Differences in the way of doing business among Indian states

India is almost as large as the European Union and has more than twice as many inhabitants. No wonder, then, that there are major differences between the various Indian states in terms of language, demographics, politics and economic growth. For a successful start-up in India, it is therefore important to take these differences into account when drawing up a business plan. Because what works in Gujarat does not automatically work in West Bengal.

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The regional differences among Indian states

For a European company to succeed in India, you must be aware of the country's vast regional differences. India is a fragmented market with large, and often underestimated, regional differences in language, culture, infrastructure and wealth, all of which affect the regional business culture.

Indian states are therefore better compared to individual countries than to, say, the Dutch provinces. Indeed, India's most populous state, Uttar Pradesh, has as many inhabitants as Brazil, and the southern state of Tamil Nadu has an economy as large as that of Hungary. 

There are also large demographic differences between Indian states. For example, southern India is older, has more to spend and is more educated than the rest of the country. Northern India, on the other hand, is younger and relatively poor.

North Indians primarily speak Hindi, while South Indians prefer to communicate in English or in their regional state language, such as Kannada or Malayalam. The German wholesaler METRO, better known in the Netherlands as Makro, found out after their start in India that there are big differences between the groceries that customers in a certain region put in their shopping cart and adjusted the assortment accordingly by adding more local products. Logical really, Finns also have different preferences than Spaniards.

"METRO found out that there are big differences between the groceries that customers in different regions in India put in their shopping cart."

- Mark Alexander Friedrich, Head of International Affairs for METRO

Do not make one business plan for all of India

For a successful start in India, thorough market research is a must. Regional differences are not only obstacles, but can also work in your favor depending on your sector and product.

The southwestern states, such as Maharashtra and Karnataka, are a suitable base for technical sectors such as automotive, engineering, as well as outsourcing IT and Research & Development teams.

Northern states such as Punjab and Haryana, among others, have thriving agricultural sectors, creating opportunities for food processing and renewable energy industries.

Starting in the right regions is also essential for selling your product in India. European products almost always fall in the highest market segment in India, so it is smart to start in the regions where people have sufficient income and there is real demand for a more exclusive, expensive product.

"Approaching India as one country by working with only one distributor or partner is one of the most common mistakes European companies make in India," says Klaus Maier, CEO of Maier + Vidorno, IndiaConnected's partner in India.

"In Europe, you wouldn't ask an Italian distributor to set up your network in Norway either. An Indian partner or distributor operating in a specific state has a good network only there and will not succeed in successfully expanding sales to other states. Therefore, those who take India seriously start with about four dedicated, local managers or distributors who understand your product and the regional market well. With them, the market can be mapped and the logistics network set up, one of the biggest challenges for international companies in India. In this way, the Indian market can be conquered step by step, successfully." 

Selling successfully in India with the right strategy

For anyone looking to conquer the Indian market, IndiaConnected has put together a special guide in which we offer you insight into the steps to take to successfully start and grow your sales in India.

From preparing your first export shipment to India to setting up a solid after sales service, we guide and advise throughout your India journey.

Outsourcing, insourcing or a hybrid form of sourcing: what is the best solution for your business?

Say you want to set up an IT or R&D department or expand an existing team, but are running into a shortage of capacity internally. Outsourcing is one way to solve this. Are you not entirely comfortable with outsourcing the work, for example, because sensitive information would then end up with third parties? Then it is interesting to look at the alternatives, such as insourcing or hybrid sourcing.

Outsourcing: a good option for non-essential tasks

Outsourcing is a business strategy where certain work, for example IT or Research & Development, is outsourced to an outside company or a freelance employee, often based abroad. An outsourcing company usually works on a contract basis, meaning that the team that will perform your work is hired for a defined period of time. Outsourcing almost always involves outsourcing "non-essential tasks and processes," that is, work that is not part of the company's core business and has a more supportive function.  

When is outsourcing beneficial?
Outsourcingrelieves an organisation of the responsibility for, and in many cases reduces the cost of, a support department such as IT or R&D. The outsourcing company not only provides the manpower, but also has the right resources and infrastructure at its disposal to support the client organisation in the best possible way. The outsourcing company not only provides the manpower, but also has the right resources and infrastructure at its disposal to best support the client organisation. Full outsourcing or outsourcing of work is therefore the best option when it does not concern the core tasks of the company, because you are literally handing over the responsibility to an external company and therefore no longer have any great influence on exactly how the work is carried out and by whom.  

What are the benefits of outsourcing?

• Lower costs: In many cases, just outsourcing the work to a location outside the Netherlands saves money. You also save on the fact that you do not have to set up a complete IT department or invest in sophisticated equipment.

• More choice of highly skilled, technical employees: IT outsourcing companies almost always have a wide range of professionals who have been specially trained for certain tasks. This makes it easy to assemble a team that fits your project. 

• Access to a new market: Outsourcing helps some companies to expand and enter new markets by bringing the production location or service point closer to their end users. Take, for example, ARS T&TT of The Hague, which develops smart technological traffic solutions. They started outsourcing their R&D in India and now sell their products to large, local governments. 

What are the disadvantages of outsourcing?

• Unmotivated: In many outsourcing companies, employees are assigned to different projects. This can lead to employees performing tasks properly, but otherwise having no idea who you are as a company and what the overarching goal is. As a result, you are one of the projects to be completed and the employees do not feel any dedication to your specific project. 

• Cultural differences: When you outsource work abroad, you always have to deal with the local work culture. If it does not fit in with your company's culture, it is not only difficult to adapt, but it can also lead to problems that can cause the project to fail. 

• Communication problems: A differentiation in work culture, for example, can lead to communication problems. Is your local team used to receiving detailed assignments while you would like to have input from their side on the possibilities? Chances are that your request for input will not be understood and therefore the results will not be satisfactory.

Insourcing: the solution if you already have the right infrastructure in place

With insourcing, a solution is sought or set up within the organisation. It may be that the work is integrated into the existing structure by recruiting new staff or through a temporary partnership with an affiliated company or subsidiary. When we talk about the insourcing of work, this also concerns tasks that are not directly considered as core tasks of the company, but often fall a little bit between 'essential' and 'non-essential' and where more direct oversight from the organisation is desired. One example is software development, where the software plays an important supporting role in the efficient execution of the company's core tasks.  

When is insourcing beneficial?

Insourcing is particularly recommended for specialist work that requires special expertise or if the company already has an existing infrastructure in which the new tasks can easily be accommodated. For example, an organisation might insource technical support for a new product because the company already has technical support for another product within the organisation. In this case, it will also be very difficult to fully outsource, as most service companies do not have the capacity and knowledge to take on such specific tasks. 

What are the advantages of insourcing?

• Flexibility: An on-site team can also be deployed on other tasks as required. For example, they can not only update and manage your software, but also maintain hardware equipment.

• Short lines of communication: Since your insourcing team is in your office, you can communicate easily and quickly. They can also get in touch with other departments within the company more quickly, so that potential bottlenecks can be identified and resolved quickly.

• More control over the workflow: You are in charge of the team, without the intervention of possible local managers. This allows you to adjust them faster, evaluate the work and motivate your team. This often results in more dedication and higher motivation. 

What are the disadvantages of insourcing?

• Higher costs: Because you will be looking for a suitable team in your own country and will have to invest in building the infrastructure and other necessary resources, the price will be a lot higher than for the other two alternatives. 

• Shortage of talent: In the Netherlands, we are facing a shortage of more than 40,000 technical staff. For many companies, it is therefore a difficult and expensive procedure to form a team that meets all the conditions and requirements.  

• Indispensability of certain employees: If you have a unique project and one of your valuable specialists decides to leave the company, this may lead to the project coming to a standstill or even being halted. Especially since it is a challenge to find a replacement quickly. 

Hybrid sourcing: the best of both worlds

As the name suggests, a hybrid form of sourcing brings together different elements of outsourcing and insourcing. The hybrid model allows you to find talent abroad that is not available domestically, for example, without being directly tied to an outsourcing organisation that determines the team composition and working methods. This means that you can take advantage of the large talent pool and lower costs of the outsourcing location, but your new employee or team becomes truly part of your company. This has the advantage that you don't have to share sensitive information with third parties because you will be directly managing your new employee or team. However, it's important to choose a hybrid provider that can provide the right infrastructure at the location where your remote workers will start, so you can ensure a consistent experience across all locations and easily scale or migrate resources as needs change.

When is hybrid sourcing beneficial?

Hybrid sourcing is a perfect solution if, for example, you are looking for an employee or team for an internal solution, but the vacancy is difficult to fill due to a lack of candidates. For example, if you choose India, the number one outsourcing country in the world, with the hybrid model you enjoy the benefits of outsourcing there, such as lower costs and a larger pool of suitable employees, and you don't have to deal with the difference in work culture because you remain in charge of your project. You decide who will do the job or work for you and what conditions they must meet.  

What are the benefits of hybrid sourcing?

• A wider choice of suitable talents at lower cost: You benefit from the large talent pool of technically skilled employees at a lower price and without compromising on quality. 

• No cultural or communication problems: Because you determine what skills your future employee or team must possess, you can pre-select employees who fit in well with your company's culture. This way, you not only bring in motivated employees, but also prevent communication problems due to possible cultural differences. 

• Control and flexibility: With a hybrid model,you do not have to deal with a local, intermediate management layer, but directly with your employees. This gives you better control of the working method and the final result. It also offers you the possibility to quickly switch or scale up if necessary. So it offers you the flexibility of outsourcing and the control of an insourcing team.

What are the disadvantages of hybrid sourcing?

• Time difference: Because you are hiring talent from abroad in the hybrid model, in almost all cases you have to deal with some time difference. This can be tricky because your teams (in-house and remote) don't quite overlap in time, but you can also use this to your advantage. The time difference with India, for example, is about four hours, so you can easily have problems solved before your European employees or users are affected. 

• Intensive preparation time / familiarisation time: Since you and your employees will be working with remote colleagues, it is a good idea to review the work processes in advance. For example, additional steps can be introduced to ensure that there is always a good understanding of the tasks that are assigned to the remote colleagues and how they are progressing. This requires some extra preparation and familiarisation time for you and your in-house team. 

• Language difference: If you choose fromthe most popular destinations to set up a remote team, you will always have to deal with employees who do not speak Dutch, but English. This can be difficult for you or your team, so check carefully whether not only your new remote colleagues, but also your team in the Netherlands has a good enough command of the English language. 

Do you also have one or more technical vacancies that you cannot fill? Then hybrid sourcing to India could be a good solution for you. It will give you access to the world's largest talent pool, save you money and bring in a new engaged colleague or colleagues who will truly become part of your business.

How to win a government contract in India

Under Prime Minister Modi, India has embarked on a major upgrade of the country. Through various government programs, such as Made in India, 100 Smart Cities and Digital India, billions are being invested in improving India's infrastructure. From clean forms of energy to the rolling out fiber optics. India is eager for foreign knowledge and technology for these ambitious projects. But how do you win such a coveted government contract as a European company?

You win a tender with 3 crucial ingredients'.

Joeri Aulman has been successful in winning government contracts in India in recent years. He is a project manager and airport developer for Naco, a division of Royal HaskoningDHV in the field of airport consultancy. "First of all, we were very lucky with our market entry. We entered the market in 2005, at the exact time that the first privatisation of airports in India was starting. That turned out to be perfect timing." 

But it was the good references from local business relations that really got the ball rolling for Naco. "On the recommendation of an existing client, we were allowed to present ourselves to the Indian party. The presentation was focused and, very importantly, not didactic. Despite our knowledge and experience, we were modest and that was the key to success." According to Aulman, the combination of smart timing, excellent references and modesty in presenting your plan are therefore the three crucial ingredients for winning tenders in India. "Over the past 15 years, we have learned that if one of these three ingredients is missing, we miss out on the contract immediately."

Not only India benefits, there are also interesting opportunities for European companies

According to the Indian Ambassador to the Netherlands, Venu Rajamony, there is a lot for European companies to gain in India. "We are the fastest growing, large economy in the world with a young population and a growing middle class. Competitive European companies entering India with long-term planning are going to benefit from the country's rapid developments and expanding consumer market."

For companies looking to win Indian government contracts, Rajamony has some advice. "To stand a chance, it helps when European parties cooperate with an Indian partner. In addition, companies increase their chances if they produce part of their technology in India (make in India), use Indian raw materials for it (source in India) and hire Indian personnel (hire in India). This not only aligns with various government objectives, but also reduces the cost of often expensive European technology. European companies must realize that India is a highly competitive market. Companies from all over the world subscribe to Indian tenders." 

There are hundreds of tenders open as part of the Smart City mission

Six tips to win tenders in India

In order to easily sideline those foreign competitors in the battle for an Indian government contract, you need to keep the following points in mind during the preparation: 

1. Timing: plan ahead

Timing is key, but you can't start building a network early enough. In other words, if you don't start building a network until demand for your products starts to increase, you are late.

2. Use references actively

India is a network economy par excellence: relationships are crucial. So don't hesitate to approach the Indian embassy in your country for help if you get stuck with permits and the like. Their network is large and they can often provide clarity. In addition, seeing is believing. Anyone who has previously done a good job on another project in India has an edge.

3. Be concrete but modest

India may be desperate for state-of-the-art technology in all sorts of areas, but that does not mean that foreign companies can be pedantic, condescending or arrogant. With such an attitude, a foreign company is doomed to fail in India.

4. Work with an Indian partner.

As mentioned, India is a network economy, so local cooperation greatly enhances your chances. If you do not have the right entrances, you will usually fail with government tenders. An Indian partner knows his way around the Indian bureaucracy - no need for the Dutch party to waste valuable time on this.

5. Make, hire & source in India

The Indian government is faced with the immense task of providing jobs for hundreds of millions of young Indians. Logically, companies that create jobs in India, directly or indirectly, have an edge in tenders. So put yourself in the shoes of Indian officials.

6. Understand your market value

Leave your European mindset at home and tailor your offer to the price/quality level the Indian government is looking for. Do you not yet have a good understanding of your sector and how you can best position yourself in the Indian market? Contact our experts and we will conduct a customised market research and give you concrete suggestions for the right next steps.