Red Herring meets CEO Ramadorai

Tata Consultancy Services' CEO steered his company to the top of the pack in India. Now his challenge is to face global majors IBM and Accenture.

If India is the crown jewel of outsourcing destinations, Tata Consultancy Services is the company spearheading this movement. As the largest Indian outsourcing company in terms of revenues and profits, TCS has become a force that is challenging global firms such as IBM, Accenture, and EDS.

In March, TCS became the first of the Indian outsourcers to cross the $2-billion revenue mark. For fiscal year 2004-2005, TCS' revenue reached $2.24 billion and its net income was $512 million. When the Mumbai-based company went public on the Indian stock markets in August 2004, shares were oversubscribed 7.8 times and the $1.2-billion IPO become the second largest in Asia that year.

S. Ramadorai started working in 1971 at the then-fledgling company as a programmer after completing a master's degree in computer science from the University of California, Los Angeles. Despite lucrative opportunities in the United States, Mr. Ramadorai returned to his home country to join what was then just about the only IT company around.

Since taking over as CEO in 1996, Mr. Ramadorai has led TCS through massive changes to become one of the leading IT companies worldwide. TCS is part of one of the largest Indian conglomerates, the TATA Group, which includes markets that cover energy, telecommunications, financial services, chemicals, and engineering and materials.

In September, TCS secured the largest-ever deal by an Indian outsourcer to provide application support and enhancements to Dutch bank ABM Amro; the work will generate $247 million in revenues over five years. In mid-October, TCS made another big move by entering the U.K. life insurance and pensions industry with a 12-year, $847-million contract with the Pearl Group. And in November, TCS bought Chilean outsourcing company Comicrom for $23 million.

Mr. Ramadorai is also extensively involved in the academic world, and is on the corporate advisory boards at the University of Southern California 's Marshall School of Business and several institutions in India. Earlier this year, Mr. Ramadorai was appointed chairman of Nasscom, India 's influential software trade association; his mandate is to drive initiatives to spread technology nationwide.

However, TCS faces challenges in the form of increased competition from smaller Indian players as well as Chinese companies, and still lags behind global players like IBM and Accenture. On a recent visit to the United States, Mr. Ramadorai fielded questions from Red Herring about the Indian IT environment, and how he plans to compete with the global giants.

Q: How does TCS plan to overtake global players such as IBM and Accenture?

A: We build scale.This year we plan to add about 13,000 people and [the total] are going to be 60,000 people by the end of March 2006. One dimension is the number of people, but we need to be very clear what we mean by going forward. Growth without profitability doesn't make sense. Growth with the right margins is very fundamental and we'll be picking the right kind of opportunities for us to grow in the places that will give us margins.

Q: TCS is facing significant competition from smaller, upstart Indian players such as BirlaSoft, Larsen & Toubro, and Bharti Telecom—how do you plan to face them?

A: TCS has been in the business for the last 36 years and has an enormous amount of competencies and client base. The total outsourcing out of India is still less than 3 percent than the total of IT spend in the world, so we still have a lot of upside in the game.

While there may be a number of other players that are emerging—which I believe must be necessary as the chairman of Nasscom, because we want to build an industry rather than one company—I think each of these smaller ones must find their own niche and find their opportunities for growth.

Q: How do you intend to grab the best talent in India, where there is a huge entrepreneurial wave catching on with all the startups and VC funding?

A: The TCS brand and the TATA brand, how it builds excellence in people and the kind of opportunity we give, is a very natural attraction. Secondly, we also have an enormous amount of innovation in the company where entrepreneurial culture and spirit is encouraged, a lot like idea generation and building a small niche product or service.

Thirdly, we have participated in funding some of the startup initiatives within the company and we ourselves act as a VC at times. Finally, we partner with some of these VC companies extensively because today startup companies with core technology will not see the market unless it is part of a solution. So some of these startups see us as a great system integrator to take them to market.

Q: The top management owns about 80 percent of TCS and employees hold very little. Is that likely to change?

A: The change came about when we went public in August 2004 and we gave stock grants to a number of people as well as cash for people to buy the stocks that were allocated to employees. Going forward, we still continue to give cash rewards but we will look at various ways as we see it necessary. If that is an option program that needs to be put in place, we will, so we are completely open and flexible.

Q: How do you see consolidation playing out in India 's IT industry?

A: Consolidation will always happen and inorganic growth can always happen. TCS acquired CMC about four years ago, now we are integrating and merging Tata InfoTech, and we entered joint ventures with airline companies like Singapore Airlines and Swissair. Finally, we bought a captive entity of insurance company back office called Phoenix Global in Bangalore, which brought in about 500 people. When you add up all of these we have almost added up 7,000 people inorganically, plus the Pearl initiative is going to bring another 950 people. We are talking about almost about 8,000 people coming into [the company] in an inorganic manner. It's a big deal—few companies have done these kinds of things out of India.

Q: TCS has been rooted in a family-owned environment—is there rigidity in the company that could impede its ability to become a big global player?

A: The Tatas were never family-owned because if you look at the historical significance of the group itself, it is completely professionally managed and the family holding is not even 2 percent of the total.

Family ownership is disappearing in India, not just in the IT services but in any part, because the next generations of the work force who want to run these companies are spreading, the companies and professional management is coming into place, and that's what we are witnessing in India. Changes are happening faster than we all believe.

Q: When is TCS planning to float American depository receipts in the stock market, if at all?

A: I can't make any prediction on when it will happen, how it will happen, and whether it will happen. But we always said on the IPO road shows that it was the beginning of a journey by the first dilution, by the listing in the Indian stock exchanges, so we will view this in the right context and the right opportunities and certainly consider it.

Q: So sometime soon

A: We don't rule out anything. We don't have any plans, or any decision on what we are going to do.

Q: What are some of the trends in the software and services space in India?

A: Open source is getting a lot of traction and attention. The second one is clearly the distributed computing and distributed infrastructure because of the communications link availability and its usage beyond urban areas in rural areas through a kiosk and a service-based model. Some states like Andhra Pradesh have partnered with TCS to create a portal to provide citizen services as a joint venture.

Q: Where do you think India stands against China?

A: China is absolutely clear that they want to grow in the globalization of IT services and software. They have a fairly long way to go, not only because of the language skills but also to migrate from a hardware mindset to a software mindset. India has a natural advantage where they have been in the software game for a long time. So the potential innovation that we can do in software is our biggest opportunity, and we will still focus on the commoditized types of services like [business process outsourcing]. So China will find its own position in the world, but at the end of the day it will not be at the cost of India or vice versa.

If we want to participate in the Chinese domestic market, we have to build local competencies. We view China as a market, as a competitor, as a source of talent to address external markets, and to service multinational companies. That's the way India will have to play in the Chinese markets.

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Hell and Heaven !!

One day while walking down the street a highly successful Human Resources Manager was tragically hit by a bus and she died. Her soul arrived up in heaven where she was met at the Pearly Gates by St.Peter himself.
"Welcome to Heaven," said St. Peter. "Before you get settled in though, it seems we have a problem. You see, strangely enough, we’ve never once had a Human Resources Manager make it this far and we're not really sure what to do with you."
"No problem, just let me in," said the woman.
"Well, I'd like to, but I have higher orders. What we're going to do is let you have a day in Hell and a day in Heaven and then you can choose whichever one you want to spend an eternity in."
"Actually, I think I've made up my mind, I prefer to stay in Heaven", said the woman
"Sorry, we have rules..." And with that St. Peter put the executive in an elevator and it went down-down-down to hell. The doors opened and she found herself stepping out onto the putting green of a beautiful golf course. In the distance was a country club and standing in front of her were all her friends? Fellow executives that she had worked with and they were well dressed in evening gowns and cheering for her.
They ran up and kissed her on both cheeks and they talked about old times. They played an excellent round of golf and at night went to the country club where she enjoyed an excellent steak and lobster dinner. She met the Devil who was actually a really nice guy (kind of cute) and she had a great time telling jokes and dancing. She was having such a good time that before she knew it, it was time to leave. Everybody shook her hand and waved goodbye as she got on the elevator.
The elevator went up-up-up and opened back up at the Pearly Gates and found St.Peter waiting for her. "Now it's time to spend a day in heaven," he said. So she spent the next 24hours lounging around on clouds and playing the harp and singing. She had great time and before she knew it her 24 hours were up and St. Peter came and got her.
"So, you've spent a day in hell and you've spent a day in heaven. Now you must choose your eternity," The woman paused for a second and then replied, "Well, I never thought I'd say this, I mean, Heaven has been really great and all, but I think I had a better time in Hell."
So St. Peter escorted her to the elevator and again she went down-down-down back to Hell. When the doors of the elevator opened she found herself standing in a desolate wasteland covered in garbage and filth. She saw her friends were dressed in rags and were picking up the garbage and putting it in sacks. The Devil came up to her and put his arm around her.
"I don't understand," stammered the woman, "yesterday I was here and there was a golf course and a country club and we ate lobster and we danced and had a great time. Now all there is a wasteland of garbage and all my friends look miserable."

The Devil looked at her smiled and told...

“Yesterday we were recruiting you, today you're an Employee. . .”

Lalu didn't do anything. Will Nitish?

Winds of change have blown across the landscape of Bihar. With Lalu Prasad Yadav's 15-year era having come to an end, it is time for a new beginning. Or is it?

A week after Nitish Kumar took over the helm of affairs in the state, there are expectations galore from the man who started his career along with Lalu, under Jayaprakash Narayan's socialist movement.

From bringing back law and order to the state, the engineering graduate-turned-Chief Minister also has to deal with Bihar's falling fortunes. Apart from resurrecting the state's economy, he also has to restore a sense of peace and calm.

For a state that has been mired in an abyss of absolute lawlessness and hit rock bottom economically, the climb will be a tough one and Kumar will have to start from scratch.

Do the people of Bihar draw confidence from Lalu’s successor? Is Nitish the man to do all of that? Is it at all possible? What people of Bihar want to get done in their home state? These are questions which will get answered in near future.

The change of guard in Bihar is definitely great. It is a huge victory for the people of Bihar and having actively participated in the polls, One can understand the sense of elation.

It also shows that the mandate was never with the Rashtriya Janata Dal and the poll results are a rejoinder to the fact that free and fair elections are quite possible in Bihar. This is just the beginning of a new, changed Bihar.

The new CM has to start everything from scratch –it’s difficult but possible. Politics, infrastructure, economics, social disorder –Nitish Kumar has a lot on his agenda. Bihar has been in a state of complete disarray over the past 15 years, which has been a period of complete misrule and non-development.

While Lalu had the mandate to work it out, he couldn't do anything for the state. Kumar will have to woo investment to the state in order to ensure that all those who had left the state in search for employment and a better future come back. Although it’s a coalition government, it will work if they have their house in order.

In business salesmanship, the consumer is the king. Likewise, in a democracy it is the people’s verdict, given freely and fairly which ultimately, is the ruler and the results reflect this.

The time for changeover was absolutely necessary. Large sections of people were yearning for social respect and prestige. They had also started clamoring for betterment in terms of facilities and availing new opportunities to better their economic standards.

The new government will have to beef up law and order, development of infrastructure and governance. However, law and order alone can’t resurrect Bihar's falling fortunes.

Kumar also has to stress on development and economic growth and there has to be a judicious mix of stick and carrot with preference between the two varying depending upon prevailing situation and circumstances.

Coalition governments reflecting a broad consensus of different ideologies and programmes, often suffer from the disadvantage of conflicting priorities even if a common minimum programme is in place. As long as that doesn’t happen to this government, things should be fine.

Since people have chosen him, it’s a welcome change. Although it’s too early to comment anything, Kumar looks promising.

The overall situation has to improve as the present state is not very good. There are lots of challenges ahead of him and he has to start from the basics. In terms of education, infrastructure, investment, Bihar has a long way to go, compared to other states.

I have spent my formative years in Bihar and I know that a change was definitely required. Kumar seems like a capable and deserving candidate who can revamp the situation in Bihar, which over the years has gone from bad to worse.

As long as the government has its priorities in order, there’s no reason a coalition government won’t work. Even at the Centre, there has been a successful coalition government. I can now hope that the bumpy roads in north Bihar, where my grandparents live will be a thing of the past.

Source: TOI, 1st December

Planning to visit Bihar? Check out this.

TCS to Support Joburg's New S/w Engineering Centre

An agreement was signed on 24 November 2005 between Tata Consultancy Services (TCS), a leading global software services and consulting company and the Joburg Centre for Software Engineering (JCSE) at Wits University. The agreement will bring specialist software engineering lecturers from India to the JCSE over the next two years. Prof Barry Dwolatzky, Academic Director of the JCSE, says "Bringing these lecturers to South Africa will make a significant contribution towards the development of high-level skills in the local software development sector."

The JCSE was launched in May this year as a partnership between Wits University, the City of Johannesburg and over 20 companies, including TCS, IBM, Microsoft, Unisys and FNB. Prof. Dwolatzky says, "TCS has a great deal of experience and expertise in training world class software engineers. The company's corporate training academy, in Thiruvananthapuram in the South of India, trains thousands of TCS recruits from across the globe. Today TCS boasts of a 54,000 strong team of software consultants and it is this centre that makes this training possible. The lecturers that will be brought to South Africa will come from this academy. It is really exciting that TCS has agreed to share this expertise with us. They will support the JCSE's educational programmes aimed at promoting best practice in software engineering and creating a pool of talent that would service the needs of our country".

Mr N. Chandrasekaran, Executive Vice President of TCS says "TCS is proud of its association with the University of the Witwatersrand and with the City of Johannesburg through the JCSE initiative. I am sure that the JCSE, in association with the industries in the ICT sector, would be able to realise its vision to create a local talent pool that would enable South Africa's capacity to deliver world class software".

TCS was among the first Indian software companies to enter South Africa, in 1995. The company implemented the STRATE system at the Johannesburg Securities Exchange, has worked on numerous projects in the banking and government sectors including Barclays, FNB, SABC and is implementing an ERP system at Wits.

The agreement will be signed for TCS by Mr N. Chandrasekaran, Executive Vice President and Head, Global Operations, who is visiting South Africa, and the Vice Chancellor of the University of Witwatersrand, Prof Loyiso Nongxa, for the JCSE. This contribution from TCS is worth over R2 million, making it a "Gold Sponsor" of the JCSE.

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TCS partners with SAP in South Africa

Tata Consultancy Services (TCS), a leading global provider of IT and consultancy services, announced its partnership with SAP AG in South Africa. The agreement was signed between TCS Limited and Systems Applications Products (Africa) (Proprietary) Limited, a subsidiary of SAP.

The combination of SAP's platform innovation and TCS' pioneering Networked Delivery Model and Software Quality Excellence will provide customers in South Africa unparalleled business agility and enable them to significantly enhance the value of their IT investments. Using its proven and robust software delivery methodology, TCS has built numerous tools and proprietary assets around SAP platforms. These have led to accelerated customer-centric solutions, reduced time-to-market and significant cost savings.

The partnership in South Africa is for several key initiatives with SAP, reflecting the strategic nature of the relationship between the two companies. TCS will also leverage its manufacturing and mining experience globally to work closely with SAP in the South African market.

Mr. Maphum Nxumalo (SAP South Africa - Director Strategic Business Development) in his address said, "It was indeed a pleasure to welcome an organization like TCS to the South African SAP Partner community and SAP South Africa was looking forward to working closely with TCS."

Speaking on the occasion, TCS EVP and Head of Global Sales and Operations, Mr. N Chandra, said - "TCS has aggressive growth plans for the Middle East and Africa regions and as part of this strategy, we want to cement our global alliances though local partnerships. TCS and SAP are natural global partners and this agreement is an extension of our joint commitment to the South African market."

About TCS' SAP Practice:

TCS has cumulative SAP project experience of over 4000 person years. Over two-thirds of TCS consultants have more than 4 years of SAP experience. TCS's SAP practice operates in North America, UK, Europe, India, Singapore and Australia with dedicated solution centers. TCS has strong, dedicated Industry Practices that are powerful repositories of domain knowledge, gleaned from work done around the globe. This ensures better understanding of requirements and successful implementations by incorporating best practices, complementing SAP's own vertical alignment of solutions. TCS's SAP practice has a presence in the SAP Partner Port at Walldorf, Germany to ensure synergy in operations with SAP AG.

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