Tata Consultancy Services, India’s largest outsourcing company, plans to increase its workforce by a quarter to help drive expansion into fast-growing emerging markets.
India’s IT outsourcers, whose largest revenue stream comes from North America and Europe, have proved highly resilient in the economic downturn.
Now, as are many global businesses, they are looking for opportunities in high-growth regions, including Asia, the Middle East and Latin America. TCS is expanding its workforce by 40,000 to 200,000 people this year to service its fast-expanding global operations.
In the long term, emerging markets are expected to contribute “upwards of 20 per cent for TCS” in terms of overall revenues, compared with 7 per cent two years ago, said N. Chandrasekaran, the company’s chief executive.
The revenues TCS derives from emerging markets such as China, Latin America, Asia and eastern Europe have risen to about $1.2bn from $100m seven years ago.
However, Mr Chandrasekaran acknowledged that his group was struggling to crack opportunities in China, as it was in Japan, where it has been held back primarily by cultural barriers and high turnover of employees.
By contrast, the group has embarked on a more enthusiastic Latin American expansion in recent months.
He said: “We have close to 8,000 people in Latin America and our revenues are well over $300m. I think Latin America can easily be a $1bn market in the medium term.”
The company is expected to find it a big challenge to sustain its strong performance, where net profits rose 24 per cent in the latest quarter, analysts believe.
Rising pay is putting a strain on profit margins. TCS has said that it would spend $200m in the coming fiscal year on salary increases, and planned to give 10 per cent annual rises to Indian employees.
Infosys, TCS’s Bangalore-based rival, offered the highest salary increase of between 14 per cent and 16 per cent, in a bid to prevent its talent from moving to rival companies.
During the quarter to the end of June, TCS suffered an attrition rate of 13.1 per cent of its staff in spite of offering higher wages.
Seven thousand employees left the company during the period, out of a total workforce of about 160,000.
TCS is also concerned about the outlook for the poorly performing European market, as debt-laden governments seek to pare down fiscal deficits.
This week Mr Chandrasekaran is due to meet George Osborne, the UK’s finance minister, who arrived in India on Tuesday,to discuss the future of large contracts that TCS holds with the British government, including an $800m pensions contract that is under review
Source:http://www.ft.com/cms/s/2/2b7906da-999b-11df-a852-00144feab49a.html?ftcamp=rss
