Outsourcing: The Norsemen Are Coming

Saturday, October 3, 2009
With high cost structures during a recession, many Nordic countries are looking towards India to help them cut those costs by almost 30-40%. Some of the biggest banks in the Nordic region, NORDEA AB, Svenska Handelsbanken and SEB are looking at outsourcing technology to India.
According to a senior official of an offshore advisory firm, QuantumStep, Nordic companies studied many successful offshoring case studies like Ericsson and Ikea before considering India. Nordic countries prefer to start off with small contracts in the region of $10-20 million, but are expected to sign larger ones only after looking at the benefits of the earlier contracts. Belgium, another potentially huge market for service providers, is also signing contracts to the tune of almost $30-40 million and more, said the official from QuantumStep.

EquaTerra, an outsourcing advisory firm, in a study involving 370 contracts, signed by over 200 Nordic customers and worth around $4.3 billion, found that Indian service providers were better than their European counterparts such as TietoEnator and Capgemini when it came to quality of services offered. EquaTerra said in a recent report that there’s no doubt that India leads the pack when it comes to providing services for the Nordic firms with at least 61% of firms using India for all or at least some of their outsourcing needs.

Unlike other European markets, such as Germany, where labor laws make it difficult for service providers, Nordic countries are more flexible and this is what makes it more viable for India. Major Indian IT companies are looking at outsourcing contracts to the tune of $100 million each, in the coming years.

When Handelsbanken was looking at offshoring, it shortlisted many firms, including European and Indian ones, before finally deciding on Indian firms. Handelsbanken had tentatively been exploring offshoring for almost a year; the recession forced them into considering it as a definite possibility. Handelsbanken are looking for suppliers to maintain their legacy mainframe systems in addition to making them work with newer business software applications.
Though one top Indian IT firm confirmed that Nordic countries are indeed looking at outsourcing to India, others declined comment.

The head of the European division of an Indian IT firm says that the overall Nordic market will not grow much this year but the demand for outsourcing is seeing a steady growth. According to him, about 100 deals which have been signed over the past six to eight months are collectively in the vicinity of € 500,000 to € 150 million with the most significant one in size and in terms of frequency being in the vicinity of € 8-20 million.
Norway is expected to show a high IT market growth in Europe this year, around 1-2% every year, while most other markets have not grown or have declined.

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