Indian offshoring no threat yet to Europe's R&D

The main Indian offshore players do not currently represent a threat to the research and development services industry in western Europe, according to a newly released report.

Research by analyst IDC on offshore services said that Indian players are currently "rushing into western Europe", seeking to recreate the success they have enjoyed in the US.

But IDC believes that their success in these markets will, at least for the short term, be limited, because of Europe's unique regional variations.

"A suitable business model does not necessarily mean that Indian players are going to dominate the western European engineering and R&D services industry," said Dominique Raviart, IDC senior research analyst, in a statement.

"The engineering and R&D services in western Europe encompass more than application development and maintenance, and include less IT-focused R&D projects. For those projects, local presence, body-shopping capabilities and engineering skills, rather than IT skills, are a must."

The analyst firm noted that the US success of Indian offshore players was based on engineering and R&D services in several vertical markets, including telecoms, high-tech, aeronautics and automotive, often developing, maintaining, enhancing and supporting applications running on embedded systems.

"Such proprietary applications running on embedded systems are relatively large projects that bring a fair share of maintenance and enhancement work in the following years," said Marianne Kolding, director of IDC's European Services group, in a statement.

"This suits the business model of Indian offshore players really well."

In the future, IDC predicts that this highly applicable business model, which has helped the Indian firms storm the US, will allow them to break into western European markets as well.

The analyst believes that Indian players are working on the long term and will penetrate key accounts.

"Indian offshore players have the resources and the dedication to succeed," said Raviart.

"At the same time, local European players have plenty of time to build their sourcing strategies, whether from Russia or from India."