TCS to increase its head count

By Jennifer Tan

SINGAPORE  - Tata Consultancy Services Ltd., India's top software services exporter, sees strong orders and revenues in the year ahead, driven by robust demand in Asia and Europe, and plans to boost its headcount aggressively.

The company, part of India's salt-to-software conglomerate Tata Group, has been thriving on an outsourcing boom as companies worldwide try to cut costs to stay competitive.

A large pool of English-speaking engineers and cheaper wages have helped Indian firms attract these deals in the past decade.

Girija Pande, TCS' Asia Pacific director, told Reuters in an interview that the group had 10 outsourcing deals of US$50 million to $100 million in the pipeline, and expects to close a few of them in the 2007 calendar year.

"Multi-sourcing is in -- previously one big provider was awarded a huge deal, but customers are now saying we don't think one company can do everything, so let's break up the contracts and give them to two or three providers," Pande said.

As a result, TCS' orders and revenues will remain robust. "Business momentum is very good -- it's fairly strong going forward, as Europe and Asia continue to drive growth," he added.

But TCS and smaller rivals Infosys Technologies Ltd. and Wipro Ltd. are facing cost pressures in India due to rising wages as firms compete for skilled employees.

Wage inflation and high attrition rates are a concern for the industry, particularly in India, where demand for programmers and IT specialists has outstripped supply.

Pande said wage pressures were likely to stay high. "But we're confident that the margins will be retained," he added.

TCS posted an operating margin of about 26 percent for the fiscal third quarter ended December.

AGGRESSIVE HIRING SPREE

Wages have risen by around 12-15 percent in the last few years for Indian IT firms, with some mid-sized firms forced to boost salaries in a bid to prevent ambitious staff from switching to bigger rivals.

To manage wage inflation and maintain margins, TCS has been recruiting more fresh graduates.

"The bulk of our people are fresh grads -- the average age (of our employees) is 27 years -- that helps to manage wage pressures to some extent," Pande added.

Meanwhile, TCS, which is General Electric Co.'s largest offshore software services provider, remains on an aggressive hiring spree, Pande said.

The group has set a target for 30,000 gross additions by the end of the current fiscal year to March, and has already added over 24,000 jobs as at end-December. The group's total headcount stands at 83,500.

"We've already hired roughly about 24-25,000, so probably we might get more than 30,000 by end of the fiscal year, but as we are hiring, we are also deploying, which means there is enough business which is allowing us to bill," he added.

In the new fiscal year, TCS expects to match or increase the previous year's target of 30,000. "We have very strong growth impulses," Pande said.

In China, TCS plans to boost headcount to 5,000 in five years, from 750 staff now, he added.

Growth in China will be driven by an outsourcing wave from Japanese firms to that market, Pande said.

"Japan is the largest opportunity in Asia, and Japanese offshoring is starting. Japanese firms have a choice to go to China or India, and China is culturally closer, with some cities like Dalian have some Japanese-speaking ability," he added.

Last week, TCS reported a forecast-beating 48 percent surge in third-quarter profit to 11.2 billion rupees ($252 million).

TCS shares have gained 57 percent in the last 12 months, compared with 56 percent for Infosys and 25 percent for Wipro.

© Reuters