...
from the Wall Street Journal
Indian Back-Office Firms To Grow in Eastern Europe
By *ASHOK BHATTACHARJEE* *DOW JONES NEWSWIRES* April 28, 2004
NEW DELHI -- India's outsourcing firms have a new target: Europe's expanding eastern rim.
But rather than trigger a new outcry, the companies hope their low-profile opening of offices principally in the Czech Republic, Hungary and Poland will help quell concerns increasingly voiced by Western European and U.S. politicians and labor unions over the migration of thousands of jobs to low-cost India.
"Indian outsourcing companies need a presence in Europe to make their big clients feel more comfortable," says Sunil Mehta, vice president of India's National Association of Software and Service Companies, or Nasscom. "Resistance to outsourcing is lower in Europe if the vendor's operations are located there."
Political correctness isn't the main motive. Cost-conscious Indian companies want to be closer to clients in the European Union that are setting up major operations in Central and Eastern Europe. Other drawing cards include the region's low labor costs, Tata-security infrastructure modeled after the technology of richer EU neighbors and a pool of employees who can speak major European languages.
"East Europe produces excellent engineers and, unlike India, their language skills aren't limited to English," says Keshav Panda, New York-based director for European operations for India's *Satyam Computer Services* Ltd. "We must be in Europe to expand our business there. ...Everything can't be done from India."
Satyam plans to start a software development center in the Czech Republic, Hungary or Poland later this year with at least 100 software engineers, with plans to quickly double that number. The move is aimed at boosting Europe's share of Satyam's $460 million (?387.2 million) annual revenue to around a quarter from a sixth now.
Tata Consultancy Services Ltd., the software arm of one of India's biggest conglomerates, Tata Group, is among the first to gain a toehold in the region by setting up last year a software-development center employing 160 engineers in Budapest. The center serves TCS clients in the EU.
Progeon Ltd., the back-office services arm of software major *Infosys Technologies* Ltd., plans to open its first overseas call-center facility employing about 150 in the Czech Republic by the third quarter of this year.
"East Europe offers more than just cost benefits," says Akshaya Bhargava, chief executive of Progeon, which has teamed with U.K.-based Hazell Carr PLC to offer back-office services to European insurance companies. "Our Czech center will provide a multi-language capability for our customers in both the U.S. and Europe."
And 24/7 Customer Corp., based in India's software hub of Bangalore, is looking at some of the 10 new EU entrants for a 1,000-seat call center by next March, says Chief Operating Officer Shanmugam Nagarajan. Unlike many Indian outsourcing firms that focus heavily on the U.S., 24/7 generates around half of its annual $30 million revenue from EU nations.
"We're looking at Eastern Europe because many of our U.K.-based clients want some of our operations to be located in the same time zone," says Mr. Nagarajan.
The moves mesh with the Indian government's desire to create more diverse export markets to reduce its reliance on the U.S., which generates about two-thirds of the Indian software industry's revenue and where the industry faces increasing criticism from unions and politicians concerned about jobs lost to outsourcing.
"Our focus on Europe is already visible and many other companies will follow these examples," India Technology Minister Arun Shourie said at an India-EU technology summit in New Delhi this month. He added that the moves will add rather than subtract jobs, noting that the majority of employees are being hired locally.
Nasscom, the Indian industry group, projects that Europe's share of India's software industry, which had overall revenue of $12 billion in revenue last year, will increase to 35% in five years from about 20% now.
But that may be easier said than done. Unlike in the U.S., Indian information technology isn't an established brand in continental Europe.
Indian companies also will face competition from Europe's software companies, such as the Anglo-Dutch *LogicaCMG*PLC., which generates the bulk of its annual 1.7 billion ($3.05 billion or ?2.56 billion) revenue in the same markets its Indian rivals want to explore.
"Locating operations in Europe or in the same time zone won't bring Indian companies much benefit," says LogicaCMG Finance Director Seamus Keating. "They don't have the required experience to offer mission-critical services to European companies."
...
source --
<http://online.wsj.com/article_print/0,,SB108309626646994976,00.html>