TCS gets another feather on its cap

NEW DELHI, INDIA: "In a challenging market, TCS remained focused on execution discipline and kept pricing stable and therefore, managed to grow profitably along with margin improvement,” said N. Chandrasekaran, chief operating officer of Tata Consultancy Services (TCS) at the announcement of its Q3 results. The company suffered from a fall in dollar denominated revenues but experienced growth in absolute terms along with significant improvement in performance metrics.

In terms of markets, North America appeared to be stabilizing for TCS while its European business grew despite sluggish market. Despite weak economic outlook, Latin America registered very strong demand, from both local companies and multinationals seeking GNDM capability while Asia Pacific and Middle East remained volatile.

During the year, TCS consolidated its operations in the Eastern Europe, The Middle East, Africa and Latin America into a strategic business unit. A reorganization was announced in March by organizing global operations into customer-centric units with integrated customer relationship and delivery.

The new structure will also support greater focus for strategic initiatives that will help drive non-linear revenue

growth. In addition to TCS Financial Solutions, and the Small and Medium Business Solutions, the company constituted a new unit for Platform BPO Solutions. These three groups operate as independent units that will leverage TCS sales, delivery and customer relationships as required.

“We have added over 30,400 people in the first nine months which is in line with our hiring plans for the financial year. Our retention rates for both IT services and BPO have shown significant improvement in the current quarter. We continue to focus on improving utilization rates and employee productivity,” said Ajoy Mukherjee, vice president and head, Global Human Resources, TCS.

TCS opened a center in Milford, Ohio to accommodate up to 1,000 associates, hired from the region and its universities. The center serves as the primary software development and delivery center for North American customers. In addition, the campus will also showcase TCS Innovation Labs, customer network operations centers and briefing centers.

The year saw TCS cut many large deals in the face of the weakening economy. The company signed 35 other large deals and adding around 92 new clients in its existing list. TCS also bagged a large domestic deal awarded by the Ministry of External Affairs, Government of India to handle the passports processing for the next six years. The latest feather in TCS’s cap is the Merrill account that moved from Satyam to TCS.

In April 2008, S. Ramadorai, CEO of TCS, had revealed that they are investing in developing infrastructure in 11 different Indian cities adding almost 30,000 seats for the year 2009. However, taking an update on those plans after the mishaps that happened later in the year, “We are likely to experience delays in ramp ups as well as in the decision-making and all our focus on building for the future would be around building efficiencies and looking at the future and investing for the future on people and some of the assets which we create,” said Ramadorai in January this year.

Application Development and Maintenance continues to contribute significantly to the chunk of TCS’ revenue (approximately 49 per cent of revenues). Moreover, the company is looking toward strengthening its infrastructure and OPD capabilities, which contribute 20 per cent in terms of revenue growth.

In order to service its customers in the Middle East, TCS has opened a Global Solution Center in Morocco (part of TCS’ Middle East and Africa geography), which provides support in the region and also in Europe.

Currently, TCS is focusing on ramping up its BPO capabilities. In October '08 TCS acquired Citigroup Global Services for $505 million to strengthen back-office services to the client. And as far as service delivery is concerned, TCS' BPO Service Area has a strong presence in India with TCS BPO (India) and TCS E-Serve, supporting customers with significant numbers of nearly 20,000 associates across the country at various locations.

Outside India, they have strategic acquisitions in Latin America (TCS Chile) and the U.K. (Diligenta) that have helped gain new competencies inorganically and cater to specific market requirements.

The company's attrition rate has fallen down to a great extent and the company attributes this to its expertise in talent management and retention. Maintaining its steady growth, TCS is hopeful that the things will change in second half of 2009.

“It has been a tough environment but TCS has a very healthy deal pipeline and we need to ensure closure of these deals,” states Chandrasekaran. Adding to this, “When we come to 2009 and what we see ahead, we are confident about the growth prospects based on momentum and the capacity and capability building, but we will continue to be watchful about the external environment especially in the U.S.,” concludes Ramadorai. 

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