Engineering Offshoring in the embedded systems sector: a growing tendency in France

The French market’s rapidly growing appetite for engineering offshoring in embedded systems segment is a clear case in point. This is the outcome of a study done by Pierre Audoin Consultants (PAC), a leading market research and strategic consulting firm in the domain of software and IT services industry in Europe.

PAC released the study in Paris on the 11th of July and added that its market survey has clearly established that very same French companies, which had so far been suspicious about the capacity of the Indian companies to lead and deliver projects in this key segment, are beginning to change their opinions. Earlier the benefits of any offshoring in this sector went exclusively to companies from North Africa and Eastern Europe, which were the favoured offshoring or near-shoring destinations for the French, largely due to the geographical and cultural proximities as well as the absence of a language barrier since French is widely spoken and understood in these countries.

However, as the salaries and other costs have been rising in these near-shore destinations, now the French companies are being forced to look for cheaper and better options and this trend has been strengthened due to the economic downturn. Another factor forcing the European companies to look for other options is the lack of specialized engineers for embedded services in Europe.

In its survey that reached out to the CIOs of 50 big, medium and small companies manufacturing embedded systems, two-thirds admitted that they use offshore services. Also, most of the French companies prefer to go through an expert or develop it internally.  But very few projects are entirely handed over to offshore. In most cases, it is the conception, the development, the test or the maintenance that is offshored.

The survey also established that while the French companies did indeed take a lot of time in deciding about using India as an offshore option, the Indian IT companies too have not had any strategies for the French market.

 “The Indian companies are seen as low cost companies, they need a better image, a better front office in France and a strong and strategic push in the French Market especially because of its cultural differences linked to language barrier and working styles. It is now that Indian companies needs to move and adopt a new strategy in Europe,’’ explains Eric Isabey, CEO of PAC.

PAC believes that the Indian IT companies need to seriously review their strategies as none of them is proving to be really effective in the French or European marketplace. Isabey says that some of the Indian companies have recently started to change their strategies and they have begun to move towards better visibility and understanding of the market through targeted marketing activities. One such example is HCL Technologies, which has launched a strong marketing campaign in the French Market for the embedded systems.

“The French market for engineering services for embedded systems is estimated to be nearly 1 billion Euros this year. Among the French companies willing to move in a significant manner towards the offshore model, most of them prefer to do it directly through specialists of offshore rather than passing through non-specialist companies,’’ says Chris Connors, head of HCL in France and Benelux countries. HCL recently organized an event in Paris with major French companies to showcase the entire range of its services and also some interesting client case studies.

“I was always a bit careful about offshore. Particularly because I thought, I could not control it and will not be able to communicate properly because of the Indian accent and the cultural differences… But our collaboration with HCL on the hardware side for the electricity distribution system of the future A350 was a total success. We particularly appreciated the transparency, the access, the permanent contact with the teams, the reporting and the quality of the French office which was present in all the stages of the project,’’ explains Jérôme Quemener, in charge of quality control at Zodiac Aerospace.

Continental Europe represents 33 percent of the HCL Group activities. Present mainly in the aeronautic sector (in France with the contract with Airbus), HCL has not really invested the market but 2 years spent in Paris have led the company to new edge, shaping a new strategy in Europe.