The founder of Infosys Technologies (Nasdaq: INFY), Narayan Murthy was recently awarded the Officer of the Legion of Honour, the highest civilian distinction of the Government of France. The Indian BPO and IT contribution is gaining recognition around the world, with major industry players making their presence felt on the global map. The Indian companies have already taken the next step by tapping the European market and catering to their need for proximity of vendors and services in local languages. Recognition as this will definitely popularise the Indian vendors further in new market areas.

TCS also announced its plans to establish a center in Moscow by March 2008. According to the company, this office is a part of its strategy to expand into Western Europe, Middle East, Africa and Latin America. A local partner is expected to help TCS to gain foothold in the Russian and CIS market. The company also plans to establish a software development center with Russian programmers.

The need for acquiring language skills….
Some of the other Indian IT and BPO companies that have actively expanded into European countries to specifically cater to the market demand of services in other languages are Infosys Technologies, Wipro and Satyam. While this trend has been steady over the last couple of years, it is expected to strengthen, as worldwide recognition for Indian expertise in the sector grows. The Indian vendors are thinking outside the box, with the current slump in the US economy. The European market appears to be the best available alternative to sustain business.

The major hurdle is lack of knowledge of European languages among the Indian workforce. It is precisely to counter this that the Indian vendors are moving into locations across Europe. This also works as a confidence building measure among European companies, who are reassured by the presence of local workforce and local offices. Presence in multiple locations mitigates risks and vendors can approach the small and medium sized companies who may otherwise not be sure of how and who to contact for outsourcing requirements or projects.

For services that cannot be outsourced or are not cost effective when outsourced, Indian companies are opting for a native European workforce. A rising trend of people shifting to India has eliminated the need to establish offices in the European countries. This is especially beneficial for the smaller vendors, as one of the biggest challenges they face is scalability. While it is easier for the larger Indian vendors to establish offices and employ foreigners to cater to new client requirements, for the smaller companies it is a constant struggle to maintain a balance between skill sets and number of clients.

UK Prime Minister Gordon Brown and French President Nicolas Sarkozy’s recent visits to India, underscore the importance of the Indian contribution to the global business. India’s expertise and experience in the outsourcing sector has made it a favoured destination among all the companies looking to outsource. Local employment is an added benefit for the client nations. However, language skill is one area where the Indian companies may need help from the clients.

Going Forward…
India has emerged as the preferred outsourcing destination in a recent survey of UK based companies. While low cost and knowledge base are the most common factors, India must make concrete efforts to move ahead in what appears to be a major drawback in terms of providing services to the European clients – that of language. While Indian universities do offer foreign language, what the Indian outsourcing industry needs to do is to communicate to the Indian education institutions its requirements in terms of the level of expertise needed to cater to the clients. A joint effort towards developing a workforce that can span across all requirements will boost the prospects of the Indian outsourcing industry further.

ValueNotes Outsourcing Watch: Insights for Investors is a unique news and analysis service from the ValueNotes Outsourcing Practice, focused entirely on outsourcing; This weekly publication analyses events in outsourcing, outsourcing companies, trends in the sector, impact of global competition from offshoring to established US companies, and emerging investment opportunities.

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