CHAPTER 7: TATA CONSULTANCY SERVICES (TCS) LTD. CASE STUDY

.15

7.1 INTRODUCTIONJ.R.D. Tata’s brother-in-law. Colonel Sawhney initiated the need to do develop a team to

cater to Tata group’s data processing needs. He suggested developing a separate unit and JRD

agreed to do so. Around 1969, TCS team decided to project itself as management consultants.

This move opened tremendous opportunities to it. Interestingly, when the western

management consulting companies were diversifying to IT services, TCS began with data

processing and moved on to management consulting. The management consuhing positioning

helped TCS to establish itself as intellectual leader. TCS pioneered offshore projects concept

during the period 1974 to 1976. Around same time, 90% of project costs were hardware costs

while software costs were 5% and people costs were 5%. Today, the parameters are reversed.

Hardware costs are 5%, people costs are 50%, and software costs are 45%. First outsourcing

contract TCS did for Burroughs for $24,000. Around 1979, TCS became the first Indian IT

software and services company to obtain a permission to set up an overseas unit in New

York. TCS used case study method as a tool in its strategic decisions. TCS began working

with overseas operations and then started to cater domestic India market. This was because

there was no domestic market in India when TCS was started around 1965. TCS sold India

story along with selling the software services for around initial 20 years. Around the year

2001, TCS observed that their customers in US, Europe, and UK started to look at emerging

markets for growth. TCS rightly observed that their clients would need IT support to set up

operations in the emerging markets. TCS focused on China, Eastern Europe, and Latin

America. The plan was to support existing clients and access growth hungry local companies.

In US TCS started setting up office in client cities and then the local managers went after

local business opportunities. TCS also went to countries wherever Tata Group companies

were present. For example, TCS could start its UK operations in 1977 since Tata Limited was

already there. Europe was tapped since the initial client Burroughs European operations

needed service that TCS was giving. Around 1982, TCS started exploring Austria, New

Zealand, and Japan. Observed slow growth in these regions but still established one-person

offices for future opportunities. The fruitful geographic expansion started around year 2000.

TCS used Latin America as a testing ground for its emerging markets strategy. Uniqueness to

TCS comes from things as it followed organic growth for first 30 years o f its existence. It

acquired CMC around 2001. This acquisition helped TCS to increase its footprint in domestic

CHAPTER 7: TATA CONSULTANCY SERVICES (TCS) LTD. CASESTUDY

116

market and provided capabilities to bid for big government and public sector contracts. At

that time, 83% of CMC’s revenue came from domestic Indian market and hence other Indian

IT companies were not interested in the acquisition.

IM PO RTA N T M ILESTONES

1971

1974

1981

1981

1996

1998

2003

2004

2006

2008

2008

2009

1965 Creation of the Tata Computer Center

1968 Incorporated as a separate entity

First programming assignment in Iran

First software export project out of India for Burroughs

Wins first software export award from the Government of India

R&D Centre TRDDC set up in Pune

First software factory in Chennai for Y2K remediation

Revenues cross Rs. 1,000 crore

Revenues cross $1 billion

Goes public

Brand launch of the ‘Experience Certainty’ campaign

Realises its vision of becoming a top ten global player on

multiple parameters

Revenues cross $5 billion and profits cross $1 billion

Revenues cross $6 billion

TAB LE 19: IM P O R TA N T M ILESTONES C H R O N O LO G Y

17

7.2 STRENGTHS, W EAKNESS, OPPORTUNITIES, AND THREATS (SW OT) ANALYSIS

STRENGTHS1. Biggest Indian IT company

2. Earliest start compared to its Indian peers

3. Tata group backing

4. Pioneered offshore projects

5. International experience since beginning

6. Sold India story for initial 20 years, this helped its Indian IT peers.

7. Tata groups global presence helped in new market entry

8. Followed organic growth for initial 30 years

9. Acquisition o f CMC provided huge access to domestic market and scale

10. Young and dynamic leader

11. Successful and long term leadership pipeline

12. Non linear growth on top o f agenda along with growth in emerging markets

13. Integrated full service model which is solution to its clients problems and IP is also

developed

14. New focus area o f SMEs

15. Actively involved with NASSCOM and CII

16. Established process to percolate the strategy through think tanks

17. Visionary board

18. Consulting led focus

19. Identified geographic growth strategies as one aspect of overall strategy

20. Realised 2008 downturn in 2007

WEAKNESSES

1. May need to optimise on human resource utilisation

2. May take more time to change compared to its competition due to large size

OPPORTUNITIES

1. Scale up beyond the obvious growth levels

2. Develop the brand globally

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THREATS

1. Uncertainties in global economies as a risk

2. Country level risks

3. Competition developing niche skills and expertise

The company’s huge size in terms o f number o f employees and revenues plays important role

in developing strengths. The size strength inherently provides weakness if not being as

nimble as a niche small competitor does. The opportunities are tremendous since the global

market is huge. The threats are obvious dues to size and spread o f the company’s business

internationally. These all have direct impact on composition and direction o f exports o f the

company.

The current CEO of the company, N. Chandrasekaran, known as Chandra is charting growth

of this big behemoth o f Indian IT industry. Chandra is carry forwarding a legacy o f F.C.

Kohli and S. Ramadorai. Chandra probably is knows that the advantage o f head count can

turn you upside down in changing business and economic scenarios. Like its other Indian IT

peers, non-linear growth is on top o f its agenda. Chandra comes from a head on projects and

client focus kind o f a person. He did successful stints in US, U.K., and Europe. The

developed markets for IT services. There are lot o f stories as to how he helped other project

and accounts managers to bid and grow their client accounts. He also worked as executive

assistant to S. Ramadorai. Chandra’s leadership style is smart and objective. As a head of

global sales, he established company’s business in China, Europe, and Latin America. It was

Chandra’s initiative to tap Small and Medium-scaled Enterprises (SMEs). As an executive

assistant to S. Ramadorai, Chandra developed TCS’s into business units. These units were

given mandate to increase its revenues. This also fuelled entrepreneurship spirit within

employees. Chandra device integrated full service model to combat head count based

revenues. The model will provide business solution to the client.

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The solution would include:

• Designing software

• Develop software

• Manage software

• Maintain hardware systems

• Manage business processes

The model provides opportunity to the company to own the Intellectual Property (IP) and use

it as a solution to its other customers.

Another agenda on Chandra’s list is to move beyond traditional markets to emerging markets.

When he became CEO in 2009, he had growth as its primary agenda. The strategies to

achieve it were:

• Focus on top 2000 companies in established markets by utilising full service model as

a solution to address client problems

• Help its customers to globalise

• Invest in new markets like South America

• Targeting SMEs by offering IT services on monthly rental basis

Responsible for formulating and executing the company's global strategy, Chandra has been

at helm o f several key strategic transitions at TCS since 2002 when he took over the role as

head o f global sales. In his previous role as Chief Operating Officer, he was the architect of

the new organization structure unveiled in 2008, which created multiple agile business units

focusing on domains and markets as well as built strategic business units in order to pursue

new initiatives with the ability to invest, develop and mature new ideas.

Under his leadership, TCS pioneered the creation o f its unique Global Network Delivery

Model (GNDM'^'^) across five continents and ventured into new markets including Europe,

China and Latin America. It added new business lines like BPO, Infrastructure and Assurance

services. 'Chandra has also driven the domain diversification drive that has seen the company

enter new verticals like Media and Information Services as well as Hi-tech. All o f these have

matured into sizeable businesses under his mentorship and guidance.

Chandra personifies TCS’ commitment to customer satisfaction and high quality o f

deliverables. Through his experience in a variety o f operating roles across TCS, he has built a

reputation in the IT services industry for his exceptional ability to build and grow new

businesses and nurture long-term relationships. He has also been a champion o f software and

business quality for the industry. Chandra represents TCS on several global and local forums.

120

He is a member o f Executive Council, National Association o f Software &. Service

Companies (Nasscom) and a senior member o f the Institute o f Electrical and Electronic

Engineers. He is on the board o f Tata Business Support Services, as well as many TCS

subsidiaries. Chandra joined TCSL in 1987 after completing his Masters in Computer

Applications from Regional Engineering College, Trichy, and Tamil Nadu in 1986. He also

holds a Bachelor o f Science in Applied Science fi-om the Coimbatore Institute o f Technology,

Tamil Nadu.

7.3 ABOUT TCSTata Consultancy Services (TCS) is an IT services, business solutions and outsourcing

organization that delivers real results to global businesses, ensuring a level o f certainty that

no other firm can match. TCS offers a consulting-led integrated portfolio o f IT and IT-

enabled services delivered through its unique Global Network Delivery Model™ (GNDM™),

recognized as the benchmark o f excellence in software development. TCS is part o f the Tata

group, one o f India’s largest industrial conglomerates and most respected brands. TCS has

over 198,500 o f the world’s best-trained IT consultants in 42 countries. Financial

Information, Revenue o f $8.2 billion as o fiscal year ending 31 March 2011.

Awards

• TCS awarded 2009 SAP Pinnacle Award

• TCS mKrishi wins Nasscom Social Innovation Honors 2010

• TCS wins Golden Peacock Award 2010

• TCS wins 2010 Global Most Admired Knowledge Enterprises (MAKE) Individual

Operating Unit Award.

TCS is the world’s first organization to achieve an enterprise-wide Maturity Level 5 on

CMMI® and P-CMM® based on SCAMPISM, the most rigorous assessment methodology.

TCS Integrated Quality Management System (iQMS'^'^) integrates processes, people and

technology maturity through various established frameworks and practices, including IEEE,

ISO 9001: 2000, CMMi, SWCMM, P-CMM and Six-Sigma.

Features like TCS’ GNDM^"^, Solution Accelerators, Innovation Network and other

capabilities set us apart. TCS has a strong network o f strategic and solution partners with a

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joint objective o f helping its customers become high-performance businesses by maximizing

the value o f their technology investments.

The company’s offerings are dived as services and software

Services

• IT services

• IT infrastructure services

• Enterprise solutions

• Consulting

• Business Process Outsourcing

• Platform BPO solutions

• Business Intelligence (BI) and performance management

• Engineering and industrial services

• iON small and medium business

• Connected marketing solutions

• Mobility solutions and services

Software

• TCS BaNCS

• TCS Technology Products

• Other products

7.4 INSIGHTTCS has bouquet of offerings like pay by transactions or IT partnership. TCS has global

expertise but local presence. It has 147 centres across world, profitability is 30%, and it is a

cash plus company. TCS takes active part in industry associations like National Association

o f Software Companies (NASSCOM) and Confederation o f Indian Industries (CII). At the

time o f financial backlash around 2008, the company cut down on recruitment, bonuses,

increments were modest, and exploring other markets. Importantly the company kept profits

at same level. The current revenue leading geographies for the company are US and UK.

The company sets revenue targets according to verticals and not according to geographies.

The HI visa issue did not have much effect on the company’s business. Application

development and maintenance and Enterprise systems will be having continuous demand.

The company has observed that when Gross Domestic Product (GDP) grows, IT grows. In

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BRIC countries, Brazil is not offering much opportunities and Russia is still in turmoil. The

company is expecting 20% per year increase from domestic India market. The Indian market

needs more sophistication to consume IT services.

The company has a think tank o f top leader for conceptualising strategic ideas, which are then

passed on to a leadership team. Each member o f the think tank becomes responsible for one

strategic idea and sees it through completion. The think tank is used as a vision setting body.

The think tank should deliberate on challenges and opportunities. It should be used for

driving change. The team should achieve mix o f thinking and doing.

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7.5 C O M PO SIT IO N O F BO A R D O F D IR E C T O R SFY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10

R N Tata,

Chairman

S Ramadorai,

CEO and

Managing

Director

Aman Melita

Naresh Chandra

V Thyagarajan

Clayton M

Christensen

R N Tata

Chairman

Ron Sommer

Independent

Director

A Mehta

Independent

Director

N Chandra

Independent

Director

V Thyagarajan

Independent

Director

5 Ramadorai

Chief Executive

Officer

6 Managing

Director

Laura Cha

Independent

Director

C M Christensen

Independent

Director

R N Tata,

Chairman

A Mehta,

Independent

Director

N Chandra,

Independent

Director

V Thyagarajan,

Independent

Director

C M Christensen,

Independent

Director

Laura Cha,

Independent

Director

Ron Sommer,

Independent

Director

S Ramadorai,

Chief Executive

Officer and

Managing Director

N

Chandrasekaran,

Chief Operating

Officer and

Executive Director

S Mahalingam,

Chief Financial

Officer and

Executive Director

P A Vandrevala

R N Tata,

Chairman

Prof. Clayton M

Christensen,

Independent

Director

Naresh

Chandra,

Independent

Director

S Mahalingam,

Chief Financial

Officer

and Executive

Director

Aman Mehta,

Independent

Director

N

Chandrasekaran

Chief Operating

Officer

and Executive

Director

Laura M Cha,

Independent

Director

Dr. Ron

Sommer,

Independent

Director

S Ramadorai,

Chief Executive

R N Tata,

Chairman

S Ramadorai,

Vice Chairman

A Mehta,

Director

N

Chandrasekaran,

Chief Executive

Officer and

Managing

Director

S Mahalingam,

Chief Financial

Officer and

Executive

Director

P A Vandrevala,

Executive

Director and

Head,

Global Corporate

Affairs

C M Christensen

Director

Laura Cha

Director

I Hussain

Director

R Sommer

Director

V Kelkar

Director

V Thyagarajan

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Executive Director

and Head, Global

Corporate Affairs

Officer

and Managing

Director

Phiroz

Vandrevala,

Executive

Director

and Head,

Global

Corporate Affairs

V Thyagarajan

Independent

Director

Ajoyendra

Mukherjee

VP and Head,

Global Human

Resources

Director

FY 2010-11

R Sommer, Director

S Mahalingam, Chief Financial Officer and Executive Director

I Hussain, Director

V Kelkar, Director

P A Vandrevala, Executive Director and Head, Global Corporate Affairs

A Mehta, Director

V Thyagarajan, Director

Laura Cha, Director

S Ramadorai, Vice Chairman

R N Tata, Chairman

N Chandrasekaran, Chief Executive Officer and Managing Director

C M Christensen, Director

TAB LE 20: COMPOSmON OF BOARD OF DIRECTORS

It seems Clayton M Christensen plays important part as a board member. He has shared

innovation wisdom with the company’s leadership team. Technology market map, which is a

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two-way classification o f technology and market impact dimensions o f any innovation

project, it guides project outcome around horizontal parameters:

• What is this project trying to achieve?

• Is it addressing replacement o f current product offering?

• Is it helping in selling more?

• Is it helping to reach out to new customers?

• Is it helping in creating new markets?

The vertical parameters are;

• Is the project trying to work with today’s technologies?

• Is it trying to make some incremental changes to the technology?

• Is it looking at radical next generation technologies?

• Is it looking for disruptive or out o f the box kind o f option?

Clayton defines derivative innovation as incremental change.

The company uses this model for:

• Planning

• Budgeting

• Governing

The model helps company to maintain funnel o f projects in each quadrant in the model.

Derivative projects are best run by elements, which are closest to the business. In platform

innovation, the company gets feedback from the customers. These projects are long-term

projects with 12 to 18 months period with customer and goal being visible. Such projects

become extension o f what the company does today.

In 1970s, TCS developing India centric software services was kind of disruptive and low

cost, offshore development Innovation model. The company is investing in biotechnology

like drug discovery, synthetic biology, genomics, and related areas. This is something new

for IT industry. The company got some early adopters. The company is working on a

medicine through an Indian lab on malaria. Once the medicine is invented, it will be

disruptive innovation.

Infinity was a strategic project to develop better internal communication within the company.

The company had had revamp its networks, support systems, IT infrastructure, IT telephony,

126

collaboration tools, knowledge management tools, and web 2.0 kind o f framework. It reduced

travel and communication costs. The company also uses balanced scorecard to measure the

effectiveness o f such innovation projects.

7.6 ANALYSIS AND FINDINGS“World-wide spending on technology and related products and services is estimated to have

crossed US$ 1.6 trillion in 2010, a growth o f 4.0% over 2009, with growth driven by

emerging verticals and emerging geographies in addition to USA. Global IT services spend

increased from US$ 566 billion in 2009 to US$ 574 billion in 2010. The geographic revenues

break-up for IT services was as follows:

• America’s share 43.0% in 2010 (42.8% in 2009)

• Europe Middle-East and Africa revenues 39.7% in 2010 (40.2% in 2009)

• Asia-Pacific revenues 17.3% in 2010 (17.0% in 2009)

Global Business Process Outsourcing (BPO) services spend has increased from US$ 152

billion in 2009 to US$ 158 billion in 2010. The geographic revenues break-up for BPO spend

was as follows:

• America’s share at 55.3% in 2010 (55.8% in 2009)

• Europe Middle-East and Africa revenues 25.9% in 2010 (26.0% in 2009)

• Asia-Pacific revenues 18.8% in 2010 (18.2% in 2009)

Trends in global sourcing remained positive and showed a growth rate o f 10.4% in 2010 over

2009 and the global sourcing market size was in the range of US$ 102 to 106 billion in 2010.

IT sourcing grew at 10.3% to a market size of US$ 62 to 64 billion and BPO sourcing grew at

10.6% to a market size o f US$ 40 to 42 billion. There is enough potential for growth.

Estimate of the addressable global sourcing market is in the range o f US$ 500 billion (US$

280 billion for IT services and US$ 220 billion for BPO services). (Source: NASSCOM

Strategic Review 2008 - 2011) One o f the major beneficiary countries o f the global sourcing

trend continues to be India whose expertise and capability in the area o f Information

Technology (IT) and Information Technology Enabled Services (ITES) has made it a leading

destination for global corporations looking for technology partners.

Growth forecasts for IT Services Industry

• IT services spend is expected to increase from US$ 566 billion in 2009 to US$ 684

billion by 2014 at a CAGR2 o f 3.9%.

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• IT outsourcing component is expected to grow from US$ 225 billion in 2009 to US$

239 billion in 2014 at a CAGR of 1.1%.

• IT services offshored are expected to grow from US$ 31.1 billion in 2009 to US$ 42.8

billion in 2014 at a CAGR of 6.6%.

BPO spend is expected to increase from US$ 152.1 billion in 2009 to US$ 201.5 billion in

2014 at a CAGR o f 5.8%. IT spend forecasts by global technology analyst firms like Gartner,

Forrester, IDC and others indicate a growing market for IT and ITES for industry verticals,

service offerings and geographies o f interest to the Company and excellent prospects for

growth in the future.

TCS continues to focus on serving large global clients in the major markets o f North America

and Europe including UK. The Company’s key focus in these mature markets is to grow its

wallet-share in key customer accounts by increasing the scope o f engagement. TCS is also

focused on winning new key accounts in these major markets by using its integrated full

services and GNDMTM offerings. The Industry domain and consulting led focus has enabled

the Company to push for aggressive growth. The Company has numerous multi-year

relationships established with global multinationals in these markets and continues to provide

them a muUiple range o f services. In North America, the Company has further strengthened

its local presence by focusing on growing its investments in Cincinnati, Ohio, by recruiting

local talent to support North American operations. In Europe, the Company has increased its

focus on the Western European markets like Germany, France, Switzerland, Benelux and the

Nordic region.

New Growth Markets

The Company has been investing in emerging markets since 2002-03 and has achieved scale.

New growth markets include Latin America, Middle East and Africa, Asia-Pacific and India.

TCS believes that these markets have the potential to be significant revenues drivers over the

long-term.”

(Annual Report 2010-11)

The company has observed uncertainties in global economy as one o f the risks. Slow or

uncertain recovery in the major markets or economic shocks resulting from instability in the

Middle East can affect the company or sovereign defaults in Southern Europe could lead to

1 2 8

cuts in IT budgets and result in demand compression, pricing pressure and / or increased

credit risk from vulnerable clients. To mitigate the risk, the company’s approach is:

• Diversification across geographies with focus on emerging markets

• Diversification of product and services offerings

• Building greater client intimacy by optimising operating metrics to lower their costs

• Broad-basing the number of key clients by gradually moving clients up the revenues

bands, so concentration risks is reduced.

4Aeokr

Total Revenue40.000

n . o m

30.000

25.000

20.00015.000

10.000 s.ooo

FVOS fY 06 FY07 FYOS FYOS 'Y IC F Y ll

GRAPH 17: REVENUE FR O M FY 05 T O FY 11

As can be seen from the chart, the revenue has been continuously rising. It is interesting to

note that there seems a drop in comparative revenue growth from FY09 to FYIO. This may

be because of American recession o f 2008. The jump in revenue growth from FYIO to FYl 1

probably shows the recovery from the recession.

129

COMPOSITION AND DIRECTION OF EXPORTSEvents

2005-06 Major offerings were

o IT Solutions and Services (including Application

Development & Maintenance, Systems Integration and

Package Implementation)

o Consulting Services

o IT Enabled Services

o IT Infrastructure Services

o Engineering and Industrial Services and

o Asset based offerings

Identified country level risks due to macro-economic and political

factors, to mitigate the risk, company had diversified geographic

spread

Penetrated into markets such as Latin America, Europe and Asia

Pacific including China

Acquired Comicrom S.A., a Business Process Outsourcing (BPO)

Company in Chile

Acquired Financial Network Services Pty Ltd. (FNS), a global

banking software product company based in Australia

Set up a subsidiary, C-Edge Technologies Limited with State Bank

of India (SBI) to provide certain specialized IT and IT enabled

services in the banking sector

Acquired Swedish Indian IT Resources AB (SITAR) to acquire

customers, increase market share and profitability

Acquired Diligenta, UK and entered 'Life and Pensions’ BPO

market

One of the objective in growth strategy was Establish TCS as a

leading player in new markets like China, Japan, Latin America as

well as the Middle-east and Africa

Identified country level risks due to macro-economic and political

factors, to mitigate the risk, company had diversified geographic

spread to China, Japan, Latin America, Middle-East, and Africa

130

2007-08 Service offerings:

o IT Solutions and Services

o Asset based offerings

o IT Infrastructure Services

o Business Process Outsourcing

o Engineering and Industrial Services (EIS)

o Global Consulting Services

Identified Geographic Growth Strategies as one of the aspect of

strategy

o Major Markets Strategy

o New Growth Markets Strategy: increased focus on the

growth markets of the Asia Pacific region and the emerging

new growth markets of Latin America, Eastern Europe,

Middle-East and Africa

Identified global economic environment as a risk and to mitigate,

increased diversification across geographies

Tata Consultancy Services (Africa) Pty Ltd. was set up to serve

South Africa region

Subscribed to 100% share capital of Tata Consultancy Tata

Consultancy Services Morocco SARL - AV to serve Morocco

region

Revenues in all geographies was growing and dependence on

Americas was reducing relatively

TABLE 21; EVENTS IN C O M P O S m O N A N D DIR ECTIO N O F EXPORTS C H R O N O LO G Y

131

FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11

GRAPH 18; REVENUE FR O M FY 2005-06 T O FY 2010-11

Revenue was on the continuous rise, percentage drop in revenue in FY 2009-10 may be because o f 2008 American recession.

25000.00

20000.00

15000.00 f

10000.00 4-

22863.00

5000.00

0.00

18685T21

FY 2005-06 FY 2006-07 FY 2007-08

GRAPH 19: REVENUE FR O M FY 2005-06 T O FY 2007-08

Revenue showed steady rise until FY 2007-08. This was the period post recovery from 2001 recession.

132

FY 2008-09 FY 2009-10 FY 2010-11

GRAPH 20: REVENUE FR OM FY 2008-09 T O FY 2010-11

Slight revenue drop in FY 2009-10 was probably because of American recession o f 2008.

The global meltdown took some time to recover. For the company, recovery could have been

quick since it diversified into different geographies.

70

60

50

40

30

20

10

9.2 59.06

- 5 * 4 3 - "50^5-------52.80 53.87

718 ] 46 B lV lid d le East a n d A frica

■ N o rth A m e ric a

■ UK

■ Eu ro p e

■ India

— B -A sia Pacific

■ Iberoannerica

O th e rs

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

GRAPH 21: D IR E a iO N O F EXPORTS FROM Pi 2004-05 T O FY 2010-11

It is evident from the chart that dominance o f the US in revenue share is decreasing

continuously. Similar is the case with revenue from UK, it is also declining. Probably the

133

sharpest decline in revenue is from Europe. Revenue from India is also on slight decline.

Revenue from Iberoamerica is on flat growth. Revenue from Asia Pacific was on continuous

rise. Revenue from Middle East and Africa showed slight growth.

70

59.260 ‘

50

59.06

50.35

40

30

20 -1

10

■ N o rth A m e ric a

■ UK

s E u ro p e

■ India

■ Asia Pacific

■ Ib e ro a m e ric a

■ M id d le East an d A frica

■ O th e rs

2004-05 2005-06 2006-07 2007-08

GRAPH 22: D IR E a iO N O F EXPORTS FR O M FY 2004-05 T O FY 2007-08

Specific FY 2004-05 to 2007-08 data shows US and Europe revenue on decline. UK and

India also shows slight decline in revenue. Revenue from Asia Pacific, Iberoamerica, and

Middle East and Africa showed gradual revenue growth.

60.00 T----------------------------

50.00

40.00

30.00

20.00

10.00

0.00

51.38 52.80 53.87

I N o rth A m e ric a

I UK

I E u ro p e

I India

2008-09 2009-10 2010-11

GRAPH 23: DIRECTION OF EXPORTS FROM FY 2008-09 T O FY 2010-11

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Revenue from US and India showed continuous growth for the period FY 2008-09 to FY

2010-11. Revenue from UK showed sharp decline while revenue from Europe showed slight

decline.

The company realised downturn o f 2008 in December 2007. Few o f its customers stopped

business and company thought it to be exceptions, but found it as becoming a pattern. To

overcome the downturn, the company restructured itself and became customer focused. The

company pushed paddle o f efficiency. The company started being more close to the customer

and proactively asked for areas where it can help them. Interestingly, the company did not

lose a single client. The company learned that in downturn it should not emphasise much on

following big deals, as those typically are delayed or cancelled.

135

7.7 CONCLUSION AND IMPLICATIONS OF FINDINGSThe company’s U.S. business shrank in 2008, overall for the past five years since 2009, it has

been growing approximately 25% on a compounded basis. The company understood that

focus is required on emerging markets like India, Latin America, and China for growth

opportunities. It also understood that growth in emerging markets could not compensate for

the contraction in demand from U.S., U.K. or Europe.

The company offers end-to-end IT services. Its dominance in IT business amongst IT

companies in India is remarkable. The company started its journey very early in India. The

company’s revenue shows remarkable contribution o f its domestic Indian market unlike its

peers. The company’s percentage revenue growth slowed in FY 2009-10. This dip in growth

may have happened because of American recession o f 2008.

The company had actively diversified its geographic presence. It had identified geographic

concentration o f revenues as a risk. This can be observed through change direction of

revenue. Share o f revenue from UK and US in terms o f percentages has been decreasing

gradually. There was sharp decline from revenues from Europe. This trend shows saturation

for IT services for the company in developed economies. Whereas revenue from Asia Pacific

was on continuous, rise and from Middle East and Africa showed slight growth. This trend is

inline in-line with global trend that shows growth in developing economies and saturation in

developed economies. Revenue from Iberoamerica showed flat growth. Interestingly revenue

from India showed slight revenue decline in terms o f percentage. This can be because o f the

strong domestic India revenue the company developed since beginning unlike its peers.

The company has planned an organic growth in the emerging markets. For example, in

Brazil, it worked with a partner initially and developed the market from ground up. Then

acquired the partner and now developing the revenue further. The strategy directly affects

company’s direction although as far as the composition, it wants to offer full service in all

geographies.

In Latin America, the company is focused on multiple countries like Mexico, Brazil,

Columbia, Ecuador, and Chile. Largest markets are Mexico and Brazil. The company serves

multi-national as well as national clients. It is the same strategy in China. Developments in

China are taking time due to culture and language barrier. The company believes in develop

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any new market in two phases. In first phase, the company does not put any big revenue

numbers but puts strengths that you need to develop credibility in that market. The strengths

are:

1. Acquiring few clients

2. Recruiting and retaining people

3. Creating delivery methodology

4. Build a reference base

Once these four strengths are developed, then the company puts up scale. The company used

this new market development strategy in Mexico, Brazil, and will follow the same strategy in

China.

The company believes in building client relationships in spite o f the volume o f the client

order. Hence, the company would like to call itself a trusted partner o f the client. The

company believed that in economic recovery after the recession, US lead the way and Europe

was lagging behind. The company did not face any recession effect in emerging markets. The

company observed that its problem in emerging markets is its business mix. The company’s

business mix is based on discretionary spend which means the IT budgets are not earmarked

and are made available for use as needed by clients. Hence, there is no annuity revenue and

the company has to work hard to get these orders.

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REFERENCES• TCS Annual Reports

http://www.tcs.com

Interaction with the company official

TCS targeting 1000 customers in SMB segment this year, The Economic Times

Indian IT aims skies through the cloud, http://www.ciol.com

TCS chief Chandrasekaran is DQ IT Person o f the Year, http://www.ciol.com

How Chandra Helped TCS Climb To The Top, Forbes India

Tata’s learn to innovate. Business Standard

TCS : Baptism By Fire, Dataquest

The world turned upside down, A special report on innovation in emerging markets.

The Economist

I never take my team for granted: TCS' Chandrasekaran, The Economic Times

A runner in for long haul. Financial Times

Software Exporter to Expand Footprint in Emerging Markets, The Wall Street Journal

Meet Tata Consultancy's New Boss, Forbes.com

India's Outsourcing Upheaval, Forbes.com

How to Build a Culture o f Innovation, Bloomberg Businessweek

No innovator’s dilemma at TCS: Podcast interview with KA Ananth Krishnan, CTO

by Tom Parish, EnterpriseLeadership.org

Beyond the Economic Crisis Success and Sustainability - Prof Pankaj Ghemawat,

Video

N Chandrasekaran takes charge as CEO at TCS, Video

Leadership thoughts TCS, Video

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