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TCS: Bigger U.S. presence lifts sales

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CIOL Bureau
New Update

Daniel Sorid and Eric Auchard

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SAN FRANCISCO: Tata Consultancy Services Ltd., India's largest software services exporter, expects revenue to rise as much as 50 percent annually over the next few years, helped by an expanded U.S. presence that could soon include a local stock listing, a top executive said.

"We expect the, growth for the industry, at least the tier-one vendors to be anywhere around the 40 to 50 percent range," Arup Gupta, president of TCS's North America business, told the Reuters Technology Summit, adding that his company should see growth in line with those forecasts.

Bombay-based TCS, which went public in August, has nearly 9,000 employees in the United States, handling technology services for Fortune 500 companies such as General Electric Co. It competes head-on with well-known Indian rivals Infosys Technologies Ltd and Wipro Ltd, as well as with the services divisions of major U.S. and European technology vendors.

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Offshore outsourcing became a hot-button political issue last year, though India's definitive cost advantage -- it churns out 200,000 engineering graduates per year willing to work for a fraction of U.S. and European market rates -- has most multinational executives looking to the subcontinent.

Gupta said TCS, which is 85 percent owned by parent company Tata Group, is looking to add 2,000 new employees outside India in a 12-month period, and is developing training facilities in the United States and relationships with U.S. universities to quickly train new staff.

"We see the business pipeline to be very robust for the next five to seven years," Gupta said. "Support for our services we feel is extremely promising. At a minimum, we see the very robust growth in that period."



The goal, he said, is to "de-risk" TCS's business by broadening its client base and developing higher-value service offerings to avoid pricing pressure. One important way, he said, is to boost TCS's brand, and the company is considering matching Infosys and Wipro with a U.S. stock listing, something that could boost public awareness.

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Gupta said his biggest concern is the pricing pressure that comes when technology services are sold like low-margin commodities. He is looking to higher-value services like business analysis, or specialized expertise in particular industries, as a way around that risk.

"The number-one challenge is to make sure our services do not get commoditized," Gupta said. "That is where we're continuously looking at ways to add value to the customers."



A second challenge is to maintain the company's position as a low-cost supplier of computer services to industrial markets by relying on a vast pool of Indian engineering talent.

Labor costs have begun to rise again in the past year, he said. He projected wage inflation will be around 15 percent to 20 percent in the coming year, up from around 13 percent to 14 percent in the past year. Wage growth was flat during an industry downturn from 2000 to 2004.

TCS cannot file for an overseas stock listing until August, when restrictions from India's securities regulator are lifted. Ahead of that, TCS's chief financial officer has been traveling to the United States, visiting potential investors, to increase the company's profile on Wall Street.

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