TCS riding high on a different plank of growth phase

BANGALORE, INDIA: Tata Consultancy Services (TCS), the oldest IT company from India, taking on global biggies and scaling to the top 10 is not mere an achievement but a journey of toil and flawless execution with organization capacity to build-up of their inherit strength. TCS recently announced their Q4 results and it highlighted the tenacity of a company to move into uncharted market and stood focused to deliver a 29 plus percentage net margin, which is highest amongst the top Indian IT Services companies.

A well all-round business performance

TCS hiring of 55,000 employees and a hike announcement of 10 pc in compensation is true reflection of their outlook for FY2015. Q4 was a flat and pulled down by few verticals like retail, manufacturing and geography like India delivering lower than their plan. The verticals like BFSI, Life Sciences, Healthcare, Media and Entertainment grew quarter on quarter (except telecom) and a double digit growth YoY in most of their industry verticals.

TCS has been adopting the new technology and delivery model to stay ahead of competitors and they have one of highest contribution from non-linear revenue which is close to 49 pc. TCS sales and marketing spend is quite good at 19 pc amongst the top Indian IT Services company, this helps them to capitalize on the opportunities available through adequate market coverage and account digging. A significant improvement in client addition reiterates the fact of a tight sales efficiency at TCS, which took their 1M USD and 5M USD client tally to 714 and 354.

Venturing and nurturing new frontiers

Many industry analyst firm call European markets as the next frontier to win, as they provide US $ 52bn IT market for the IT service providers. When most of the established India IT Services vendors focused on low hanging fruits of outsourcing from US. Few tasted the success and sowed seeds to nurture the opportunities with their superior delivery capabilities and low cost model in comparison with the MNC IT Service providers.

Today, the success of TCS is more due to its well spread presence in these geographies, verticals and its ability to pick-up the discretionary spending in these markets too. They have maximum wallet share of IT Services spend happening in European region compare to their competitors in the last few years. Europe contributes to around 29 p.c of their revenue. We anticipate that with Europe opening up to outsourcing and many European countries yet to move and transform from their past legacy systems. These opportunities in this market will help an established player like TCS more favorably. The strategic moves of acquiring local company like Alti (in France) helped them to showcase the will to enter into a language barrier country and establish their base. TCS followed again same strategy to penetrate into Japan through their strategic joint venture with Mitsubishi to tap this large market.

Stable Organization Structure and Leadership

TCS had maintained its leadership in IT Industry while its peers are threaten and some lost their positions to others. TCS kept pace with the business model and its evolvement and invested in those directions. In the world of changes from punched card services business to cloud based services the organization structure was on a very stable and seen only three changes at their top most rank in last 4.5 decade starting with F C Kohli, who later handed over to S. Ramadorai who took it to next level of outsourcing and today N Chandrashekaran taking it to league of top 10 global IT services companies with far larger engagements and serving the mass market with templatized iON framework (IT as a Service) tapping on to new cloud delivery model.

(The author is head of Cyber Media Research)