Keeping the lights on: What's driving offshoring in Europe for HCL

The recession is pushing its clients in the region to expand their use of outsourcing to keep the lights on, according to HCL
Written by Jo Best, Contributor on

A year ago, HCL's CEO took to the stage to tell an all-hands company meeting that the company must transform from just an outsourcing provider to a firm that provides higher-end business transformation services to its clients.

It's an ambition that the ongoing recession seems to be frustrating. According to the president of HCL Europe, Rajeev Sawhney, most of the business coming HCL's way is about keeping the lights on.

"The overall traction for outsourcing in Europe has definitely taken off, with the crunch and the economic pressure... what they call 'run the business' or keeping the lights on is really driving the growth for offshoring as far as our European clients are concerned," he told ZDNet.

While HCL's experience may seem to run counter to the overall market — total outsourcing spend in the region fell 21 percent year-on-year — Europe remains a growth area for the company. In its latest set of financial results, published in July, HCL reported its Europe revenues for the 2012 financial year up almost 19 percent, slightly above its overall growth rate of 17 percent.

Its workforce on the continent now numbers 5,000 — up 10 percent from a year ago — around 80 percent of which are local.

"Over the last three to four years we've been investing much more in Europe, investing largely in a workforce that is a local workforce. That's a big profile change that has taken place over the years... [and] we're aggressively pursuing an increase in market share in this territory," Sawhney said.

Public sector

The Nordic region is the biggest earner in Europe for HCL of late, followed by the GAS area (Germany, Austria, and Switzerland), Benelux and France.

One area where it's been slow to win new business, however, despite the pledges to go after the market in a big way, is the UK's public sector.

"I must confess it's not the easiest sector to take on, it has its own idiosyncrasies... the public sector cycle times for decisions are fairly long, the deals are very complex, they call for a lot of investment, and that gets even further aggravated when you have a government that comes in and wants to change a lot of things. You have the well-entrenched club of 19 incumbents that have been there for decades and it's hard to displace any of that," Sawhney said.

When the coalition came to power in 2010, it proclaimed its intention to shake up the way that IT was procured in the public sector, breaking the stranglehold of the biggest suppliers on the market, and promoting greater use of SMEs and new vendors.

While the Cabinet Office did succeed in getting some tech heavyweights to agree to cut the amount they charge the public sector, Sawhney believes not a great deal has fundamentally changed.

Noble intent

"There's been noble intent, I would say, in expanding that list and bringing in new [suppliers] and particularly encouraging small and medium businesses. There's been a lot of interest to do that, however, if you look at results, I haven't seen very much across the industry in terms of new participants having won any landmark deals or marquee deals," he said.

"It's been a challenge, but public sector has been one of the laggards as far as HCL is concerned and therefore we're not dependent on that when we want to grow. We want to see where the best results will come in the shortest possible time — that's the thumb rule — and you make investments according to that."

With that in mind, the company is concentrating on manufacturing, the biggest growth area for HCL during the last financial year, with revenue up almost 24 percent. And the broad focus on keeping the lights on will remain.

"Our intent would be to take advantage of the market trends — we're clearly seeing the money is being spent, not on discretionary areas of change-the-business or development of new stuff, but in the area of maintenance and support of existing IT. We're looking at that landscape more with greater focus," Sawhney said.

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