TCS joins global IT league; challenges ahead for Chandrasekaran

TCS-careersWith its domestic rivals fading in the rearview mirror and global competitors coming into focus, Natarajan Chandrasekaran, chief executive of Tata Consultancy Services (TCS), in early 2013 went on a quest.

His target — and that of many of his peers — was the $100-billion Japanese outsourcing market. Until very recently, TCS earned barely $100 million of $12 billion in annual revenues from the Land of The Rising Sun. Chandrasekaran, 51, was determined to fix this.

On April 22, TCS jumped-started this business it had painstakingly built since 1987, when it merged its Japan unit with IT Frontier Corporation (ITF) and a local joint venture Nippon TCS Solution Center Limited to overnight create a business with revenues of around $600 million annually.

Japan is the world’s second largest market after the United States. But it’s been a difficult one to crack courtesy of its culturally sensitive clients chary of outsourcing work to vendors without local language and knowledge expertise.

Analysts believe TCS has put in place a strong framework for future growth. “TCS has a robust business acquisition and execution engine,” says Dipen Shah, an analyst with Kotak Securities. “Right from recruitment, to planning of projects and executing on time and within budgets, TCS has built a business which is superior to others.”

Having snagged a bigger share in Japan, analysts think this will be a stepping stone for TCS.

The company, they say, will now focus on similar investments in Latin America and Continental Europe to further globalize its revenues.

The protracted negotiations by TCS signal the company’s intent not only to crack the Japanese market but also to be seen in the same bracket as IBM and Accenture and less as an India-centric outsourcer.

According to a TCS spokesperson, TCS ranks No 2 in market value, No 7 in revenues, and No 4 in profitability.

Company officials were not available for comments for this feature. “I think TCS breaking into the top 5 [in revenues] can only be achieved in the near future [next three years] through a major acquisition [or a few sizeable ones].

Even at current growth rates it would be hard for them to gain the [at least] $6 billion they need to get to a top 5 position [assuming zero growth in the top 5 position],” says Jamie Snowdon, a vice-president with HfS. (Source:ET)

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