European Companies’ Approach to Outsourcing to India

Posted on May 6, 2010

European companies are embracing outsourcing as never before. However, there are certain European companies that are still reluctant to push the outsourcing button! The need for outsourcing in Europe is steadily growing as it offers enormous financial benefits.

Advantage India

Over the last 2 decades, India has been delivering cost-effective and high quality outsourcing services to companies in Europe. While the preliminary focus was on IT services, today, the most multifarious and analytical services are also offered by India, including product development and engineering, research and development, etc. Its large talent pool, innovation, cost arbitrage, etc. are the key drivers that have allured European companies to outsource to India.

Other outsourcing destinations like Philippines and China are giving India stiff competition to India, but countries like China have drawbacks such as a non-English speaking workforce and lack of adequate technical skill and expertise. According to a recent survey, India is the key destination for global offshoring, followed by China and Brazil.

Nearshore Options

However, we must not rule out the near shore options that European companies have to outsource their requirements. A near-shoring option is more welcome because of cultural proximity, ease of communication and close cultural connection between the Central and Eastern European countries with Western Europe. India is bound to face further competition from Eastern Europe, Mexico and Brazil in the outsourcing domain.

European firms normally favor a near shore alternative, such as Eastern Europe due to geographical proximity and identical time zones. Moreover, there are lesser language barriers with languages such as French and German being commonly spoken. Moreover, Eastern Europe is comparatively a less risky location for investment purposes. Several Continental companies are still taking a cautious approach towards outsourcing to India.

Contradicting Statistics

According to reliable statistics, more than 60% of European companies prefer India as their key outsourcing destination. The study exhibits that India is an undisputed outsourcing hub for the European companies who wish to outsource their complete business processes, while maintaining high levels of quality and standards. International companies such as Siemens have been using Indian outsourced services, leveraging the country’s low-cost workforce for almost a decade. In order to gain more business in Europe, Indian service providers are making strategic investments so as to become more relevant to companies in markets such as Germany and Switzerland.

Only time will tell as to whether European companies will continue outsourcing to India or stop midway to outsource to nearshore locations.

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