ar130405 - Fotolia

Coronavirus: Do Indian companies still have an edge in Nordic outsourcing?

Covid-19 lockdowns and social distancing have affected Nordic outsourcing strategies. Do Indian firms still have the upper hand?

IT outsourcing in the Nordic region has increasingly been dominated by Indian firms. Local providers are still present, and some have even gained revenue over the past decade, but firms making use of Indian workers have made considerably larger gains overall and taken a bigger slice of the pie.

However, that was before a large proportion of the world’s population was suddenly confined to their homes, forced to maintain social distance and, in most cases, prevented from working in an office – any office. So how has Covid-19 affected IT outsourcers, providers and their Nordic customers?

According to Manoj Chandra Jha, lead analyst at technology research and advisory firm Information Services Group, the pandemic is having, and will have, a direct impact on the Nordic IT market (Sweden, Norway, Finland, Iceland and Denmark). Jha said that even in the early stages of the global lockdown, the following events occurred in Sweden alone:

  • Truckmaker Volvo put all 20,000 Swedish staff on a temporary layoff-scheme.
  • Scania suspended European truck production.
  • Support offered by the government included measures for short-term layoffs, whereby employers’ wage costs can be halved but the employee still receives more than 90% of their salary, with the state covering the difference.
  • Airline SAS halted most traffic, temporarily laying off 10,000 staff.
  • The government announced a coronavirus economic package and unveiled a series of economic measures worth up to €28bn to protect companies and workers from the fallout of the pandemic.

Similar actions have also been taken in Norway. For example, Aker Solutions reportedly issued a warning of lay-offs to all its 6,000 employees in Norway, while both itself and compatriot contractor Kvaerner have sent home hundreds of foreign contracted staff. Denmark, meanwhile, will compensate as much as 75% of the wages for some private sector employees who face losing their jobs as the economy slows.

Naturally, the global business slowdown means that overall IT spend will change and there could be a new outlook from industry. Jha said: “This would certainly change the IT viewpoint in new contracts, digital and cloud project implementation. This move is exceptional and is placing a substantial tension on Indian IT service providers.”

As a consequence, major IT projects could be withdrawn or put on hold. The short-term ban on travel will affect new deals, consulting projects and acquisitions, in the Nordics as well as in the global market. Indian IT service industries are under pressure from working-from-home directives. This is partly because of security restrictions on accessing clients’ data, confidentiality requirements and an understandable lack of contingency plans for such a massive market change.

“I personally see a decline in the renewal of IT outsourcing and new deals,” added Jha. “Perhaps this slowdown is an indication to the Indian IT industry to prepare for hard times ahead.”

Read more about IT services and the lockdown

However, just because the Indian outsourcing industry may be suffering at the moment doesn’t necessarily mean Nordic firms can take advantage. In fact, there are signs that Nordic firms may be struggling as much as, if not more than, their Indian counterparts.

Peter Schumacher, founder and CEO of the Value Leadership Group, said: “TietoEvry, the leading Nordic IT services firm, has already pulled its guidance for 2020. In contrast, the leading Indian firm in the Nordics, HCL Technologies, has reported that it does not expect to see any negative Covid-19 impact.”

According to Jha, restrictions on freedom of movement of people in the Nordic region have been quite relaxed compared with places such as China, Germany and India. Sweden has been singled out – for both praise and criticism – for following a less restrictive path than many other countries.

Although its citizens have been advised to be sensible in terms of social distancing and working from home, they haven’t been ordered to do so. As a result, economic activity has not been curtailed as much as it has in other countries, and Swedish workers have more freedom than some of their international counterparts.

Also, temporary travel bans may well be extended – at the very least, air travel is likely to become more costly and potentially subject to quarantine restrictions that make short trips all but pointless. This, too, would appear to hand the advantage to Nordic firms when dealing with local clients.

These factors could impact India’s IT service industry from the perspective of new contracts, deals and digital project implementations. “Organisations like TietoEvry, Orange business service (Basefarm) and KMD may experience a competitive edge, as these are Nordics-born organisations with local niche talent availability in the Nordics region,” said Jha.

Extraordinarily tough

The next financial quarters could be extraordinarily tough for the Indian IT services industry, he said, as client spending will be lower because of the pandemic, and new projects are likely to be postponed until the outbreak is contained.

So, views differ – but who is right? As with many facets of the economic fallout from Covid-19, it is too early to tell. There will be some winners, but probably many more losers, with recession and even depression likely to hit hard.

If Nordic firms are nimble and able to capitalise on their home-turf advantage, they could pick up new business from local clients. The longer international restrictions continue, the more likely this is to happen, as there are some jobs that – barring changes in the law – simply cannot be performed remotely.

Even so, Jha said there is potential long-term gain for Indian IT service providers. “Currently, not all the Indian IT service industry is prepared to work from home, due to multiple reasons, such as lack of matured IT assets and capacity planning to cope up with a 100% remote working model,” he said.

“This is a good time for the Indian service industry to re-evaluate and determine how it tackles such an unprecedented situation. Possibly this could bring about a new normal model of leveraging on communication and collaborations tools, along with security mechanisms to establish a trust matrix, regardless of location.”

Content Continues Below

Read more on IT outsourcing

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.

SearchCIO

SearchSecurity

SearchNetworking

SearchDataCenter

SearchDataManagement

Close