Nordic countries have been facing a shortage of skilled workers, especially in the information and technology sector. Indian IT companies have therefore proffered their resources – both human and inorganic, to leverage the situation, which in turn believed to be beneficial for the Indian companies.

With the majority of Nordic people being able to converse in English, solves a huge logistic issue for international companies looking to establish their bases there. To enable the same, Nordic countries are also providing subsidies and incentives to foreign institutions, some of which may be outside the EU’s jurisdiction.

Great Scope For India

“The Nordic region of Europe is one of the most progressive and innovative regions, as many leading technology companies, including chipmakers, semiconductor, equipment manufacturers and service providers creating their RnD bases in the region,” said Chief Strategy Officer of Tech Mahindra, Jagdish Mitra.

President of sales, Sudhir Chaturvedi of the L&T Infotech (LTI), valued the Nordic IT industry at $25 billion. Nordic companies also hired external agencies to handle specific tasks required by the company. He said that the companies would prefer outsourcing their IT services and logistics offshore in order to reduce the cost of operation.   

Jukka Holappa of Business Finland also said, “Companies have access to the global market beyond just the Nordics. With 5G and 6G connectivity, there’s a lot of R&D being done here across industries like telecom and healthcare.”

Looking Beyond Europe

In recent years, Nordic countries have been outsourcing their IT service to service providers beyond the European ones, marking India as their number one destination. The cost has been one of the main reasons for the companies to outsource their IT service. A few of the other reasons are — to focus on their core industries that are fishery, metal, forestry, hydropower, fossil fuel, etc., and to have access to their resources. The service providers claimed to have transitioned from the existing model of operation and finances to be the biggest motivators of the industry. The companies also choose to outsource the IT service to locate and employ contemporary and creative individuals and their strategies. 

Pareekh Jain of Pareekh Jain Consultancy said, “The Scandinavian strategy of Indian service providers is two-fold. First, to increase the share of wallet in large accounts where they have a footprint and then compete with other local and global firms. Second, to target new accounts, typically medium-sized businesses.” 

India has been the leading recipient of such outsourced service as the cost of labour – both skilled and unskilled is comparatively cheaper to other countries. However, in the current scenario, the Indian IT sector has undergone a rapid transformation, becoming more competitive and efficient as any other. At the same time, the IT sectors in the European countries have stagnated in recent years. Indian IT companies have also expanded internationally, recording greater performances and higher revenue than their native counterparts. Though the outsourcing schemes have been profitable, the difference in the profit margin for the Indian IT companies and services providers as compared to the Nordic companies has been quite substantial. If the recent trend continues, the Nordic IT sector might face isolation and regressed infrastructure in the future.

Adverse Effects

Swedish investment bank Handelsbanken Capital Markets tried to explain the negative prospects of outsourcing to the Nordic business leader, who failed to comprehend the adverse effects such schemes can have on the country and its economy. He argued, “They got it so wrong, they just couldn’t understand the new competitive paradigm,” and “They had said, ‘Surely it’s just cheap labour, just a procurement situation?’. We told them no, it’s more than that. Moving to a globally distributed model means everything changes – culture, HR, processes, customers, incentives and recruitment. The entire value proposition will change.”

Outlook

Peter Schumacher, CEO of Value Leadership Group, said, “There’s just no substitute for the kind of hunger the Indian firms have. Europeans don’t have it.” He added that the IT infrastructure in Bangalore had experienced record growth for the year 2019. Indian IT companies are poised to reap sizable dividends while will have tremendous effects on the continuation and survival of the European IT companies, Nordic included.