TCS and Ferrari - A strange combination or is it?

At 2 pm on race day when rubber hits the road and the world's eyes are on the race track – TCS is ready to deliver certainty with speed for Ferrari- even at 350 km per hour Cutting-edge solutions delivered with speed and precision and the constant search for excellence and innovation had led to a partnership between the makers of one of the world's fastest and most famous red car and Asia's largest software company. TATA Consultancy Services and Scuderia Ferrari have crossed yet another milestone on their journey, completing three years of a successful relationship. In 2004, in a unique initiative both the companies had come together where teams of engineers and specialists from TCS provided IT and engineering services and assist in the development of the Formula 1 racing car and the Ferrari sports car. The F1 car is the most complex and advanced car platform in the market, packing research in aero dynamics, engine technology, brakes, tyres and modelling to name just a few. An F1 car is a feat of engineering in many domains. It has more in common with a jet fighter than it does with a normal car. Experts compare it to a moving solutions platform that tests not only the stamina of the drivers but also mechanical and electronic systems that have to perform under levels of extreme stress. Goalposts shift dramatically every moment and pressure to deliver is a constant. From car electronics to safety, aerodynamics to trouble-shooting, TCS works with the F1 team to provide IT-based solutions before, during and between races. A Formula 1 entry, as part of Ferrari's technology team is a feather in the cap for TCS, showing that the Indian industry leader is now part of an elite group that is driving the future of technology worldwide. Collection and processing of millions of data elements with speed and accuracy is daily business at Scuderia Ferrari, the Maranello, Italy-based home of the car manufacturers. While glamour and speed is what attracts millions of viewers to the races, a lesser-known fact is that increasingly, TCS has also delivered cutting edge engineering solutions to several customers in Europe in the automotive, aerospace, heavy engineering and automation domain. TCS remains the first and only Indian company to enter the F1 stadium alongside the most famous occupant of this global arena.

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TCS: First Mover In India - CEO speaks to Forbes.com

To what extent and for how long will you and the industry be able to weather the impact of the rising rupee [which has appreciated over 8% against the dollar since January]? What do you expect from the government on that front?
The rupee's appreciation vis-à-vis the dollar is definitely of concern to the industry and TCS. Hedging is a mechanism by which you cover your losses. We've done that fairly well in the last quarter. But because of the mechanism and costs involved, we can only go to a certain point. So anything below 43 rupees vs. the dollar will continue to worry us.
To what extent the government will succeed in the short term in addressing inflation will determine how the rupee's rise will play out. The industry has expressed its views on a number of policies, and we've said what interventions are possible from our perspective.

TCS has a huge workforce, to which you're adding substantially every quarter. What percentage is global and how much is that going to expand in the next few years?
We have a network model where we deliver from multiple global locations, including Uruguay, Chile, Mexico and China. It's becoming a scale play even outside the country. At present, 9.6% of our employees are from other nationalities; it'll grow to 10.5% in two years.

We're hearing so much about the talent crunch today. What are you doing to attract and, more important, retain employees in India? How much is the fight for talent contributing to rising costs per employee?
The war for talent will only get tougher. [In India] the demand is not from IT alone--there are also industries like retail, financial services, banking. The brand which TCS has built has some attraction for young graduates. The number of colleges we go to in India alone each year just crossed 300. We've been successful in ensuring we get invited [to campuses] early in the game. We also engage students through summer projects, training and have strong ties with the faculty. We have centers of excellence on campuses, fund projects there.
Having gotten people from campuses, the second level is the quality of work, what kinds of opportunities they have. We have a dedicated [two-month] training program for all new employees. Experienced professionals have two-week trainings every year. Our attrition rates are 11.3%, way below the industry average. We trained 32,000 professionals last year.

What are your favorite global locations for TCS centers? Why?
North America tops the list because of its proximity to our customers. Another favorite is Uruguay, from where we are able to address European and North American requirements and cater to companies that need Spanish capabilities support. Canada is another asset.
In China, we can address the domestic as well as Asia-Pacific market. Countries in Eastern Europe and Africa help us to identify talent and draw professionals. They want us to employ their graduates. And in India, tier-two cities are definite destinations of the future.

There's growing interest from global firms in setting up captive centers in India. For how long will our infrastructure and talent pool be able to sustain that?
This will be one of the mechanisms global corporations will adopt for their own strategic reasons. They see India as a good destination, but the size of such centers will not exceed a couple of thousand employees. And some global majors also exit these centers after a certain period of time. Some will never have captives. Most companies realize their main brief is to run their business rather than run their IT capabilities. The bigger portion [of their technology needs] will always be outsourced.

What keeps TCS ahead of the competition? What do you do that makes the firm unique?
The experience of the last 38 years is a very clear and powerful differentiator. We're present across geographies. We do strong deployment of capabilities in the domestic market, where 12% of our revenue comes from. Our ability to handle large turnkey, total-responsibility projects is also a very important differentiator. Another factor is, we've integrated our global workforce and reached out to markets that are far beyond traditional non-English-speaking markets. We did it successfully in Uruguay and China. We're a global player with a global presence.

How will a reduction in discretionary spending in the U.S. affect TCS and the industry as a whole? Is a global slowdown good for Indian tech growth?
When discretionary spending gets reduced, that plays out well to our strategy and the India strategy, because of our ability to take costs out through process improvements and by shifting from high-cost to low-cost locations. We provide value-added, low-cost arbitrage for firms. The ability to ramp up in offshore locations rapidly is a dimension we bring in.
But I don't see any such indication of a slowdown in spending as we speak. About 18% of our revenues last year came from new services that we launched.

Opponents of an increase in the H1-B visa cap argue that since Indian firms file the highest number of those applications for visiting Indian professionals, the program isn't really being used to retain talent. Is that a fair argument?
To us, whether the number of visas gets increased or decreased or stays the same, we look at our business model differently, where we should not be dependent on just the movement of people from here to there. How do you localize, globalize, how do you hire the locals as well as distribute the workforce, not just in the U.S. alone. We view this in totality. We don't make recommendations saying, "Increase the number of H1-Bs...we're having problems."
Our whole view is the mobility of employees, and the ability to execute projects in any part of the world, is going to be critical for any global company, whether you go for one year or a couple of weeks. The same is for whether a U.S. company needs access into India or any other country. That's the way we need to look at this, rather than as a U.S. "visa situation."

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Some like it hot: India's invader - An article on the Tata group

When Jamsetji Tata, perhaps India's most revered industrialist, aired the idea of starting the subcontinent's first steel mill in 1907, Sir Frederick Upcott, the British commissioner of railways in India, seemed to think it was no more than hot air. He is said to have remarked at the time that he would "eat every pound of steel rail" the plant produced.
So executives at the Mumbai headquarters of Tata Steel, the country's largest steel producer, could be forgiven a chuckle after the board of Corus, the former British Steel, recommended Tata's audacious £5.1bn bid last week. If shareholders back the offer, the deal will be worth more than three-quarters the combined value of all previous foreign acquisitions by Indian companies.
Yet Tata Steel is just a small part of the massive empire of Tata Group, which numbers more than 100 companies and is now pursuing an aggressive push beyond its domestic borders. It is virtually impossible in India to get through the day without somehow adding a few rupees to Tata's coffers. Cup of tea? How about a drop of Tetley, which the company bought in 2000, served in a mug made by Tata Ceramics? How about a holiday? Try a stay in one of the five-star properties run by the Taj Hotels and Resorts, the country's largest luxury chain and also part of the group. The heaving streets of Mumbai are clogged with cars and trucks made by Tata Motors; the new skyscrapers puncturing the city's skyline are built with Tata Steel.
The group, which was started as a trading firm by Jamsetji Tata in 1868, today accounts for 2.5 per cent of India's GDP. It is majority owned by a Tata family trust that funds a range of initiatives including hospitals, universities and disaster relief.
Yet for all its ubiquity at home, Tata is still relatively unknown abroad. Until now. If the purchase of Tetley, once famous for its Yorkshire "tea folk" marketing campaigns, was its coming-out party in the UK, the offer for Corus, a company four times the size of Tata Steel, is its coming-out to the world.
Under the 68-year-old Ratan Tata, who took over as chairman in 1991, the group has been an active buyer of businesses, but these have generally been small. Now, fuelled by an economy that Standard & Poor's predicts will grow at 7.5 per cent annually for the next few years, and by a sudden willingness on the part of international banks to lend to acquisition-minded Indian enterprises, Tata is looking beyond its borders like never before.
None of the group's sprawling portfolio of companies encapsulates its growth and ambition more than Tata Consultancy Services (TCS). Already the largest of India's booming information technology outsourcing companies, it writes software, runs call centres and manages back-office systems for an array of big international names, including Virgin Atlantic and Alliance Boots in the UK, and Lehman Brothers and retail giant Target in the US. It accounts for roughly half of the group's $49.1bn (£26.1bn) market value and has set itself the goal of growing annual turnover from $2.9bn last year to $10bn by 2010.
To do so, TCS is in the midst of a massive recruitment drive. Within the next 12 months, it expects to hire 30,000 engineers - more than a third of its current workforce of 78,000 - at a rate of around 100 people every day. While some critics worry about such breakneck expansion, bigger rivals such as IBM and Accenture are pushing into India and domestic competitors Infosys and Wipro are growing at similar rates. And for now the market loves TCS, giving it about the same market value as Accenture, though the latter has six times the turnover.
S Ramadorai, the avuncular chief executive, who started at TCS over three decades ago as a trainee engineer, acknowledges the scale of the task but exudes complete confidence that the plans will work. "Our biggest challenge is managing growth," he says in an interview at his 11th-floor office in the Air India building in Mumbai. (JRD Tata, an aviation enthusiast who led the company for five decades after Jamsetji died, started Air India. It was later nationalised by the Indian government.) "It does get harder day in and day out, but then good companies will always attract the numbers."
Much of the growth will come in the city of Chennai, a technology hub where many international and domestic firms have set up shop. After a job fair earlier this year, TCS received over 26,000 applications in one day. Using the kind of automation software it sells to clients, it whittled down the pool to 13,000 candidates, who were then tested. A week and a few thousand interviews later, it offered jobs to around 1,000.
Wages for Indian engineers are on the rise and the number of companies providing similar services is increasing. As that happens, the cost advantages enjoyed by TCS and its ilk will erode. So the company is betting that the future lies in a shift of focus from low-cost outsourcing to hi-tech innovation and consulting, which can be sold at a premium to Western clients.
Like much of Indian industry, TCS is in transition: instead of making someone else's widgets, it wants to design them. For example, it is putting the finishing touches to an airline innovation lab in Chennai, where executives can walk into a room mocked up as the interior of a commercial jet and test-drive new software or any other ideas the company is coming up with.
Ramadorai says TCS is open to more acquisitions "when it makes sense", but that it will not buy companies that might dent its chunky 25 per cent margins. TCS looked at Vertex, the call-centre business now being auctioned by United Utilities in the UK, but walked away because its 3 per cent margins were too low. Instead, it is scouring low-cost markets such as South America and Eastern Europe.
Analysts expect TCS to list in either the US or London within the next couple of years as a way of increasing its profile and beefing up its balance sheet.
Yet looking out from the top floor of one of TCS's innovation centres on the "IT highway" - a road through Chennai that houses numerous technology companies - one can't help but be struck by the obstacles that stand before it. The IT highway, for one thing, looks anything but.
Across the street from TCS's sleek brick-and-glass building, which would not be out of place in Silicon Valley, a naked, emaciated child squats defecating on the side of the road. The highway is flanked by thatched huts and open ditches, while motorised rickshaws jostle among the tangle of cars and cows on the potholed road. The government promised years ago to improve the thoroughfare, but roadworks lie abandoned. Criss-crossing the city is an unfinished elevated railway system, the empty stations serving as temporary shelter for the homeless.
In contrast to China, where big infrastructure projects are relentlessly pushed, things here move at a glacial pace. "In the next few years, they need to build a lot more roads, a lot more ports, a lot more everything," says Standard & Poor's analyst Ping Chew. "When they build new highways, they're almost coming to capacity as soon as they are done."
Whether or not such projects get off the ground, Tata is used to the government being more hindrance than help.
Consider the story of the Taj Mahal Hotel in Mumbai, a palatial building on the waterfront. In the early 1900s, Jamsetji Tata was already a successful businessman, yet he was, so legend goes, denied entrance to a British hotel because he was Indian. So he decided to build his own. When it opened in 1903, the Taj Mahal was the first hotel in India to have electricity; it remains the group's flagship property.
"There is a very strong pioneering sprit here," says one TCS executive. "We all grew up with Tata soap and Tata shampoo." And if the group has its way, Tata will become a hosehold name in the rest of the world too.

Source:The Independent [22 Oct 2006]

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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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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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A Hindustan Times exclusive interview with CEO

TCS has a market cap of over $16.5 billion and yet it is acquiring small companies of less than $50 million. Where do these acquisitions fit into your global delivery model?

We are doing this by design. The acquisitions are meant to scale up the global delivery model. Size is not important. The important aspect for an acquisition is what value addition does it bring to the table in terms of domain knowledge, geography or its clientele. We have categorized six verticals or bubbles in TCS — IT services, business process outsourcing (BPO), engineering and industrial solutions, package enabled solutions, consulting and infrastructure services.

Going forward, one has to separate between voice and transaction based services which is why we divested from voice (Intelenet) before the IPO. Using technologically intensive modules, the future is in platform based, domain based, transformational based and transactional based services. The recent multimillion dollar with the Pearl Group is to achieve this end. Pearl has 13 platforms which is a most inefficient way of operating. We will rationalize their systems and create a single platform and take a thousand plus of their people and bring them into our fold. The Pearl Group has four million of the closed books in the insurance and pensions space, worldwide, there are 75 million of these available.

The recent Joint Venture (JV) with SBI and the acquisition of FNS will kick start our product space foray. The deal in Chile is a bolt onto the Pearl deal. It gives us a toehold in the life and pension area and credit cards space in South America.

You mentioned that you are adding 1,100 personnel from Pearl Group, where is TCS headed in terms of employee numbers?

The CMC absorption means an addition of 3,300 employees, the integration of Tata Infotech another 3,200, while FNS has seen us add 190 and the Chile operation will add 1,200 people. This means that very quickly we have added close to 8,000 people and this we have done hitting the road running.

We have seen CMC and Tata Infotech adding mass to TCS in different ways through a collaborative model and a merger, what does it mean for the Tata group?

We are going to leverage Tata group companies' strengths to bring comprehensive solutions for our global customers at competitive prices. In addition, we are in the process of amalgamating all the different platforms into one, which will help us in offering best of breed and best in class services at a comparable price.

TCS is aggressively exploring opportunities in the remote network and infrastructure management domain. For this we are going to use the bandwidth of VSNL or Tyco or Teleglobe. Similarly we are going to use the servers of one of the companies. Depending upon the requirements of global customers, the utilities of these services will help us in bringing down the cost. While at the same time increase the efficiencies and dependability as well as quality of services.

In fact, TCS has put in a lot of effort to bring seamless synergies with various vendors and other group companies like Tata Technologies, Tata Elxsi and others. It is a collaborative model where all the companies will benefit. Our go to market strategy incorporates leveraging all our assets all over the world.

What is the differentiator or USP for TCS? Is it price competitiveness?

Let me make it clear that the labor arbitrage model is history. Indian companies are providing end to end solutions. We are not merely a low cost hub, we are much more starting with research and development to service delivery to product delivery. We compete on the global canvas not because of price alone. Though price is an important ingredient, it is not the sole criteria. There are a host of other reasons that goes in favor of India like credibility of delivery on or before time, offering a comprehensive solution that helps these companies in achieving higher productivity.

Since a reasonable number of Indian IT firms has either crossed the billion dollar mark or is poised to do so, they are being viewed as more credible with long-term longevity. That helps us in partnering with some of the global leaders even for critical operations. Each Indian tech company will evolve in its own way - some will be product facing, some engineering, some BPO facing — we have to make sure that depth and breadth of IT is covered by us.

What about merger with other group firms?

No more mergers. The buck stops here. Basically it is the issue of synergies. All the group companies in the technology space have their own space. It is better to have a collaborative model than to go in for a merger.

Given the kind of growth rate you have registered in the recent past, where do you see TCS in the next three to five years in terms of revenues?

It is difficult to give you a number. But our aspiration is to double the turnover every three years through organic growth. While doing so we would also like to ensure our margins should increase or at least remain protected. In fact each of the six bubbles should give us revenues of half a billion dollars in the next three to five years.

Last year, when TCS was listed on the Indian bourses, we were told that TCS would be listed on the US bourses after one year. When is this going to he happening?

We have planned to list overseas, but as of now there is no dialogue. It is difficult to hazard a guess on a timeline. We will be deliberating on this in our board and let you know.

But what is the purpose of an overseas listing?

Let me clarify that an overseas listing would not be for the purpose of raising funds. TCS is a global company. The intent of listing on the overseas market is to create visibility in that local market, which in turn helps in building new businesses. Secondly, it helps the company in hiring and retaining locals as it is easier to give Employee Stock Options (ESOP) to them once you are listed there.

Source: Hindustan Times 29 Nov 2005

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TCS Awake and hungry

Savour a few contradictions. Tata Consultancy Services (TCS) is slow. TCS is old-fashioned. And TCS will have $3-billion revenues by March 2006 - a full $1 billion more than that of nearest Indian rival, Infosys Technologies.

Over the last seven months, the Tata group's flagship IT company has bagged global outsourcing contracts worth $1,457 million and pushed through acquisitions valued at $50 million. When it closes its accounts for the financial year, these moves will have translated to a $600-million rise in the company's top line, propelling revenues to the $3-billion mark. That's barely three years after it hit $1 billion. Clearly, the company that pioneered the factory model of Indian IT services nearly two decades back is in a hurry to go somewhere. CEO S. Ramadorai quantifies the goal: $10 billion by 2010.

This week, the TCS deal run continued with the acquisition of Chilean BPO firm Comicrom for $26 million. Though a small acquisition, the deal will give the company's BPO business a foothold in the Latin American pensions processing market and add to the critical pensions and insurance BPO skills that TCS has started building. [The $847-million Pearl deal was the first step towards that.] The Comicrom deal comes just two weeks after the $23-million acquisition of Australian banking solutions firm FNS in late October, which TCS bought to augment its products business. Ramadorai intends to maintain the deal momentum. "Over the next two years, growth through acquisitions will become very important for TCS," he says.
TCS's recent moves have certainly perked up the markets. As the stock charts show, the TCS share price has gained significantly over the last nine months. As on October 2005, while its earnings per share (EPS) was trailing Infosys by a fair margin at Rs 59.1 per share (Infosys is at Rs 92.2 per share), in terms of P-E (price-to-earning) ratio, the gap in valuations is quite small. Infosys is trading at a P-E of 29.1, while TCS is at 24.8.

Acquisitions, though critical, is just one component of the 2010 growth strategy being spearheaded by TCS's core think tank - N. Chandrasekaran, executive vice-president (global operations), S. Mahalingam, executive vice- president & CFO and S. Padmanabhan, executive vice-president (HR) at the company's corporate headquarters in Mumbai. The plan to reach $10 billion assumes a complete overhaul of the company's internal processes and businesses, and big jumps in organic growth. Much of the overhaul process has been under way since 2000, and the job is about half done. "In three years, TCS will look like a very different company," says Chandrasekaran, second-in-command to Ramadorai and dubbed internally as CEO-in-waiting.

If TCS does get to $10 billion by 2010 - and that is still a huge stretch target - it will redefine the global pecking order of IT services players (see 'Sizing up the Competition'). It will place TCS at the same high table that is today occupied by IBM Global Services, HP Services, EDS and Accenture. It would make TCS a prime contender in the $1billion-plus order game. It would, in effect, make TCS the first Indian global IT superpower. But for that to happen, it needs to clock growth rates of over 40 per cent year-on-year for the next five years, while the global Top 10 are averaging at 8-10 per cent a year today. The TC Strategy Think Tank.
Can TCS really reach that exalted status? A couple of years ago, the answer would have been no. After two decades in the business, TCS seemed to have lost its growth momentum. Younger rivals like Infosys and Wipro were growing much faster and had almost caught up with TCS in terms of revenues. Worse, both Infosys and Wipro had spotted new growth avenues, while TCS was still stuck with its old legacy businesses.

Making Up For Lost Time

In March 2003, TCS revenues scaled $1 billion. It was a notable milestone no doubt, but the sheen wore off in no time. A year later, Infosys also crossed $1 billion in revenues. The Bangalore-headquartered company had taken much lesser time to scale the heights that had taken TCS over 20 years to climb. Infosys was joined by Wipro and Satyam Computer the same year.

Source: BSE

In early 2004, TCS was beginning to look like a has-been. With 24,168 people on its rolls, close to 20 global development centres, and multiple service capabilities, TCS could still boast of being a more complete company in terms of services and geographical depth than any of its peers. But it had some glaring weaknesses. To begin with, the company's topline growth rates were barely at 20-22 per cent year-on-year, while Infosys and Wipro were clocking steady 35-40 per cent per annum growth rates. TCS's offshore-onsite revenues were also lopsided in favour of onsite 40:60, which meant lower margins. Despite an impressive breadth of service capabilities, it did not have a presence of note in new growth areas like remote infrastructure services, BPO and consulting. Traditional application and maintenance work accounted for over 70 per cent of its revenues. All these factors began to gain prominence as TCS edged closer to its public listing.
Meanwhile, Infosys had chalked out a very clear model for chasing growth. It had a five-year plan to look at the big targets, a three-year model to set strategic targets for each business division, and a one-year goal to address immediate revenue and profit targets. It was looking at $2 billion by 2005-06, and seemed well on its way to achieve that goal. It had kicked off a complete overhaul of its businesses that saw it re-organising along verticals. And it had taken the lead among Indian players in building up the consulting business.

Meanwhile, Wipro was moving equally fast to grab two very different growth opportunities - infrastructure management and BPO. In BPO, Wipro had taken a head start with the acquisition of Spectramind in 2002. It was among the first Indian firms to bag some of the bigger outsourcing contracts, the $80-million Lattice contract.

Though TCS seemed to have fallen asleep, it was actually preparing the base for the spectacular acquisitions and deals that have started rolling this year. In fact, the agenda to propel TCS into the global big league by 2010 was being formulated in April 2000.

Perhaps it was the top management's preoccupation with its impending IPO in 2004 that was slowing the company down. The TCS management is still highly centralised and the strategic decisions are still taken by just four men at the headquarters. Analysts point out that the Tata company will have to address this issue if it wants to become a global company.

At any rate, things speeded up dramatically after the IPO, and the TCS team went on an acquisition and deal- closing spree. One analyst points out that after the IPO, TCS was also under much more public scrutiny than it was as a private company. And that added its own pressure for the team to roll out the ambitious growth plan quickly.

At the core of TCS's Vision 2010 is, what it calls, its 'five-bubble' strategy. It has identified five strategic growth areas - consulting, BPO, infrastructure management, products, and engineering services - which will play a key role in powering its growth to $10 billion. "Each of these businesses will have revenues of $50 million-$200 million by the end of this fiscal. This excludes growth by acquisitions. We see each of these businesses growing to $500 million-$1billion over the next 3-4 years," says Chandrasekaran.

At present, engineering services and infrastructure are its fastest growing areas and will be closer to $200 million in revenues each by the end of this fiscal. In fact, engineering design and services is one of the areas where TCS has a big edge over its domestic rivals. Wipro and Infosys do some work in product and chip design in areas like mobile interfaces, but TCS has the widest breadth of services and a big team of 2,000. It does high-end work in aerospace design and has a large presence in industrial design because of its strong domain focus on the manufacturing sector. Manufacturing accounts for 20 per cent of TCS's revenues and engineering design accounts for 30 per cent of that. An industry veteran points out that these will be critical growth areas for IT service companies in the next few years. Apart from TCS, no Indian firm has any competency in these fields.In infrastructure management though, TCS is still lagging behind Wipro. Globally, infrastructure outsourcing is the space in which most big-ticket deals happen. Companies like IBM and EDS dominate the infrastructure space which also brings in the multi-billion dollar deals. Here, TCS realises it has a huge gap to cover.

Till the beginning of the year, TCS seemed to lack focus in the BPO segment. Wipro and Infosys had taken big strides already. But the recent Pearl outsourcing deal and the Comicrom deal have changed that picture. The Pearl deal was important in terms of the revenues it would add to the BPO business - £60 million (over $100 million) by the end of the year. But it was more than just a big deal for boosting the topline. The real importance of the deal lay in the fact that the Pearl group had built up 13 process platforms to manage its pensions, life and administration services. This was what TCS really wanted - and the reason why it agreed to absorb the 950 Pearl employees. Similarly, Comicrom was attractive to TCS not just because it gave a toehold in the Latin American market but also because it operated in the pensions space - an area TCS hopes to dominate.In consulting though, TCS has not done anything spectacular so far. Unlike Infosys, TCS has not yet carved out the consulting practice as a separate company. That's because Ramadorai says consulting has been embedded into TCS' services all along.

--Sources : Businessworld

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