15_chapter 7.pdf

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

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CHAPTER 7: TATA CONSULTANCY SERVICES (TCS) LTD. CASE STUDY 7.1 INTR O D UC TIO N J.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% o f 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

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market and provided capabilities to bid for big government and public sector contracts. At that time, 83% o f CM C’s revenue came from domestic Indian market and hence other Indian IT companies were not interested in the acquisition.

IM PO R T A N T M ILESTO N ES 1965

Creation of the Tata Computer Center

1968

Incorporated as a separate entity

1971

First programming assignment in Iran

1974

First software export project out of India for Burroughs

1981

Wins first software export award from the Government of India

1981

R&D Centre TRDDC set up in Pune

1996

First software factory in Chennai for Y2K remediation

1998

Revenues cross Rs. 1,000 crore

2003

Revenues cross $1 billion

2004

Goes public

2006

Brand launch of the ‘Experience Certainty’ campaign

2008

Realises its vision of becoming a top ten global player on multiple parameters

2008

Revenues cross $5 billion and profits cross $1 billion

2009

Revenues cross $6 billion

TA B LE 19: IM P O R T A N T M ILE S TO N E S C H R O N O L O G Y

17

7.2 STRENG TH S, W EA K N ESS, O PPO R TU NITIES, AN D TH REATS (SW O T) AN ALYSIS STRENGTHS 1. 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 o f 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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TH R EA TS 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 o f the company, N. Chandrasekaran, known as Chandra is charting growth o f 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 o f 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 TC S’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 o f 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 TC S’ 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 A B O U T TCS Tata 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 ITenabled 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 2 0 10

•

TCS wins 2010 Global M ost 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 121

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 INSIG H T TCS has bouquet o f 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 com pany’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 122

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 P O S IT IO N O F B O A R D O F D IR E C T O R S FY 2005-06

FY 2006-07

FY 2007-08

FY 2008-09

FY 2009-10

R N Tata,

R N Tata

R N Tata,

R N Tata,

R N Tata,

Chairman

Chairman

Chairman

Chairman

Chairman

S Ramadorai,

Ron Sommer

A Mehta,

Prof. Clayton M

S Ramadorai,

CEO and

Independent

Independent

Christensen,

Vice Chairman

Managing

Director

Director

Independent

A Mehta,

Director

A Mehta

N Chandra,

Director

Director

Aman Melita

Independent

Independent

Naresh

N

Naresh Chandra

Director

Director

Chandra,

Chandrasekaran,

V Thyagarajan

N Chandra

V Thyagarajan,

Independent

Chief Executive

Clayton M

Independent

Independent

Director

Officer and

Christensen

Director

Director

S Mahalingam,

Managing

V Thyagarajan

C M Christensen,

Chief Financial

Director

Independent

Independent

Officer

S Mahalingam,

Director

Director

and Executive

Chief Financial

5 Ramadorai

Laura Cha,

Director

Officer and

Chief Executive

Independent

Aman Mehta,

Executive

Officer

Director

Independent

Director

6 Managing

Ron Sommer,

Director

P A Vandrevala,

Director

Independent

N

Executive

Laura Cha

Director

Chandrasekaran

Director and

Independent

S Ramadorai,

Director

Chief Executive

Chief Operating

Global Corporate

C M Christensen

Officer and

Officer

Affairs

Independent

Managing Director

and Executive

C M Christensen

Director

N

Director

Director

Chandrasekaran,

Laura M Cha,

Laura Cha

Chief Operating

Independent

Director

Officer and

Director

I Hussain

Executive Director

Dr. Ron

Director

S Mahalingam,

Sommer,

R Sommer

Chief Financial

Independent

Director

Officer and

Director

V Kelkar

Executive Director

S Ramadorai,

Director

P A Vandrevala

Chief Executive

V Thyagarajan

Head,

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Executive Director

Officer

and Head, Global

and Managing

Corporate Affairs

Director

Director

Phiroz Vandrevala, Executive Director and Head, Global Corporate Affairs V Thyagarajan Independent Director Ajoyendra Mukherjee VP and Head, Global Human Resources

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 TA B L E 20: COMPOSmON O F BOARD O F 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 o f 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 o f US$ 102 to 106 billion in 2010. IT sourcing grew at 10.3% to a market size o f 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 o f 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%. 127

•

IT outsourcing component is expected to grow from US$ 225 billion in 2009 to US$ 239 billion in 2014 at a CAGR o f 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 o f 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

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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 o f product and services offerings

•

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

•

Broad-basing the number o f key clients by gradually moving clients up the revenues bands, so concentration risks is reduced.

Total Revenue 40.000

n .o m 30.000

4A e o kr

25.000

20.000 15.000

10.000

s.ooo FVOS

fY 0 6

FY07

FYOS

FYOS

'Y IC

F Y ll

G R AP H 17: R EV EN U E F R 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 o f American recession o f 2008. The jum p in revenue growth from FYIO to FYl 1 probably shows the recovery from the recession.

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COMPOSITION AND DIRECTION OF EXPORTS Events 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

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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 o

Major Markets Strategy 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

TA B LE 21; E V EN TS IN C O M P O S m O N A N D D IR E C TIO N O F EXPO R TS C H R O N O L O G Y

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FY 2005-06

FY 2006-07

FY 2007-08

FY 2008-09

FY 2009-10

FY 2010-11

G R AP H 18; R EV E N U E F R O M FY 200 5-06 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 22863.00

20000.00

18685T21

15000.00 f

10000.00 4-

5000.00

0.00

FY 2005-06

FY 2006-07

FY 2007-08

G R A P H 19: R EV EN U E F R 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.

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FY 2008-09

FY 2009-10

FY 2010-11

G R AP H 20: R EV EN U E FR O M FY 2008-09 T O FY 2010-11

Slight revenue drop in FY 2009-10 was probably because o f 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

9.2

59.06 -5 * 4 3 -

52.80

53.87

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■ N o r th A m e r ic a

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40

■ India —

30

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20

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B lV lid d le East a n d A fric a O th e r s

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2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

G R AP H 21: D I R E a iO N O F EXPORTS FR O M 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

60

59.2 ‘

59.06 50.35

■ N o r th A m e r ic a

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s

40

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■ In d ia

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■ M id d le East a n d A fric a ■ O th e r s

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2004-05

2006-07

2005-06

2007-08

G R AP H 22: D I R E a iO N O F EXPO R TS 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---------------------------53.87

52.80

51.38 50.00

40.00 I N o r t h A m e r ic a I UK

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I E u ro p e I In d ia

20.00

10.00

0.00 2008-09

2009-10

2010-11

G R AP H 23: D IR EC TIO N O F EXPORTS FR O M 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.

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7.7 CON C LU SIO N AND IM PLICA TIO N S O F FIN D IN G S The 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 o f 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 o f 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 com pany’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 136

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 Inever 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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