Indian IT looks at eastern Europe for talent, captives

Eastern Europe is fast becoming a go-to location for Indian IT players both for talent and for the captives that dot the former Soviet Union territories, as they look to boost growth in that continent. Countries like Poland, Hungary, Romania and the Czech Republic already have centres of multinational outsourcing companies such as IBM, HP and Accenture.

India’s largest IT outsourcing firm TCS also has a centre in Hungary. Other Indian IT firms are exploring the region as a base for talent, as engineering skills are strong in the region. In fact, Wipro board member Jagdish Sheth had warned that India could lose its edge in BPO to countries in Eastern Europe in a recent interview with ET.

“While our primary focus continues to be Continental Europe, we are seeing opportunities in Hungary and Poland. These are currently small in scale but hold future potential,” said Ulrich Meister, senior vice president, Continental Europe, Wipro. Wipro has delivery centres in Romania and Poland for IT and BPO as well as a presence in Hungary. About 90% of the Europe opportunity comes from Western Europe, while Eastern Europe accounts for the rest. But Indian IT players are using Eastern Europe as a delivery location to cater to Western European countries because of the favourable time-zone.

Also, as some of the Eastern European countries are part of the European Union, data protection rules are not an issue.

“Most of the work Infosys BPO does in Eastern Europe is related to SAP consulting and cost arbitrage. European multinationals are open to outsourcing although it’s becoming more of a trend now. We also advise on how they can set up shared service centres in these markets,” Abraham Mathews, chief financial officer, Infosys BPO, said.

Infosys has around 2,000 employees in Poland and about 500 in the Czech Republic. While IT firms are looking to expand organically, acquisitions of captive centres in Eastern Europe could also be on the cards. Eastern Europe is growing as destination for captives, according to research by the Loughborough Business School.

In the 12-year period between 1985 and 1997, two captives were set up in Europe and 13 in India. Fast forward 10 years and the data shows a marked acceleration, as the Soviet Union collapsed and the Eastern European economies began regaining lost ground.

Between 2006 and 2010, there were 36 captives set up in India and 25 in Eastern Europe. “While Indian IT players are focusing on acquisition activity in Continental Europe and the United States, there is some interest in Eastern Europe as well,” Sandeep Ladda, executive director, at consultancy PwC said.

Aegis and Wipro were looking at acquisition opportunities in Eastern Europe, an investment banker, who declined to be identified, told ET. Wipro’s Meister brushed of any immediate investment but said the company would consider it if there was a good business opportunity. Aegis did not respond to a request for comment.

“There has been talk about Indian IT companies looking at acquisitions in Eastern Europe, but most of them are currently trying to understand this market, its capabilities and size,” said Christophe Chalons, chief analyst at Pierre Audoin Consultants, a French consultancy and market research firm.

Filed in: Computer Hardware, News

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