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The outsourcing trends followed by US and UK competitors is prompting couple of large French companies to join the race. These French companies are warming up to the cost savings associated with shipping work to the India.
Atos Origin, a Paris-headquartered IT services company, and Capgemini, a consultancy, are both eager to ramp up their India operations and each may buy an Indian player soon.
Ovum Senior Analyst Dominique Raviart noted that French information technology companies have "long resisted the offshore wave." Instead, they favored a "nearshore" approach combined with industrialization of delivery processes."This approach has made sense and still does for most of IT services users," he said. "However, large enterprises are now clearly moving towards a more generalized use of offshoring in France."
Capgemini last week said it wants to increase headcount in India to 10,000 people by the end of year 2005. With some 2,000 people on its payroll in India, a five-fold increase can only be possible through the acquisition of an existing player. The company has been scouting for an acquisition in India for the last year or so. It came close to buying a stake in Mphasis, a full-service IT company based in Bangalore, but in the overheated IT services space, that company's valuation seemed too high.
Atos Origin has been looking for an ideal candidate for over a year now, but no deal has come through. Mr. Raviart suggests Atos Origin's interest may have been kindled by a recent contract win. "The Renault contract awarded to Atos Origin-and not to Unilog, a long-time Renault supplier-showed that French large enterprises, especially in manufacturing, now expect their IT service suppliers to lower costs through offshore sourcing," he said.
"French companies have been slow to offshore service functions because of practical hurdles and regulatory constraints," A recent McKinsey report said. "They have so far resorted to alternatives such as developing shared services, re-engineering their operations, and outsourcing work locally. "But as global competition heats up," it said, "They will probably follow the lead of their U.K. and U.S. competitors in offshoring."
A recent report by Sitra, a research agency in Finland, showed that compared to some three years ago, about 75 percent of companies are thinking of sending a portion of their software development work offshore, and India is at the top of their minds.
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