Despite The Crisis in Europe Outsourcing Work Expected to Continue

Despite a debt crisis in Europe, are expected to continue and, in some cases, even increase their outsourcing and offshoring work to low-cost countries like India and Philippines. Though Europe is still fragile, we are certainly seeing an uptick in outsourcing, as well as offshoring from European clients. Deals are getting shorter and smaller in duration, but it certainly is increasing. To give you an idea of the 800 inquiries that we received last year from European clients, about 90 per cent asked us about offshoring, explains Gilbert Van Der Heiden, Gartners research director for information technology (IT) sourcing.

Earlier European customers started with staff augmentation but as they see the cost advantage, they are looking beyond that and want to partner at a strategic level. Other than the economic downturn and need to cut cost, European customers use a large number of contractors. Due to the immediate cost savings initiatives, they are looking at replacing expensive contractors with offshoring. IT firms also agree that Europe is much more positive to offshoring than it was before the global meltdown hit.

“The Europe crisis will not have much of an impact on Philippine IT service providers. The impact will be on valuations due to the currency movement, but this will not impact the deal flow. Similarly in the UK, the incumbent government is under huge pressure to reduce cost,” says Peter Bendor Samuel, Chief Executive Officer, Everest Group. Much more, Philippine outsourcers have been urged to turn their attention to European customers to expand their markets. European Chamber of Commerce and Industry in the Philippines executive VP Henry Schumacher said the Philippines is still unable to fully maximise the outsourcing market, which is currently being enjoyed by India. Philippines has a huge potential to even grab a bigger share. Since Europe is also aggressively looking at opportunities from emerging countries in the east, Philippines set to explore Europe since it is also the largest business process outsourcing market.

Vikram Gulati, Director of Quantum Step remarks that Europe has some serious challenges. The population is aging, and they are running out of skills. They will have to look at outsourcing and offshoring. Most of the large players have benefited from this. It is for the others, the medium-sized players, to adopt this.