Peter Schumacher, President and CEO of the Value Leadership Group sent me a very interesting article he wrote on the failure of the European IT services industry to compete effectively with the new wave of offshore outsourcing firms, and cites Cognizant’s recent growth surge (a 98% revenue increase for its European business in 2006) as a prime example of European’s IT services providers inability to cope with this competition. This is not dissimilar to the failure of the US IT services incumbents to recognize the growth surge of Infosys, Wipro and TCS in the late ’90s. The five key reasons discussed for this failure are:
European IT services firms…
1. Have failed to see the emerging competitive scenario
2. Face revenue deflation pressure from a smart arbitrage strategy
3. Have not addressed the holistic transformational challenges posed by offshore IT firms
4. Lack the financial resources to challenge offshore firms head-on, which are now driving the game
5. Will need to compete with powerful rule-breaker companies funded by private equity and venture capital firms
