Indian IT companies to tap big business in Europe; up hiring plans

Banglore/ Mumbai: With European corporations emulating their American counterparts to make outsourcing mainstream , Indian software companies are tapping into a rich new vein of opportunity and are hiring and looking for acquisitions to grow in the continent.
As Europe rebounds from the lows of the economic crisis, firms on the continent are beginning to raise their IT spending as they look to cut costs and focus on a digital future. They are also open to working with Indian players, something that was not common a few years ago.
"Large European accounts are now ready to work with Indian IT players. Pressure to save costs is one of the reasons, but more importantly Indian IT companies have been selling more consulting work and delivering high-value services," Christophe Chalons, partner and chief analyst at Europe-focused IT advisory firm Pierre Audoin Consultants, told ET.
ET reported last month that Schneider Electric, whose $1 billion IT services contract with French provider Capgemini is due to be renewed, is looking at Indian outsourcers for the first time. At least three European deals with annual value of $100 million are being negotiated with Indian IT companies currently, industry players said.
Part of the reason Europe is warming to Indian IT players is the building of local talent, either through organic on-site hiring or through acquisitions. Tata Consultancy Services BSE -1.44 %, India's largest IT provider, invested in on-site hiring in Europe and then doubled down with a $75 million acquisition of French IT services player Alti last year.
Infosys BSE 0.40 % spent $349 million to buy Zurich-based consultancy firm Lodestone in 2012, and more acquisitions are on the cards. "We have invested in different European markets, built nearshore centres in Budapest, Poland etc. We may look at acquisition targets. We may look at something like a Lodestone in Nordics," said BG Srinivas, one of two presidents at Infosys who used to oversee Europe for the Bangalore-based company.
Indian IT players are focused on the European market both for acquisitions of companies and captive units. "In terms of acquisitions, Indian IT companies are looking actively at continental Europe and also eastern Europe for deals. Small consulting firms in stronger markets in northern Europe are very much on the radar," an investment banker, who declined to be identified, told ET.
The deal pipeline and conversion rate in Europe is also increasing. TCS BSE -1.44 % reported strong growth from the continent in its fourth-quarter results, higher growth than the US - the longtime dominant market. Continental Europe accounted for 11.4% of TCS' revenue for FY2014, up from 9.6% for FY2013. Other IT players also see a major scope to do well in that market . "Europe is a hunting ground for new opportunities. We see a strong demand pipeline from European customers and many first-time outsourcers." Ashish Gupta, head of Europe, Middle East and Africa, at HCL Technologies BSE -1.43 % said. Indian firms have also started bulking up their senior management on the continent. Late last year, Tech Mahindra BSE 0.38 % appointed managers for countries like Denmark, Sweden, lurin talent away from France's Capgemini. Even smaller player Hexaware BSE -1.87 % appointed a new head for Europe - HCL Tech's Amrinder Singh - last October.