The European Union and India’s first free trade deal could see IT service providers expand business on the continent, with large untapped markets opening up.
While clusters of smaller economies – for example, in the Nordic and Benelux regions – have been successful markets for Indian IT services firms, there are bigger economies where there is room for them to grow. The free trade deal between the EU and India, the first of its kind, means businesses on the continent can more easily tap India’s vast IT sector.
According to Peter Schumacher, CEO at The Value Leadership group, which specialises in advising enterprises on services from India, one of the key agreements is around making it easier for Indian IT professionals to work and settle in the EU.
“The EU-India free trade agreement creates a new framework for Indian IT services to expand across Europe,” he said. “Central to this is a mobility pact that simplifies visas and residency, easing intra-company transfers (ICTs) and global project management.”
He said European businesses will be attracted by the opportunity to increase competitiveness “through tapping into India’s scale, expertise and cost efficiencies”.
Indian suppliers such as heavyweights Tata Consultancy Services (TCS), Infosys, Wipro and HCLTech boast huge shares of the US and UK corporate IT services market – tier-two players to a lesser extent, but significant, nonetheless.
There has been major activity in the EU, particularly in countries such as the Netherlands and the Nordic region, but it is small in comparison to the US and the UK. There is a huge opportunity with economies such as Germany, the world’s third largest economy; and France, the seventh largest, where outsourcing to Indian firms is a fraction of that of the world’s biggest economy (the US) and sixth biggest (the UK).
Amrinder Singh, EMEA head at tier-two Indian supplier Hexaware, agreed that the free trade deal is the dawn of a new era for Indian IT suppliers in continental Europe.
“It will be fertile business ground for a lot of collaboration between Indian heritage IT services providers and large enterprises,” said Singh.
He pointed out that Hexaware has a lot of work in the Nordics and Benelux regions to date, with Germany and France being “the next big market”. He also believes early success in the Nordic and Benelux regions is due to the prevalence of the English language, which has “really helped Indian IT services firms in the past”.
To put into perspective the size of the untapped market, Hexaware’s total EU revenue – taking in all countries – is just 40% of its UK revenues. Furthermore, the Nordics and Benelux regions account for two-thirds of its total EU business.
Hexaware sees Germany and France as countries it can now compete strongly in. “We have the ability to both hire and train local talent where needed and the ability to bring in talent,” said Singh, who added that the increased mobility of staff is not the only major boost. “We are very excited about this deal, not just for scale and mobility, but also from a market access perspective.”
Access to public sector customers in the EU is another big opportunity for the company, with Singh saying: “Public sector organisations in the past have been very difficult for Indian IT services to do deals with.”
Mark Lewis, IT outsourcing specialist lawyer at Stephenson Harwood, said France and Germany will inevitably be targets for Indian heritage companies, but there will be challenges that could stiffen the door opened by the trade deal, because it won’t overrule local laws such as those around employment.
“The proof of the pudding is going to be in how the big EU economies eat this,” he told Computer Weekly. “There are going to be intra-company transfers with IT and IT-enabled services that will enable the Indian suppliers to bring more senior staff into the EU for three years, otherwise they’re on 90-day visas.
“So, [while it should] open significant opportunities to the Indian IT and IT-enabled services sector, the test is going to be how much appetite there is in Europe for those services compared with, say, the UK and the US. It’s going to be an interesting test of market appetite, including in the public sector, to engage more with Indian IT and business services providers.”
Schumacher at the Value Leadership Group, a Germany-based company, said the country has been opening up to offshore services: “A lot has been happening even without a trade deal being in place. In other words, German companies have been shaping their own destiny.
“Indian innovation ecosystems like Bangalore have changed the world and have become templates for how entrepreneurial ecosystems can shape the future of an economy. Germany, with its many world-class companies, can benefit greatly by embracing the many opportunities this dynamic and forward-looking ecosystem offers across all sectors.”