Quotes of the Day

German Chancellor Gerhard Schröder dropped in on Asia's other emerging economic giant last week, and his message — for both his Indian hosts and the folks back home — was comforting: when it comes to business ties between India and Continental Europe, you ain't seen nothing yet. Schröder, accompanied by 22 top executives from companies including Lufthansa, insurer Allianz and the media firm Bertelsmann, insisted that Germany's bilateral trade with India would double to $12.3 billion within the next seven years. After scattering rose petals at Rajghat, the shrine outside Delhi where Mahatma Gandhi's last rites were held, he borrowed a line from Hermann Hesse while signing the guest book: "In order to achieve the possible you have to try the impossible."

The people at EXLService, an outsourcing firm in northern India, know just what he means. When it began operations in 2000, most of its clients were American. Some U.S. callers who rang with customer queries had trouble understanding Indian accents, so EXLService's employees were given exercises to flatten their singsong speech patterns. Then, in early 2003, EXLService began to outsource for Aviva, the British insurer, and the accent problem took a new twist. British customers who called EXLService with questions about their insurance policies had no trouble deciphering the Indian accent. But the Indians found the British hard to understand. "There's such a variety of accents in England," sighs Vikram Talwar, CEO of EXLService. So he switched from "accent elimination" training to "listening" training, in which employees listened to tapes of various accents, including Irish brogues and Scottish lilts. Today, about 2,000 of EXLService's employees exclusively handle Aviva work, and in August the British insurer paid $12.5 million for a stake in EXLService.

India's tech companies aren't letting cultural barriers stop them from turning Western Europe into the new beachhead for global outsourcing. India's outsourcers, who do everything from running call centers to handling sophisticated software programming and IT consulting jobs, are still heavily oriented toward the U.S., but they're increasingly taking aim at Europe. In the past year, a number of British financial-services companies, including banks such as Barclays, Lloyds TSB and HSBC, have announced plans to move thousands of jobs to India. British utility National Grid Transco is the largest client for Wipro, a major Indian tech company. And last week, media company Reuters said it would relocate up to 1,500 jobs — 10% of its workforce — to Bangalore.

So far, firms from Continental Europe have been mostly absent from this trend. A report in July by Forrester Research, an IT consultant firm, estimated that European companies will move about $1.4 billion in IT services offshore this year — with Britain and Ireland accounting for an estimated $945 million of that. (The U.S., by contrast, sent about 10.6 billion dollars' worth of services offshore in 2003.) "Continental Europe has barely left the offshore services starting gate," wrote Forrester analyst Andrew Parker.

But Schröder's India trip is one sign that this may be about to change — and despite the Chancellor's happy words, the trend makes European workers nervous. For Germany alone, Deutsche Bank estimated earlier this year that 50,000 domestic IT jobs are at risk over the next three years as German firms jump on the offshoring bandwagon. Already, Indian firms are picking up the new vibes. "There's definitely a greater urgency [about offshoring] from European companies now," says S. Gopalakrishnan, the COO of Infosys, a tech company based in Bangalore. In the last financial quarter, revenue growth rates for Indian outsourcing firms were 5-10 percentage points higher in Western Europe than anywhere else, says Partha Iyengar, an analyst at Gartner Research, a tech consultant.

The Indians aren't just sitting around and waiting for business to drop into their lap. Some are crisscrossing continents, touting for work — in both Europe and India — and looking for ways to overcome cultural barriers. Language is one of the biggest. "We just don't have the skills in India to handle phone calls in German and French," says EXLService's Talwar. "Doing it in English is hard enough." Firms like Wipro and Infosys now offer language lessons to computer engineers who will work in Europe. In addition, Indian companies are recruiting Continental Europeans into their sales and marketing teams, and figuring out how to fine-tune their sales pitches for different countries.

Sukumar Namjoshi, who oversees European operations at Patni Computer Systems, a Bombay-based tech company, says that European companies are still uncertain about India, and often send three or four groups of executives to check out the conditions in cities like Bangalore or Bombay — which delays any potential deal. In contrast, "Americans just go ahead and say yes right away."

Some European firms need less convincing than others. Germany's software giant SAP, for example, employs about 1,100 programmers and other staff in Bangalore and expects to increase that to 3,000 over the next two years. The attraction is clear: the going rate for a skilled computer system architect in India, for example, is about $50,000 per year, less than one-third of a U.K. salary, according to consultant firm Forrester. Talwar of EXLService, for one, says he's learning an important lesson about how to get European executives to pay attention. "If you go around offering them outsourcing, their first reaction is to say, 'No, not interested.' But if you tell them you're offering a way to cut their costs in half, then they listen carefully." Given that sort of sales pitch, maybe the impossible won't prove so impossible after all.

• ARAVIND ADIGA | New Delhi
• Outsourcing firms are picking up more European clients