-headquartered IT company, Steria. He was speaking to BT on the sidelines of the India Leadership Forum , hosted by Indian IT industry lobby Nasscom, in Mumbai, on Wednesday. Enaud expects the portion of the European IT services market that it targets to grow by one per cent, from about 100 billion euros now. This, he feels, will come about as enterprises hoarding cash start spending on cost-cutting initiatives and open up like never before to offshoring.
"European clients now want to benefit from global delivery. One of the drivers is cost. While IT budgets in Europe will not increase this year, clients will be spending less on internal IT and more on IT services (given to third-party vendors)," said Enaud. Steria clocked revenues of 1.74 billion euros in 2011.
The IT services market, Enaud said, declined one per cent in 2012 and IT budgets shrank even more. "However, the Eurozone has now been saved. There is more trust and confidence in the future of the region. It is again becoming attractive for investments. We are seeing some stabilisation in IT spending."
Europe, particularly continental Europe, has always been closed to offshoring. If the region opens its doors to global delivery - a model pioneered by Indian companies, where IT services are delivered from remote locations - it is good news for the India's IT fraternity.
In its yearly strategic review, released on Tuesday, Nasscom noted that Indian IT is seeing a demand surge in Europe. Continental Europe grew 10 per cent for Indian companies in 2012/13.
European companies such as Steria, Logica and Capgemini can expect more competition from the likes of TCS, India's largest IT exporter, who have made strong strides in Europe. Indian companies have the advantage of a more mature global delivery network. Steria, for instance, only has about 5,000 people in India and most of its delivery centres are located in Europe. Its operating margins are in the region of seven per cent versus 20-28 per cent for its Indian peers.
Enaud said he is preparing for a more competitive environment. "This is a new competitive challenge we will have to face as Indian players become stronger in Europe. We need to focus even more on higher value services and innovate in specific domains," he said.
Steria is investing in the public sector, where it services police, border control and defence forces, among others. That will always be a difficult sector for Indian IT to crack.