The German business environment market is changing, throwing up huge opportunities for Indian information technology companies, Philippe De Geyter, member of the board for IT at Deutsche Leasing AG, the 100 per cent subsidiary of the Spurkassen group, told visiting Indian journalists in Frankfurt.

"Germany is a big market. It's starting to develop," De Geyter said, cautioning, however, that the market was very quality minded. "Indian IT companies can't quote 60 per cent less and deliver bad services and products," he added.

Outsourcing and India: Complete Coverage

In a candid broad-brush outline of the state of the German market for Indian IT service companies, the fast-talking 27-year former Citibank veteran explained that the unions at German companies were strong and that German companies had for long been very conservative when it came to outsourcing. "If you offshore, you are taking jobs away from Germany," he said.

The German perception of the need for outsourcing started to change some three years ago, however. The wave of bank mergers in Europe had worked.  "Germany lacks IT skills," he also explained.

Further, economic growth in Germany was stagnant and middle-tier companies were looking for new distribution channels and so needed IT skills. "There's still a lot of scepticism about outsourcing but it is now been put on the national agenda," De Geyter said.

He said he'd seen the virtues of outsourcing at Citibank and so had brought to his job at Deutsche Leasing the belief in the global sourcing model.

"Hexaware is delivering IT architectures and infrastructure and is part of a global sourcing model I'm very much in favour of," he said. Deutsche Leasing signed on Hexaware Technologies in June 2002 for a euro 25 million project to put applications for savings bank accounts on the web, for back end banking operations, for maintenance, among other things, and is starting on new five-year projects worth up to $35 million with Hexaware.

Hexaware has an unusual presence in Germany. It has what it calls a "near site" at Bad Homburg on Frankfurt's outskirts -- that is, a centre that is not on customer sites yet is close enough to them liaise effectively with them, with a lot of the work being offshored to its centres in Navi Mumbai, Chennai and Bangalore.

Hexaware expects to clock revenues of $114 million this year. Its German unit will contribute 11-14 per cent of this revenue.  Hexaware executives say that 20 pert cent of IT budgets of German companies will, in the next four years, be accounted for by outside companies.

The German IT services market is worth Euro 26.5 billion and is growing by 1.7 per cent a year. Indian IT service companies together account for less than one per cent of the market.

According to Indian consul general in Frankfurt Arun Kumar, at least 36 Indian IT companies have a presence in Germany.  With a handful of exceptions, most have not made much headway in the country.

Sunil Surya, president, Europe operations, Hexaware, said that German companies seek multiple references. "They ask you about your technology, your domains and want to know what you have done in Germany. So Indian IT companies have longer sales lead cycles than in the US. But the market is very loyal and German companies get into partnering relationships," Surya added.

In a conversation with Business Standard, Kanak K Choudhury, who heads Hexaware's German operations and worked for Geometric Solutions in Germany earlier, listed several mistakes Indian IT companies in Germany make. First, they adopt a short-term outlook. They hire one German thinking that he'll get them company business.

"Indian companies have a wrong impression of what a local presence in Germany means. They can't attract talent in Germany because their names aren't well known yet. So they get the B category German and he doesn't understand us. Successful Indian companies have brought in Indians."

Secondly, Indian companies have to clearly tell clients what they can and cannot do, he said. Thirdly, they expect sales cycles - the time taken to clinch to be six months, as in the US.