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Europe is now the largest global IT outsourcing market overtaking the US going by the number of deals announced in the September quarter. However, the US continues to be largest market for IT outsourcing.
Europe has a 43 per cent share while the US 35 per cent in the third quarter, says Everest Group, an advisory and research firm on global services.
Two mega deals
During the quarter, Europe announced two mega deals of $1 billion and above.
There is an increase in the number of captive units announced and expanded in Central and Eastern Europe due to aggressive incentive packages offered by Central European governments that are hard hit by a slow global economic recovery. Europe also benefited from service providers seeking to locate new capacity in Tier-II markets, said Anurag Srivastava, Practice Director, Everest.
The share of India-based IT service providers (TCS, Cognizant, Wipro, Infosys, Tech Mahindra, HCL, EXL, Genpact, WNS) has increased to 55 per cent in the US versus 28 per cent in the Europe market (compared to global providers – Accenture, IBM, Capgemini, Atos, Aon Hewitt, Convergys, CSC, Dell, Xerox, HP, Unisys).
Over the past 3-4 quarters, the share of Indian providers was 40-45 per cent in the US market and 20-25 per cent in the Europe market, he said.
R. Chandrasekaran, Group Chief Executive, Technology and Operations, Cognizant Technology Solutions, said the North American market is the largest IT market and companies there are traditionally aggressive adopters of technology and generally have more mature global sourcing programmes.
However, “we are finding an increased appetite from clients in Europe to move more work to a global delivery model,” he said.
Attractive market
The overall European IT services market is roughly the same size as the North American IT services market, yet the penetration of the global-delivery model in Europe is currently a fraction of that in North America. “We believe Europe remains an attractive long-term market for us, and merits our continued focus and investment,” he said.
For Cognizant, Europe contributes nearly 17 per cent of its revenue while the US nearly 77 per cent.
The number of US corporations among the G500 has dwindled, and it further supports the view the deals are reducing.
However, the US economic recovery appears to be much stronger than in Europe. In the short term at least, much of the immediate opportunity is going to come from participating as a supplier in the US' growing economy, said Sid Pai, President, APAC Region, ISG, a research firm.
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