European enterprises may not slash IT budgets
in a way they did during the 2008-2009 downturn, despite the volatile climate this year, Daniel Shepherd, an analyst with Frost and Sullivan told Business Today
on the sidelines of the Nasscom Leadership Forum
Nevertheless, it could be an uphill task for Indian firms to make inroads because of two forces - protectionism
from the European governments and strong unions.
Europe, primarily the UK, generates upto 20 per cent of revenues for many companies. Indian firms have been making investments in Germany and France over the last many years.
"Western Europe is suffering from high unemployment
. While country wise, the unemployment rate could vary between 10-15 per cent, it is even higher in some regions within these countries. The rationale for offshoring, therefore, has to be very compelling," Shepherd, who heads Europe, Israel and Africa for Frost and Sullivan's ICT practice, said.
While the current environment looks tricky to get much offshoring done, debt-heavy countries would eventually have to start reducing technology costs - even the hard-nosed public sector. Business is likely to go to companies with bigger footprint in the continent. German companies have been offshoring to Eastern Europe while France has a preference for North Africa because of language issues.
Germany, Shepherd is hoping, would adopt offshoring at a faster clip, going ahead - good news for Indian IT. The reason is leadership changes in many of the country's large enterprises.
"Companies are looking for foreign blood since they want to expand outside Europe. There are a lot of US-style leadership coming in. This is resulting is a greater degree of openness to offshoring," the analyst explained.