Europe to drive India’s IT growth in 2014: Nasscom
30 Dec 2013
Despite the fact that North America is India's biggest IT market, industry analysts believe that the growth of country's $108-billion IT industry in 2014 will be driven by the European region.
"Europe is growing faster than the US. That is something we saw this year and this will only gain momentum. There is a lot of latent demand in the region, which will drive growth for the sector," Som Mittal, president of India's IT industry body Nasscom told PTI.
Currently, North America accounts for over 60 per cent of export revenues of India's IT sector, while the European region's share is about a third of that with the UK accounting for the major chunk.
"The share of the European region has been growing... The market is now more open to outsourcing and in the coming year, we will see a lot of new projects coming up, which is a huge opportunity for our domestic companies," Mittal said.
Faced with rising uncertainties due to and stricter visa regulations and other issues in the US, their largest market, Indian IT companies have shown growing interest in Europe, as is evident from their European acquisitions and hiring in recent months, aimed at bypassing labour issues and enhancing client trust.
In April, Indian IT giant TCS acquired French IT services firm Alti SA for €75 million to strengthen its presence in Europe (See: TCS completes acquisition of French ERP firm Alti).
In January, Geometric Ltd bought German engineering services provider 3cap Technologies for €11 million (Geometric acquires Germany's 3Cap Technologies).
Last year, Infosys took over Swiss management consulting firm Lodestone Holding AG, for about €270 million (Infosys to buy Swiss consulting firm Lodestone for Rs1,900 crore).
US-based Congizant Technologies, which has three quarters of its workforce in India, said that it will buy French financial services firm Equinox Consulting, besides acquiring several small IT services firms in Germany.
"For European companies, many of them which have seen prolonged economic slowdown, Indian IT firms not only offer cost advantage but also high quality of work," Mittal said.
In 2012, TCS ranked 11th in IT revenues from Europe, climbing up from the 21st position in 2009. Indian rivals Wipro and Infosys improved their positions to 18th and 23rd during the year, according to German outsourcing advisory Pierre Audoin Consultants (PAC).
India's IT exports are likely to hit $86 billion in the current fiscal, registering an expected growth of 12-14 per cent, according to Nasscom.
It is believed that with a relatively low market penetration, Europe provides a lot of headroom for growth.
However, language problems, strict labour rules as well as data privacy issues remain in several European countries which need be overcome to achieve sustained growth. Countries like Germany and France which did not show willingness to offshore deals earlier are opening up and are even setting up centres in India and China.
According to some analysts, overall business of top Indian IT companies in Europe is expected to grow about 16 per cent this year, against an expected 12-per cent growth in the US.