This document summarizes a study about the differences between European and non-European IT providers. It finds that European IT providers focus on long-term relationships, continuity for customers, and social aspects like workforce development. They adapt flexibly to local markets and view corporate social responsibility as important. In contrast, non-European providers often pursue more aggressive growth, are more innovative and deal-driven, and focus on costs and short-term goals. The study analyzes the different approaches of European and non-European providers in terms of strategy, business development, sales approaches, and cost efficiency. It concludes European providers could better leverage strengths like cultural understanding and long-term perspectives.

1. The European Way –
A new Generation of IT Providers
Carsten Rossbach, Dr. Markus Puttlitz, Dr. Julia Daecke Study

3. The European Way –
A new Generation of IT Providers
Carsten Rossbach, Dr. Markus Puttlitz, Dr. Julia Daecke Study

4. 2 | Study
Management Summary
Looking at the performance of the world's 3,000 largest companies over
the past ten years, it's clear that European firms have done extremely well.
Contrary to expectations, they have done better than non-European com-
panies both in sales and EBITDA growth as well as in terms of business sus-
tainability. The European IT providers among this group have also performed
amazingly well and often even better than their non-European competitors
– a result which might contradict the conventional market view.
In order to better understand these empirical findings we spoke to IT deci-
sion makers at clients and senior management at IT providers. We highlight
the strengths of the European management philosophy that underpins the
success and show which factors are essential for successful business in the
European market:
> Successful IT providers in the European market are rooted in
Continental Europe's strong industrial base
They focus on their core business, occupy small and large niches
and are thus distinct from unfocused all-round IT providers
They have detailed expert knowledge and ensure continuity for
their customers through long-term personnel development
They enter into long-term partnerships and review new technologies
in detail, thus achieving a high degree of stability
They view the CIO as the first point of contact, but also professionally
contact customers at CEO/CFO level and apply value selling
They make up for wage differences compared to other countries
through a high degree of automation and standardization
They are well accepted by employees' representatives, for example
through socially responsible personnel policies on outsourcing and
earnings-enhancement actions

5. 3 | The European Way – A new Generation of IT Providers
The European management model is a success
There is not simply good and bad management but a recognizable continental
European management style. European managers grow up surrounded by diverse
languages, cultures and mindsets; they are accustomed to including all stakeholders
in their decisions and, above all, they think in a long-term way.
Jürgen Hambrecht, Chairman of the Board of Executive Directors, BASF SE
The financial and economic crisis made it abundantly clear: The days when Euro-
pean companies considered exclusively the American management style to be a
role model are over. An analysis of the 3,000 largest companies worldwide shows
that European companies did better financially in the period 1998-2008 than North
American or Japanese companies, for example. Although their sales growth is only
around one percentage point higher than North American companies, they are well
ahead on profitability and sustainability. We think this is due in part to the following
features unique to the European management model:
European managers make plans and decisions on a long-term basis
They value social aspects and staff development more than their colleagues
outside Europe do
European managers have broader intercultural experience than non-European
managers
They view corporate social responsibility as an important and strategic
competitive advantage
Comparatively speaking, European companies invest more abroad than
companies outside Europe
They view the state's role in initiating business in a positive light –
in contrast to the much more skeptical US managers, for example
This model for success can also be applied to the performance of European IT
providers. Although the public views the IT industry as dominated by American
firms, European IT providers grew more profitably and sustainably on average bet-
ween 1998 and 2007 than their US or Japanese competitors. Despite globalization,
customers apparently perceive differences in behavioral patterns among providers.

6. 4 | Study

7. 5 | The European Way – A new Generation of IT Providers
Own strengths still largely unexploited
However, European IT providers often try to copy their US or Indian
counterparts rather than recognizing and building on their own strengths.
This study therefore attempted to find out what distinguishes European
from non-European IT providers – to decode their DNA in a way – to
highlight success factors for the European market and thus work out the
strengths and weaknesses of European IT providers.
Our findings can help European IT providers focus on their strengths. But
they will also show non-European IT providers how to successfully operate
in the European market, particularly those who have been trying to enter
the European market for years but have not managed to become major
suppliers to European corporations.
The findings of this study can also provide valuable tips to user companies
on choosing IT providers beyond a purely empirical analysis in the form
of spreadsheets with lots of data.
We use the terms European DNA and European IT provider to mean
companies originating in Europe. We know that many companies of
non-European origin have a strong local base in Europe and a European
management team. But we still believe that there is a kind of basic mindset
determined by the country in which the company has its headquarters –
even if it is a real global player.

8. 6 | Study
Classifying corporate DNA based on 4 elements
To decode the DNA of European IT providers and compare it to that
of global non-European IT providers, we developed a structure based
on four elements:
SHAPE: How do companies' strategies differ in terms of new
markets and customers, portfolio expansion, personnel develop-
ment and industrial links?
SEEK: How do the companies generate new business or pursue
business development?
SELL: How do they successfully sell their products or services?
SAVE: What do the companies focus on to efficiently add value?

9. 7 | The European Way – A new Generation of IT Providers
We discussed the individual components of these four elements in over
25 intensive expert interviews with IT decision makers at clients and among
the senior management of IT providers, and added our own experience from
our project work. The results are summarized below and illustrated with
quotes from the interviewees.
This study is not about determining what approach was right or wrong.
The aim is to tease out the differences that can result in varying degrees
of value added (as outlined above) for European and non-European IT
providers and their corporate customers.
SHAPE – European IT providers see reliability and trust as the key to success
and growth; non-European IT providers take a more aggressive approach
European IT providers often pursue different growth strategies than their
non-European competitors. The latter often aggressively push growth with
more short-term goals – many customers mention focusing on quarterly
results – or through deal-driven market development. In doing so the
focus is absolutely on growth:
Growth is absolutely necessary; we sell our products and solutions
to everybody who wants them. Survival is in growth and the fittest
will grow.
John Wargin, Hewlett-Packard
Customers also see non-European providers as being more willing to
experiment: In extreme cases, innovative concepts are first sold and
only then developed, according to the customers – but in most times
successfully.
Europeans, by contrast, are more interested in long-term customer relation-
ships. They first develop innovations until they are market-ready before
starting with intensive market development. The key to success, as they see
it, is gaining customer trust through reliability and continuity. From their
perspective, business with customers – especially in IT outsourcing – be-
comes profitable only after several years, so they are keen to offer customers
long-term prospects. This continuity is especially important for SME custom-
ers, who account for a large proportion of GDP in Europe. These customers
value a stable workforce with strong industry expertise, with whom they
can build up a trusting relationship.

10. 8 | Study
People often tell us that compared to American IT companies, we respond
more flexibly to customer wishes, make decisions faster, escalate issues more
quickly and take a long-term approach to difficult situations and projects,
rather than focusing on short-term optimizations at the expense of the long-
term partnership. Together with our strong 'industrial DNA', in my view
these factors are leading to a renaissance among European IT companies –
even with American customers!
Rainer Koppitz, CEO Sales, Siemens IT Solutions and Services
Technical skills are still fairly highly valued in Europe, even when putting
together a management team: The European market wants subject matter
experts in management positions. Outside Europe, salesman types are in
demand, while European providers prefer experts for this type of position.
But, according to customers, European managers could still learn a lot from
their American counterparts about self-promotion and charisma.
When it comes to conquering geographical markets, non-Europeans tend to
assume there is a global standard to meet or to set. As a result, they try to
apply this standard to new markets in their portfolio. Europeans adapt more
flexibly to each particular market, showing a willingness to consider the
relevant local standard and refine it or even provide tailor-made solutions.
They use their detailed knowledge of the European markets to address the
unique cultural and regulatory requirements better than the competition –
one of their strengths which could be better leveraged.
European companies are able to accept diversity, different cultures and
rules and to create value from these. Companies of non-European origin
cannot do this in the same way.
Winfried Holz, CEO Germany and CEMA (Central Europe,
Mediterranean Countries and Africa), Atos Origin
The European market presents providers with a few cultural challenges,
as some Indian providers experienced to their dismay:
We were stupid (…) We didn't seriously think we needed a German work-
force in Germany. The cultural and linguistic barriers could not be overcome
by our Indian staff. We probably came to Germany too early. There was not
as much cost-saving pressure at companies to outsource their IT.
Azim Premji, CEO, Wipro (Source: Handelsblatt, August 23, 2010)
European companies are keen to retain their workforce over the long term,
to develop them and ideally instill in them high levels of motivation and
identification with the company.

11. 9 | The European Way – A new Generation of IT Providers
Non-European providers see these values as leading to inflexibility and
problems in the age structure and skill set of the workforce. But customers
in Europe often appreciate this long-term staff development; it guarantees
the desired continuity in the supplier relationship, detailed knowledge of
specific requirements/processes and avoiding new young staff needing
to re-learn processes. Users and providers should bear in mind:
It is a challenge to establish industry expertise in an IT team, so it is
important both for providers and customers to have long-term stability
in the core of the team.
Dr. Ulf Dunker, Managing Director, 24/7 IT-Services,
IT service provider to MVV Group
Finally, it is worth mentioning that European IT service providers are firmly
anchored in the continent's strong industrial base – quite a few large IT
providers in Europe started out as corporations' in-house service providers.
They therefore know the opportunities and risks of IT. Moreover the virtuali-
zation of operations technology (OT), meaning the vertical and production
orientated IT, asks for such capabilities. We realize e.g. through virus attacks
in the automation area of OT the necessity of IT capabilities and industrial
competences, which are typically not in the domain of the CIO or traditio-
nal IT providers. Given the increasing convergence of these technologies,
the anchor in the continent's industrial base is a major asset and will offer
European IT providers attractive opportunities in the future.

12. 10 | Study
SEEK – Beyond Europe, speed is what counts in business development.
European IT providers focus on long-term strategic partnerships
For some IT providers beyond Europe, aggressive pricing strategies are
a proven means of rapidly increasing their market share. European IT pro-
viders are more cautious, instead trying to fill existing gaps with long-term
strategic partnerships.
In developing new business, global players of non-European origin with
large RD budgets aim for innovation leadership. European IT providers, by
contrast, do not see this as an end in itself. Although they also deem innova-
tions very important, they do not drive them but evaluate them and squeeze
out the customer-specific benefits. Interviewees saw their US counterparts
as more innovative:
Internationally aligned companies, such as American ones, are very open
to top innovation technology and enjoy trying them out as early adopters.
Dr. Alexander Arnold, Managing Director, Steeb
The habit non-European providers have of modifying existing technical
concepts slightly, renaming them and marketing them as innovations is met
with skepticism in Europe and does not lead to the desired sales success.
One example of this is cloud computing: Scattered, virtual architectures were
not invented by the cloud, but have existed under various names for some
time, just like the related security and data protection concerns in Europe.

13. 11 | The European Way – A new Generation of IT Providers
SELL – IT providers of non-European origin focus on closing deals,
while European IT providers concentrate on technical details
In sales, it is obvious that European providers think long-term. As described
in the SHAPE section, relationship management plays a major role: because
the European market is one of the main sources of sales, they invest in
long-term customer contacts, while providers of non-European origin do
not manage to establish these contacts. As a result, Indian IT providers,
for example, find it hard to make inroads.
Many non-European IT providers have not managed to build up long-term
contacts on the sales side. In a similar way to US companies in the early
1990s, they started up with expats, who often only stayed in the location
for two or three years. Recently some Indian firms have been using German
managing directors – but they have to prove continuity here, too.
Peter Kreutter, Otto Beisheim School of Management (WHU)
Because European providers have often built up contacts with very senior
staff over the long term, they can conclude contracts fairly easily. European
CIOs are among the most important customers of European providers,
which is why these providers normally have technically focused sales cycles
and go into more detail. The CIOs receive special treatment from them,
whereas they are often treated like second-class customers by large global
players (B customer status). Of course this is also due to the absolute size
of global players.
As a customer, you notice when negotiating with a global IT service pro-
vider of non-European origin that they are managed centrally and nothing
can be decided without speaking to the headquarters first. At European
providers you speak directly to the decision makers.
Michael Schmelmer, CIO, Infineon
In their purchasing behavior, European CIOs are often risk-averse. They
want providers to have an excellent reputation and be long-term partners.
To meet these expectations, European providers tend to avoid unrealistic
promises. Instead, they concentrate on not just delivering on their promises,
but exceeding them if possible.
IT providers headquartered outside Europe are much more deal-driven
and sometimes sell an immature product as the latest innovation. Europeans
are more cautious in this respect. This may be due to cultural reasons or
different rules about liability.
Michael Schmelmer, CIO, Infineon

14. 12 | Study
This strategy has some downsides – European sales cycles are often much
lengthier than those of non-European players because of their technical focus,
and speaking directly to the CEO/CFO as a customer (rather than the CIO) is
still a hurdle for many. Non-European IT providers tend to be more aggressive
and show great flexibility, even in pricing, in order to make a quick sale.
Only the CIO has the necessary perspective to choose the IT solution
that meets all the technical requirements and simultaneously fits best into
the overall IT concept. Selling to technicians without involving the CIO
is to be avoided.
Prof. Matthias Mehrtens, CIO, Stadtwerke Düsseldorf
European CIOs in particular like to be the first point of contact, and do not
always see it as helpful when IT providers approach IT specialists directly.
For this reason, in Europe at least the overall strategy should involve a sales
approach that is slower, more thorough and more technical. For large con-
tracts, the provider should certainly aim for closer contact with the CEO/
CFO, but should under no circumstances fail to involve the CIO.

15. 13 | The European Way – A new Generation of IT Providers
SAVE – European IT providers value sustainability and favor nearshoring
Besides focusing on core competencies, economies of scale are an important
reason for companies to work with IT providers.
I expect from IT providers mainly efficiency. Skilled workers who can
give my company a competitive edge are hired for my internal team.
Michael Schmelmer, CIO, Infineon
That is why both European and non-European IT providers need to
improve their cost effectiveness. However, they go about achieving this
goal in different ways.
Regarding new technologies and offshoring approaches, non-European pro-
viders are comparatively open and their solutions focus primarily on costs.
By contrast, a European provider will often not be the first to introduce new
technologies, but will wait to learn from others' experience and clarify security
concerns, which in Europe are relatively important. One example is the role
of the German Data Protection Act regarding cloud computing.
Even for outsourcing, costs are not the top criterion in Europe. Both IT
providers and customers in Europe value cultural affinity, resulting in a
preference for nearshoring to such locations as Eastern Europe, versus
offshoring to India or China.
Offshoring solutions in the Far East are seldom feasible if the IT solution
requires close coordination on the technical end. Both the geographical
and cultural distances are vast.
Dr. Ulf Dunker, Managing Director, 24/7 IT-Services
(IT service provider to MVV Group)
In addition, European providers have other levers for increasing cost advan-
tages. For example, they often play a leading role in standardization processes.
ITIL and CMMI have not been fully implemented, in the US for example.
The culture there is dominated by flexibility. European providers have driven
the industrialization of IT services, much farther in some cases.
Detlef Exner, Managing Director, DB Systel
Over the long term, actively driving industrialization and automation will
lessen the differences in wage costs. In this respect, companies in India,
for example, will lose their competitive advantage.

16. 14 | Study
A further key criterion in Europe is the acceptance among employees'
representatives, e.g. the social acceptability of implementing outsourcing
decisions and layoffs (including training programs or generous severance
packages). European providers are more likely to take this approach than
their non-European competitors.
Finally there is administrative efficiency. Viewed from the outside, European
IT providers often give the impression that they have overly generous over-
head resources. Yet in our experience, observers often overlook a key point:
for European providers, headquarters and holding functions are frequently
included in this view, whereas these function rarely exist in Europe at non-
European providers. The latter usually have just a sales organization and if
necessary lean on-site resources for delivery here. Completed and ongoing
corporate efficiency programs at certain providers, such as T-Systems, SIS or
Atos, show that SGA costs have improved over the past few years, or are
already at benchmark levels in certain functions.
We have made great strides regarding our costs in the past few years and
plan to do much more by 2011. This also affects cost items in the proverbial
comfort zone, such as travel costs or productivity per unit area.
Dr. Jürgen Kohr, Head of Corporate Strategy, T-Systems

17. 15 | The European Way – A new Generation of IT Providers
Summary: Success factors for IT providers in the
European market
European providers deserve to feel proud of their performance over the
past decade in comparison with their international peers. In recent years,
they have continued to go from strength to strength. The time for simply
copying the successful strategies of global IT players is over. European IT
service providers are quickly becoming more confident in bringing their
strengths to the market: technical thoroughness, reliability in sales and
strong delivery, all of which combine to give them an excellent reputation.
Particularly in Europe, cultural affinity plays an important role. Potential
customers are more likely to decide in favor of IT outsourcing when em-
ployees are handled in a socially responsible way and European cultural,
legal and regulatory characteristics are known to the provider.
But European providers can still learn much from their non-European
counterparts: how to focus on growth, communicate directly with senior
management and business departments, increase flexibility, act pragmati-
cally and aim for innovation leadership.

18. 16 | Study
The authors
Carsten Rossbach
Partner
Roland Berger Strategy Consultants, Frankfurt
Phone: +49 69 29924-6318
E-mail: carsten_rossbach@de.rolandberger.com
Dr. Markus Puttlitz
Senior Project Manager
Roland Berger Strategy Consultants, Hamburg
Phone: +49 40 37631-4336
E-mail: markus_puttlitz@de.rolandberger.com
Dr. Julia Daecke
Project Manager
Roland Berger Strategy Consultants, Düsseldorf
Phone: +49 211 4389-2364
E-mail: julia_daecke@de.rolandberger.com

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