Posts Tagged ‘TCS’

TCS focuses on the ‘digital transformation’

September 23rd, 2014

Tata Consultancy Services is ramping up its offerings in big data and analytics, looking to increase its competitiveness in IT consulting and services as communications service providers try to get a handle on the opportunities and challenges that cloud, mobile and social technologies are bringing.Outsourcing18

“CSPs find themselves at a crossroads,” said Seeta Hariharan, general manager and group head of TCS’ recently formed Digital Software and Solutions group. “The ones that we see as the winners are those that make data a substantial part of their strategy.”

Hariharan said that CSPs are looking for new revenue sources and new business models, and that the new group was formed within TCS about 16 months ago to take on the challenge of helping businesses cope with the digital transition going on that is being heavily driven by mobile technologies, social technologies and the cloud as well as big data analytics.

TCS was named a leader in business process outsourcing for business analytics by IDC earlier this year, and announced in August that it is partnering with Cloudera to certify both its professionals and its products for big data and analytics.

In a blog entry earlier this year, Hariharan wrote about what she called “a gap between the vision of digital transformation and what is actually delivered today in the market.”

She said that “one group of vendors provides broad-based technology platforms like cloud, mobile, social, and big data. When a customer asks for a solution, the vendors say ‘we will pull the technologies together for you’. This approach is cost-prohibitive and time consuming.

“Another large and disparate group of suppliers offer narrow, non-integrated point solutions aimed at solving isolated issues such as web analytics or cross-channel management.  This approach requires clients to integrate with various technology platforms and other point solutions to solve problems posed by digital transformation, which is also time-consuming and expensive,” Hariharan wrote.

Hariharan said that while communications is the backbone across every industry, CSPs are under particular pressure to figure out new ways to leverage technology to better understand their customers so that they can deliver customized products and improve profits, as well as improve their own operations.

Successfully navigating this digital transition is crucial to businesses, Hariharan said — and those that don’t manage it well are likely to not continue to be in business.

“In my view, it’s not a choice — it’s an imperative,” Hariharan said. “The time to address this is in the next 18 to 24 months.”


TCS leads Indian peers, says global survey

September 19th, 2014

Clients see Tata Consultancy Services (TCS) as the only local information technology (IT) company strong on two important parameters, implementation and innovation, said a study.Outsourcing8

It was conducted by America-based HfS Research and KPMG last month. The annual survey, state of services & outsourcing, covered 312 global clients, 347 advisors and consultants, and 420 participants from the companies that manage IT and business operations.

“IT-outsourced service providers, such as TCS, are leading the way in terms of buyer perceptions, both on innovation and execution, relative to their peers,” said Charles Sutherland, executive vice-president of research at HfS Research.

The country’s second- and third-largest in the sector, Infosys and Wipro, respectively, were seen as strong on implementation but weak on innovation. This could mean if their areas of execution become less significant, these may become candidates for churning, the report added.

Smaller companies iGate, Xerox, Fujitsu, Unisys and CSC scored low in the survey. “For these, the task ahead is to increase awareness of their capabilities and, in particular, to highlight investments in innovation,” said Sutherland.

Almost half the survey participants said they would look at switching their existing IT service providers for several reasons. While 15 per cent said they planned to do so at the renewal cycle, 12 per cent said they planned to move some or all of the outsourced work in-house. As many as 23 per cent said they wanted to switch their provider but were still working through the practicalities of doing so.

“Some of this (dissatisfaction) may be the result of long-standing contracts where it is harder to repeat the level of savings initially achieved and booked for first-generation contracts,” said Sutherland. “But when combined with the results of a perception study of the IT outsourcing service providers, it may be that the larger issue is the market is increasingly fragmenting and certain providers (specially some entrants like Amazon and Google) are just changing the market at such a speed, that a new level of dissatisfaction with the previous status quo is setting in.”


Indian IT companies battle it out for Rs 11k-cr Australian pie

September 15th, 2014

Indian IT companies will be fiercely competing with MNCs for five big IT contracts in Australia valued at over A$2 billion (Rs 11,000 crore).infosys

Infosys, Wipro, TCS and HCL Technologies are participating alongside IBM, HP and Capgemini in request for information (RFI) and request for proposal (RFP) for incremental IT outsourcing work coming from Sydney Water, Rio Tinto, Jetstar, Aurizon and Transport for NSW, said an Australian IT consultancy firm that did not want to be named.

Incumbent IT vendors IBM, Infosys and Accenture have sought RFIs and RFPs to participate in mining major Rio Tinto’s A$750 million IT-BPO contract. The work is in HR, analytics, engineering and logistics. Rio Tinto had previously outsourced procurement to Infosys and finance & accounting (F&A) to IBM. Accenture was engaged with the mining major for ERP and application support, while CSC maintained its IT infrastructure. These previously outsourced 10-year contracts were worth A$3 billion.

Jetstar, a wholly-owned subsidiary of the Qantas Group, is considering outsourcing work related to ticketing, customer loyalty programme, analytics, HR and F&A. Wipro TCS and Genpact are participating in the RFIs/RFPs. “Jetstar is currently using Lincom for virtual desktop support. It has been subcontracted through Tech Mahindra. Jetstar’s customer support is partially outsourced to Teleperformance and Convergys,” the consultancy said.

Australian companies are reviewing monolithic contracts and are breaking them down into smaller ones to drive operational and cost efficiencies.

The Australian IT services market has gone through several cycles of IT outsourcing with strong demand particularly from public sector utilities. Last year, New South Wales (NSW) Transport had floated an expression of interest (EoI) for next generation infrastructure services (NGIS) that includes server and webhosting, data centre infrastructure and end user computing. Infosys, Wipro, HCL and TCS, as also HP and IBM, participated in the EoI.

“Analytics and BPO will lead the charge (in contracts). Public sector contracts have opened up in a big way. There will be at least 7-8 RFPs in both federal and state governments in the next six months,” said Mohit Sharma, director of Australia-based advisory firm Mindfields.

Siddharth Pai, president in outsourcing advisory firm ISG Asia Pacific, says Australia is one of the early adopters of offshoring, with Telstra using offshoring a decade back. Infosys counts the telecommunication and media company as one of its top ten customers.

Australia’s largest rail freight operator Aurizon is floating an incremental A$500 million contract for IT and BPO services. The freight operator is looking to outsource F&A, procurement and analytics, for which Capgemini, Wipro, Genpact and WNS have sought RFIs and RFPs.


3,000 jobs lined up for Saudi women at outsourcing center

September 15th, 2014

The first all-female business process outsourcing (BPO) service center in the Kingdom, which was inaugurated in Riyadh on Sunday, will aim to provide 3,000 local jobs to Saudi women in the next three years in line with nationalization efforts.outsourcing46

The BPO center was jointly opened by Saudi Aramco, General Electric (GE) and Indian IT services company, Tata Consultancy Services (TCS).
Aramco and GE were the first clients of the center, which spans 3,200 square meters.

Commerce and Industry Minister Tawfiq Al-Rabiah, Prince Saud bin Khalid, deputy governor of the Saudi Arabian General Investment Authority (SAGIA), Khalid Al-Falih, Saudi Aramco president and CEO, John Rice, GE’s vice chairman, Natarajan Chandrasekaran, CEO and managing director of TCS, and various dignitaries from government entities and business executives attended the official opening ceremony here.

Supported by the Human Resource Development Fund (HRDF), the center has begun operating with around 300 employees that have been trained in communication and presentation skills, corporate etiquette, global culture and basic computer programs, such as Microsoft Office and Excel.

About 100 of these new employees are fresh graduates, while the rest have two to three years of experience.

Fresh graduates were selected from educational institutions in the Saudi capital, including Princess Nora bint Abdulrahman University, the largest university for women in the world, King Saud University (KSU) and Imam University out of 1,200 candidates interviewed for the jobs.

Speaking at the inaugural ceremony, Al-Falih said: “Being the first all-female BPO service center in Saudi Arabia, this joint effort will bring significant value in diversifying the economy and society and will help address the challenge of creating jobs for talented and skilled female graduates by establishing a more diverse work force and boosting competitiveness.”

Echoing the sentiment, Rice observed: “The newly opened BPO center is proof of our commitment to support the Kingdom’s priorities around human capital development and the creation of employment opportunities for talented Saudi women.”

He described it as a new model for business customers to achieve higher operating efficiency in the Saudi market.

Expressing his delight, Chandrasekaran underlined, “skills, talent and technology converge here at the Kingdom’s first all-female BPO center, marking a new era for the information technology and BPO industry in the Kingdom.”

The center, which will undoubtedly reduce female unemployment rates (pegged at 34 percent in 2013), has already achieved a more than 70 percent nationalization rate.

The opening of the center was announced in September last year, with specialized services in finance, accounting, human resources, material supply and library services, in order to enhance operational efficiency for customers.


Why TCS is betting again on Chandrasekaran

September 12th, 2014

When N. Chandrasekaran was named chief executive officer (CEO) and managing director (MD) of Tata Consultancy Services Ltd (TCS) five years ago, analysts and insiders started talking of the firm’s acronym being short for “Take Chandra Seriously”.
Chandrasekaran proved them so right that no one was surprised when India’s largest software services exporter last week appointed the marathon runner CEO and MD for a second five-year term effective 6 October. Given his track record, shareholder approval to the appointment seems to be a mere formality.

In an industry where at least three big information technology (IT) firms—Infosys Ltd, Wipro Ltd, and Nasdaq-listed Cognizant Technology Solutions Corp.—have faced leadership challenges that have either affected, or threaten to affect, their fortunes, TCS’s numbers speak volumes for Chandrasekaran’s performance since he succeeded his mentor S. Ramadorai in 2009.

At $13.4 billion as of 31 March, TCS’s revenue made up a little more than 11% of the $118 billion IT industry. Its 305,431-strong workforce is a little over 10% of the number directly employed by the industry.

There’s more. Women composed 32.7% of its workforce as of 31 March, making it the largest employer of women among private sector companies. When the quarter ends on 30 September, the company will have easily surpassed the 100,000 women employee mark.

On Thursday, TCS’s market capitalization, at a little over $85.55 billion, almost equalled the combined $86.37 billion market cap of the next four biggest Indian IT firms—Infosys, Wipro, HCL Technologies Ltd and Tech Mahindra Ltd.

Cognizant, whose market cap is about $28 billion and is listed overseas, and US-based Accenture Plc, with a market cap of about $51.3 billion, aren’t in the list although most of their employees work out of India.

Chandrasekaran, who has been with TCS for almost 28 years, never applied for any other job. He started at TCS as a software programmer in 1987, having completed his master’s in computer applications from the Regional Engineering College, Tiruchirappalli (now National Institute of Technology, Trichy), in 1986. In the final year of his master’s programme, he took up a project with TCS, and never looked back, rising to the helm of the firm where he learnt the ropes of the IT business.

The transition was well-planned, say analysts. Chandrasekaran, they insist, was identified for the CEO’s role around 2004-05, but that became apparent only somewhere around 2007. When he eventually rose to the top at the age of 46, he became one of the youngest CEOs in the Tata group.

His rise in TCS was rapid. In 1999, he started the company’s e-business unit and expanded it to an over $500 million segment in four-and-a-half years. In September 2007, he was co-opted on the TCS board and named chief operating officer (COO).

As COO, he drove the company’s acquisition strategy—the purchase of Citigroup Global Services for $505 million in October 2008 is credited to him.

Under Chandrasekaran, TCS has consistently posted results that have beaten market expectations. The company does not provide quarterly or annual revenue forecasts, but it exceeded software industry lobby Nasscom’s 12-14% revenue projection for the year ended 31 March and is expected to easily beat the 13-15% revenue forecast for the current year.

Analysts expect Chandrasekaran to retain the growth momentum in his second innings. And TCS may soon become India’s first $100 billion market cap company as analysts from securities houses JPMorgan Chase and Co. and CLSA wrote in June when TCS’s market cap was about $61 billion. To be sure, that pales in comparison with the $190 billion market value of International Business Machines Corp. (IBM).

“While Chandra was expected to be re-elected for a second term, in his second innings we would expect him to foray deeper into new service lines like digital technologies, including social media, mobility, analytics and cloud (SMAC), and continue to outperform the industry, maintaining the 16-17% growth rate for the year that Chandra had earlier indicated,” said Dipen Shah, head of private client group research at Kotak Securities Ltd.

TCS is expected to hit $100 billion in market value soon, said an analyst from an international securities house who did not want to be named because he is not authorized to talk to the media.

“We are also expecting a possible merger or acquisition of a small digital enterprise, given that peers Infosys and Wipro have made many such digital acquisitions recently, although TCS hasn’t. Besides, TCS generally makes at least one small merger or acquisition every year, and the company is expecting digital to contribute significantly to revenue going forward,” said the analyst.

Rivals wane, challenges loom

Chandrasekaran’s first term at the helm coincided with a steady decline in the fortunes of Infosys and Wipro, its two closest rivals.

Once the bellwether of the Indian IT industry, Infosys got embroiled in leadership issues that took a toll on its profits. The firm will take time to recover under its new CEO Vishal Sikka, who took charge on 1 August. Wipro, under the leadership of T.K. Kurien, is also trying to rebuild.

Even Cognizant is showing chinks in its armour. On 6 August, Jennifer Hamel, an analyst at research firm TBR, noted that for the first time since the June quarter of 2011, Cognizant had not outpaced TCS in year-on-year revenue growth in the three months ended 30 June. In response to an unexpected dip in client spending, Cognizant pared its annual revenue growth forecast from 16.5% to 14% for 2014.

On 18 August, Mahesh Venkateswaran, the head of Cognizant’s $500 million SMAC business, stepped down. The 18-year veteran used to report to CEO Francisco D’Souza.

To be sure, TCS—and its rivals—does face its set of challenges.

Although automation has started taking over the traditional labour arbitrage lever for IT services delivery, TCS maintains a robust pace of hiring people (10% year-on-year in the quarter ended 30 June), mainly freshers, since it can keep employee costs low, said Bozhidar Hristov, an analyst with research firm TBR.

“However, hiring freshers in bulk could put pressure on TCS’s ability to deploy resources in timely manner, impacting its credibility and ability to maintain a competitive edge,” added Hrsitov.

And despite all the digital talk, traditional services continue to account for a major portion of the revenue of Indian IT firms, while SMAC technologies still account for less than 10% of the total revenue of IT companies.

Application, development and maintenance work alone accounts for 35-40% of the revenue of most IT firms. But with increased automation and platform-based services that can be replicated across segments and non-linear initiatives, analysts agree that SMAC will allow the IT industry to offer more value to clients.

Non-linear initiatives, unlike in the traditional model, are not dependent on the number of people engaged in a project for their revenues.

Much will depend on the ability of companies such as TCS to offer solutions that integrate new business models such as analytics and cloud-based services—which are part of SMAC—with traditional ones.

Scale is another issue TCS will have to deal with.

TCS has handled challenges related to size and scale very well, but in the future it will have to balance the need for linear, or headcount-related, growth with that of reducing costs through automation and by templating solutions that can be replicated across industries without the need to add additional labour. As TCS continues to grow, it will have to hire more laterals, or professionals, too, along with freshers to feed an increase in onsite project demand and the need for SMAC professionals. This will add to wage costs since the salaries of professionals, on average, start from Rs.7-10 lakh while freshers, on average, can be recruited for Rs.3-5 lakh.

Moreover, as TCS continues to expand in geographies other than the US, which include Europe, Continental Europe, Latin America, Japan, Africa and China to name a few, it will be forced to hire more local or onsite employees due to increasing pressure from those governments to hire locals. This will add to dollar costs and reduce its labour arbitrage, which it will have to compensate by more value-added work like digital, automation and templatization of solutions that can be replicated across industries—similar to what companies such as Accenture and IBM do.

Last, but not the least, if a proposed US immigration Bill gets passed in its current form, it will add to the wage costs of TCS and reduce its margins, analysts warn.

According to a 26 May note by research firm Offshore Insights, TCS employs about 27,000 staff in the US, of which 9,000 are US citizens and green-card holders. The rest are employed on H-1Bs and L-1 visas.

“Should the Bill (that limits the proportion of H-1B/L-1 Visa workers to 50% to that of US employees) gets passed in 2017, TCS’s US staff size would be estimated 35,000-36,000. This means it will need 18,000 US citizens which includes 9,000-10,000 new recruits. This doesn’t stop here; TCS will have to stop issuing any H-1Bs in coming two years. Clearly a huge hit, as constraints like talent acquisition, billing rates, margin pressures and similar others are bound to affect its operations onsite,” the note said.

Building for the future

The TCS management is not resting on past laurels.

TCS spent Rs.913.76 crore on research and development (R&D) and innovation in fiscal 2014 compared with Rs.776.58 crore in the year earlier, according to the company’s 2013-14 annual report. This is not much when compared with the billions of dollars that a company such as IBM spends on R&D, but sizeable given that TCS started out as an outsourcing firm that relied on low-cost labour in its home market to drive profits.

Till date, TCS has filed for 1,746 patents and 114 patents have been granted. The company opened its first R&D lab in 1981 when the technology industry in India was just taking shape. Across industries and services, TCS has established a global network of Innovation Labs. Its Co-Innovation Network has partnerships with academic institutions, start-ups and venture funds.

TCS has also invested significantly in digital technologies. It has invested in building a network of cloud data centres across the globe. The company has set up a digital enterprise unit in Silicon Valley to club its SMAC services, headed by Satya Ramaswamy, vice-president and global head of TCS Digital Enterprise, who joined TCS in 2010 after the company acquired Brightfon Inc., a mobile solutions firm he founded in July 2008.

Investments in digital initiatives are increasingly dictating “TCS’s go-to-market strategy as the company realizes that the pace of adoption of developing digitally enabled, vertical-specific portfolio is the key to remain competitive in the fast-evolving IT services market”, Hristov of TBR wrote in a 17 July report.

He added that to accelerate its portfolio and foothold expansion and offset potential margin pressure, “we expect TCS to pursue an acquisition of a Europe-centred technical consultancy with vertical-specific capabilities focus, as developing IP (intellectual property) through R&D can be more expensive and riskier than making an acquisition”.

Chandrasekaran earned compensation of Rs.18.68 crore in the year ended March, compared with Rs.11.7 crore the previous year. The pay excluded his earnings from the 88,528 shares he held in the firm as of 31 March.

The nearly 60% hike in Chandrasekaran’s annual salary in fiscal 2014 made him the highest-paid CEO in India’s IT industry. But in July, Infosys said it will pay Sikka $5.08 million in annual salary and stock options worth $2 million.

Judging from TCS’s performance in the past five years, Chandrasekaran, it appears, has earned his pay and his second term in office. At least for now.


TCS Expands IT Education Program to 11 U.S. Cities

September 9th, 2014

Indian outsourcing giant TCS says it has expanded its IT education program to 11 cities across the United States and the Canadian city of Toronto.stem
Known as goIT, the program is designed to provide hands- on technology education to high-school students so as to encourage them to launch a career in lucrative information technology sector.

Since inception in 2009, TCS goIT has engaged more than 7,500 students across 50 school districts. The results so far have been encouraging, said the IT firm headquartered in Mumbai, India, with goIT schools reporting a 27% increase in high school students choosing STEM disciplines in college.

As part of the program, TCS volunteers host workshops, teaching basic programming to open source 3D modeling.

“STEM education is necessary to ensure that each and every child is prepared for a 21st century global economy,” said U.S. Congressman Michael M. Honda (CA-Silicon Valley). “Programs such as goIT provide our students the tools and opportunities to succeed and compete for quality jobs.”

According to the U.S. Bureau of Labor Statistics (BLS), there will be two jobs available for every graduate with a Computer Science (CS) degree between 2013 and 2023, and more than 1.4 million jobs created by 2020 that require CS and programming skills – but only 400,000 CS college graduates to fill those jobs. Currently, less than 2.4% of U.S. college students graduate with a degree in CS, with just 12% of CS degrees awarded to women.

Furthermore, nine out of ten schools do not even offer computer programming classes, and in 30 of 50 states Computer Science does not count towards high school graduation in math and science requirements.

This October, goIT will launch an in-school program in Canada, with grade nine students from five high schools learning to develop apps.

Meanwhile, UST Global, another IT firm from India, is also providing STEM education to women across the United States.


TCS attains Rs 5 lakh crore market-capitalisation

September 4th, 2014

Tata Consultancy Services (TCS), the country’s largest software services exporter, on Wednesday, attained a market valuation of over Rs 5 lakh crore after over a month. outsourcing35

At the end of today’s trade, the market-capitalisation (m-cap) of TCSBSE 0.75 % soared to Rs 5,09,523.91 crore, the highest for the company since its listing in 2004. Shares of the outsourcing giant ended the day at Rs 2,601.30, up 2.45% on the BSE. In intra-day trade, it rose by 2.9% to Rs 2,612.95.

In dollar terms, TCS’ market valuation rose to $84 billion.TCS, the first Indian company to achieve the feat, had earlier crossed Rs 5 lakh crore market-cap in July this year.

The IT bellwether is also currently the country’s most valued company in terms of market valuation. TCS is followed by state-run ONGCBSE -1.06 % whose m-cap stood at Rs 3,74,730.47 crore, Reliance IndustriesBSE -0.50 % (Rs 3,33,400.02 crore), ITC (Rs 2,78,020.71 crore) and Coal India (Rs2,37,495.30 crore).

The market valuation of other big IT players such as Infosys stood at Rs 2,14,454.24 crore, Wipro (Rs 1,42,478.12 crore), HCL Technologies (Rs 1,16,142.59 crore) and Tech Mahindra (Rs 57,293.10 crore).


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