The European comeback: Why European IT providers should build on their distinctive managerial strengths and not just copy US competitors

• European IT providers show better long-term sales and EBITDA growth than their US competitors
• Japanese competitors also fail to match European EBITDA growth, but they have performed better on sales
• The Europeans' business model is geared toward long-term sustainability and creates competitive advantages
• European IT providers generally have a strong position in the European market – but they can still learn lessons from the strengths of their non-European rivals

The European management model has evolved over the last ten years into quite a success story. Its special strengths include a long-term orientation and a desire to bring all the stakeholder interests on board. This is paying off in the case of IT providers. In terms of sales and EBITDA trends, they clearly outperformed their US rivals over the period 1998 to 2007. They also compare favorably to Japanese providers: Although the Japanese show higher sales growth, they are the least successful at growing EBITDA. In its study entitled "Next generation IT providers – The European way", Roland Berger Strategy Consultants analyzed the factors required for success on the European IT market and compared the "corporate DNA" of European and non-European IT providers. A key finding is that the success experienced by European companies has stemmed above all from a distinctively European way of running a business. The study concludes that, to ensure continued growth, the European IT providers should build on these specifically European core strengths. But there are also lessons to be learned from non-European competitors, and the study identifies their strengths.

"European IT providers still often regard themselves as second best in the market and try to copy their supposedly more advanced competitors from the US or India," says Carsten Rossbach, Partner at Roland Berger Strategy Consultants. "But there's actually no reason to: the European companies are much better than their reputation." The experts at Roland Berger have analyzed European and non-European providers and their commercial progress on the European market. The study's central finding is that European IT providers have outperformed their US competitors on sales growth and on EBITDA growth over the decade from 1998 to 2007. As for Japanese companies, they did better at improving sales, but lay far behind the Europeans in terms of growing their EBITDA.

Competitive advantage thanks to "European DNA"

"We have traced the success of the European IT providers to a distinctively European 'corporate DNA'", says Roland Berger project manager Markus Puttlitz. For instance, while "US providers tend to be sales-oriented, the Europeans operate with a much sharper focus on technology and relationships. A core European goal is to build long-term client relationships based on trust and reliability. This means they're rather conservative in what they promise and prefer to exceed expectations rather than disappoint their customers." By contrast, providers of non-European origin often make an aggressive pitch and promise too much. What's more, the European providers generally have exceptional technical expertise in their sales departments, which also helps to build trust.

"Of course, the 'corporate DNA' of many non-European providers also offers advantages. They have frequently been leaders in terms of speed and innovation. They are considerably more flexible and more responsive to market trends," notes Project Manager Dr. Julia Daecke. "But the Europeans reap the benefits of a generally longer-term strategy, including efforts to retain and develop their people. The CEOs tend to see themselves as solution leaders and not as salesmen as they do in American firms. They follow the strategy of consolidating core areas of expertise and concentrating on established markets and customers."

Europeans are also more concerned with making corporate success sustainable. Whereas non-European IT providers frequently switch standards and are keen to take up the latest technological fad, their European competitors are more skeptical about short-term trends in technology. They also adopt a more cautious and socially responsible approach to outsourcing and efficiency drives.

Build on your own strengths – and copy other's strengths

European IT providers have generally secured a strong position in their home market. The Roland Berger study recommends that the European IT firms continue to build on their distinctively European strengths while also learning from the strong points of non-European competitors. Puttlitz elaborates on these: "Certain characteristics of the non-European 'corporate DNA' – like having sales in the top tier of management, being pragmatic about developing solutions, doing innovative ways of thinking and staying highly flexible – can be exemplary for European IT providers, too. It's worth learning the lessons here!"