Labor Disturbance in Nordic Countries Impacts Indian IT Outsourcing

Media reports say that rigid labor laws and resistant labor unions that are affecting IT outsourcing by firms in Europe are influencing the Nordic region as well.

Specifically, a Swedish bank - Handelsbanken - was forced to offer its IT outsourcing work to a local firm after scrapping plans to offer the deal to an Indian supplier.

Handelsbanken proceeded with a RfP or a Request for Proposal to issue a contract to global IT vendors. The work involved maintenance of its mainframe systems and development of software applications and the project was valued at $100 million.

Indian IT outsourcing firms like L&T Infotech, Wipro, and TCS were involved in the bidding, reports Business Standard. In addition, the bank presumably shortlisted a Tier-1 Indian IT services supplier.

A source close to the story told the Business Standard that the Swedish bank had almost awarded the contract to the Indian IT firm. At the last minute, news of the contract going to India reached the labor union, causing an uproar. Hence, the contract was awarded to a local firm, TietoEnator.

Indian outsourcing firms consider the Nordic region to be one of the most favored markets for information technology outsourcing. Moreover, firms in the region are known to outsource to offshore suppliers due to the cost linked to domestic IT firms. Companies in the Nordic region had been actively seeking out Indian IT suppliers to curtail costs, particularly in the global economic crisis.

Incidentally, Wipro was forced to cave in to labor unrest at its Sophia Antipolis site in France, where the company shuttered down a segment. Wipro, caught in the middle of the labor strife, announced that it would provide compensation for the affected employees at Sophia Antipolis.