Infosys Technologies’ acquisition of UK’s Axon couldn’t have been better timed as a new study finds that Europeans are becoming more open to outsourcing. The French, however, are likely to be more reserved than their English counterparts when it comes to adoption of outsourcing, according to a Ernst & Young study completed last month. The study found outsourcing was being used by 70% of the European firms surveyed.
The study is the first in recent times that analyses European openness towards outsourcing. An earlier study by research firm Gartner had said Europeans continued to show a strong preference for local vendors. Part of the reason behind the reluctance of some of the European firms may be tough labour laws in countries such as Germany and France, according to the study. Despite a growing recognition of the quality advantage, the primary motivation to outsource still comes from cost savings, and this, according to study’s authors, Thierry Muller and Paul Young, is not easy to achieve.
“In order to achieve an overall reduction in costs, employers must be able to either successfully reallocate internally those staff whose operations have been externalized, or carry out redundancies. The options available to employers vary according to each country’s legal framework. European countries such as France and Germany have less room for maneuver than countries such as the UK, where labor laws are more liberal,” according to Mr Muller and Mr Young.
The British are, however, likely to outsource only a few standard functions, while the French and Belgians are open to outsourcing a wide range of functions.
Also, compared to 70% of respondents that had at least one outsourcing relationship, only 49% of respondents cited cost savings and higher productivity (revenue earned per employee) as the advantage of outsourcing for their organisation. About 33% identified better quality through use of specialised skills.
“French companies attribute less importance to cost-saving benefits, with improvements in quality and strategic organization being the key advantages identified. Belgian companies are also strong proponents of the improved quality brought by outsourcing, while in the UK, quality considerations are rated on a par with cost savings,” the study said.
The higher emphasis on quality among some of the EU nations may help Infosys, which positions itself as a premium player rather than a low-cost player. In the past, it has let go of some large clients such as GE because it wanted to maintain its pricing. It has also not participated in some large projects with lower margins.
In the recent past, however, there are some indications that Infosys may review some of these measures. The recession is making it harder for IT firms to get more business as many of their clients are facing huge losses and write-downs.
The study is the first in recent times that analyses European openness towards outsourcing. An earlier study by research firm Gartner had said Europeans continued to show a strong preference for local vendors. Part of the reason behind the reluctance of some of the European firms may be tough labour laws in countries such as Germany and France, according to the study. Despite a growing recognition of the quality advantage, the primary motivation to outsource still comes from cost savings, and this, according to study’s authors, Thierry Muller and Paul Young, is not easy to achieve.
“In order to achieve an overall reduction in costs, employers must be able to either successfully reallocate internally those staff whose operations have been externalized, or carry out redundancies. The options available to employers vary according to each country’s legal framework. European countries such as France and Germany have less room for maneuver than countries such as the UK, where labor laws are more liberal,” according to Mr Muller and Mr Young.
The British are, however, likely to outsource only a few standard functions, while the French and Belgians are open to outsourcing a wide range of functions.
Also, compared to 70% of respondents that had at least one outsourcing relationship, only 49% of respondents cited cost savings and higher productivity (revenue earned per employee) as the advantage of outsourcing for their organisation. About 33% identified better quality through use of specialised skills.
“French companies attribute less importance to cost-saving benefits, with improvements in quality and strategic organization being the key advantages identified. Belgian companies are also strong proponents of the improved quality brought by outsourcing, while in the UK, quality considerations are rated on a par with cost savings,” the study said.
The higher emphasis on quality among some of the EU nations may help Infosys, which positions itself as a premium player rather than a low-cost player. In the past, it has let go of some large clients such as GE because it wanted to maintain its pricing. It has also not participated in some large projects with lower margins.
In the recent past, however, there are some indications that Infosys may review some of these measures. The recession is making it harder for IT firms to get more business as many of their clients are facing huge losses and write-downs.
*Reference Economic Times
No comments:
Post a Comment