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Study: Europe's IT industry losing ground

Needs to tap expanding Asian market

European IT firms are viewed as inflexible and expensive compared with their US and Asian counterparts, traits that could make it hard for them to tap expanding Asian markets, according to a new survey of CIOs (chief information officers) by KPMG and The Economist.

For the survey, entitled A wake up call for Europe, 126 CIOs, IT managers and directors in 20 countries were interviewed in September. The respondents were chosen to represent a range of industries including manufacturing, healthcare, financial services, telecoms and IT accounting, and were asked questions related to the selection of European IT firms as partners.

European firms are expected to be favoured at home for their attention to detail and tailoring of products, but see some of the Asian companies are making significant headway in European markets, according to Crispin O'Brien, chairman of KPMG's UK technology group. Pricing concessions and greater flexibility in contracts strengthen the positions of Asian suppliers.

O'Brien cited as evidence BT's selection earlier this year of Huawei Technologies, a Chinese firm, as one of the suppliers for its 21st Century Network, a £10bn voice, video and data network project.

Specifically, the suppliers of IT services, hardware, desktop software and microelectronics are seen as slipping behind. Europe is still seen as strong in production of mobile devices, applications and enterprise software, according to the executive summary.

The survey showed that 84 percent of respondents felt that the US will be home to the strongest suppliers of IT hardware in two years, followed by India at 72 percent and China at 64 percent. Germany came in fourth at 40 percent.

"I think the US is still seen as the major player in technology," O'Brien said.

Asia tends to view the US as an innovator, and the country has a cost advantage, O'Brien said. But US companies have not proved as adept in tailoring products for Europe.

The advice for European companies is twofold. To compete in Asia, IT firms should look for an Asian partner, O'Brien said. Also, European companies should be wary of offshore manufacturing in places such as China, as the supply chains can become very long when work is subsequently contracted out.

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