Capgemini sees Indian IT firms growing in Europe

FRANKFURT (Reuters) - Indian IT giants such as Infosys (INFY.BO) and Tata Consultancy Services (TCS.BO) can look forward to years of growth in Europe, the chief executive of Capgemini (CAPP.PA), Europe's biggest IT group, told Reuters.

Paul Hermelin said Indian firms could move on to Europe as U.S. growth slowed, adopting the same strategy of offshoring processes easy to separate from other operations for multinationals that was so successful in the United States.

"In the U.S. market, they focused on very large accounts, where they took the layer of application that could be easily offshored and did that extremely well," Hermelin told the Reuters Technology, Media and Telecoms summit in Paris.

"By doing that they completely transformed the U.S. market and that led a lot of players in the U.S. just to die," he added on Tuesday. "The good news and the bad news is, they will probably do the same in Europe."

Hermelin said that to expand their business further in the U.S., Indian IT firms would have to cultivate smaller companies than their current client base of large companies such as General Electric (GE.N) or Morgan Stanley (MS.N).

That would be more complex and require deeper local connections, he said, while replicating their U.S. strategy in Europe could be far easier.

"The penetration of Europe the U.S. way can last three to four years," he said. "They frankly can enjoy many, many quarters of high growth in Europe."

Hermelin said that although Capgemini wanted to keep growing its business in India, to which much of the Anglo-Saxon world outsources an increasing variety of operations, it would never compete with the Indian giants in terms of numbers.

Capgemini has about 20,000 of its 83,000 worldwide employees in India, compared to Infosys's 80,000-90,000, he said.

"I think that's a ratio that we'll not catch up. We cannot become an Indian player," Hermelin said. "But the ratio of 1:4 is probably not the right one."

"We cannot run a race against the Indians. Tata are at 100,000, they just announced they want to have 250,000 people in India by 2010 on the group level I think. This is not my race. At that game, I don't win and I cannot compete in that range," he said.

(For summit blog: summitnotebook.reuters.com/)

(Editing by James Regan)