Tata Consultancy Services’ CEO N Chandrasekaran has deputed one of his top lieutenants, AS Lakshminarayanan, to head the company’s Japan business and grow its revenue as the largest Indian IT player looks to grow in that large and largely unpenetrated market.,
Japan was a very small part of TCS’ business — with just about $100 million in revenue. But in April, the company announced it was acquiring Mitsubishi Corp’s IT arm, which has about $500 million in revenue a year, and about 2,400 employees. The deal, which closed at the end of June, gives TCSBSE 0.30 % the greatest scale of any Indian IT firm in Japan.
Lakshminarayanan, who joined TCS in 1983, has a history of being sent to build businesses from the ground up at the Mumbai-based company. He built the UK-business at TCS almost from scratch and since 2011 has been leading the emerging verticals business — including hi-tech and media and entertainment — which now accounts for over 10% of TCS’ revenue.
“I am moving from one island to another. It is a personal challenge and it is hugely exciting. In the UK, we built our platform there organically. In Japan, with the acquisition, I am being given a platform that has its advantages and challenges. We have to bring our Japanese workforce onto the TCS processes and the TCS way of doing things,” Lakshminarayanan told ET.
The challenge is not just a personal one. When Chandrasekaran offered Lakshminarayanan the job, he also issued a target — to double the company’s revenue in a set period of time.
“I can’t tell you the time frame but knowing TCS, you should know we always have plans and they are ambitious,” Lakshminarayanan said. Japan is the second-largest market in terms of IT outsourcing. Its total outsourced IT spending is about $109 bn and it has been tough for non-Japanese vendors to gain a foothold. Of the total, almost 70% is serviced by Japanese players. Indian IT’s share of business is less than 1%.
But analysts expect TCS to grow quickly after its acquisition. “I expect their internal target should be to grow that business to $1-$1.5 billion in the next three to five years,” a Mumbai-based analyst said. He declined to be identified because he is not authorized to talk to the media. TCS’ Chandrasekaran has said he expects Japan to grow to a billion dollar business in the next few years.
One of the reasons that Japan has been tough for Indian IT is the insularity of the culture. TCS is already taking steps – from town halls to translating the internal magazine to Japanese – to welcome its new employees.
“We held a town hall and there were about 2,000 employees. And a lot of young people came up to me and they were very excited about working for TCS. We’ve met clients and the initial feedback is that they are also happy. Now we have to work to convert that excitement to actual results,” Lakshminarayanan said.
Talking to employees will be an on-going process, to explain the company’s long term vision for Japan and working with the middlemanagement. Lakshminarayanan is learning Japanese and is encouraging his top management to speak in English, a language they know but aren’t very comfortable with, to smooth communication.
He is relocating to Japan from the UK for the next few years. His wife will join him once his daughter, who is in her final year at school, goes to university. TCS, through Lakshminarayanan, will be spear-heading the biggest push into Japan and growth in that new market will help the company retain its lead over the rest of the industry.
“The law of large numbers would catch up with TCS if the footprint and capability were the same as other Indian IT. The reality is that growth leadership will sustain; what sets it apart is that its addressable space is the largest among Indian IT and capabilities wellspread across the entire IT spectrum,” Kawaljeet Saluja, analyst with Kotak Institutional Equities said in a note after Mitsubishi deal was announced.