Business Strategy Project (Nirmalya Sirkar)

1Business Strategy Project

Tata Consultancy Services

Submitted To: Prof. Michael J. Lenox

Foundations of Business Strategy

Table of ContentsVision, Mission and Values........................................................................................................................3

Indian IT Industry Analysis ........................................................................................................................3

2Porters Five Forces Model Indian IT Industry ...........................................................................................8

Porters Five Forces Analysis TCS ............................................................................................................... 9

SWOT Analysis TCS...................................................................................................................................10

Key Differentiators of TCS...........................................................................................................................10

Pioneer in the industry & Brand .............................................................................................................10

Integrated full-services player ................................................................................................................10

Collaboration with multiple stakeholders ..............................................................................................11

Global Network Delivery Model..............................................................................................................11

High Quality and Maximum security.......................................................................................................11

Innovation Network ................................................................................................................................11

Generic Business Strategy...........................................................................................................................12

TCS Service Practice Revenue .....................................................................................................................13

BCG Matrix of TCS.......................................................................................................................................14

Global Strategy............................................................................................................................................15

Follow the Sun Strategy ..........................................................................................................................15

Strategic Alliances ...................................................................................................................................16

Acquisitions by TCS .................................................................................................................................19

Recommendations ......................................................................................................................................21

References ..................................................................................................................................................22

This term project report covers strategy analysis of Tata Consultancy Services (TCS).

3 Tata Consultancy Services Limited (TCS) is a global IT services, business solutions and outsourcing company

It is the second-largest India-based provider of business process outsourcing services.

In the 2011/12 fiscal year TCS achieved annual revenues of over U$10 billion.

TCS had a total of 238,583 employees as of 31 March 2012, of whom 220,835 were based in India and 17,748 in the rest of the world.

As of 31 March 2012, TCS had 183 offices across 43 countries and 117 delivery centers across 21 countries

Vision, Mission and Values

To create value by leveraging our co-innovation network in a manner that has an impact on the customers ecosystem

To be among the top 3 companies worldwide by 2011; Culture of accountability, delivering certainty to customers.

Their values integrity, leading change, excellence, respect for the individual, and fostering an environment of learning and sharing.

Indian IT Industry Analysis

4The following PESTEL analysis discusses the Indian IT industry macro environment

Political

Political Stability : Indian political structure is stable for the IT industry positive

Increasing adoption of technology and Telecom by consumers and focused Government initiatives leading to increased ICT adoption -positive

Government owned companies and PSUs have decided to give more IT projects to Indian IT companies positive

US government headed by Barack Obama had declared that US companies outsourcing work to locations outside US will not get tax benefits negative

Terrorists have tried targeting Indian IT hubs like Bangalore, Pune, Delhi negative

Economical -

India, with its low cost advantage and emergence of several private players, represents the fastest growing market in the IT sector -positive

Within the global sourcing industry, India was able to increase its market share from 51 per cent in 2009, to 58 per cent in 2011 positive

The industry continues to be a net employment generator -expected to add 230,000 jobs in FY2012, thus providing direct employment to about 2.8 million, and indirectly employing 8.9 million people. - positive

As a proportion of national GDP, the sector revenues have grown from 1.2 per cent in FY1998 to an estimated 7.5 per cent in FY2012 positive

5 The industrys share of total Indian exports (merchandise plus services) increased from less than 4 per cent in FY1998 to about 25 per cent in FY2012 positive

While the challenges facing global economic growth persist the Eurozone crisis, weaker US recovery, a slowdown in China the outlook has at least stabilized. Gartner's current U.S. dollar growth forecast for overall global IT spending in 2012 has been revised up slightly from 2.5% last quarter to 3.0% now. positive

Currency fluctuations dollar to rupee has a long term negative impact negative

Social

Language spoken English is widely spoken in India and English medium is the most accepted mode of education positive

Education Large number of colleges and universities in India provide high quality IT end engineering education- positive

The working population age is below 35 years positive the presence of a large number of Indians, especially engineers, in

the US gave India an easy entry into the US software market.

Technological

Telephony - positiveo India has the world lowest call rates. o Expected to have total subscribers base of about 500 million

by 2010.o India has the second largest telephone network after china.o Enterprise telephone services, 3G, Wi-max, VPN, poised to

grow.

Internet Backbone: Due to IT revolution in 90s India is well connected with undersea optical cables - positive

New IT Technologies: Technologies like SOA, web 2.0, High definition content, grid

6computing, and innovation in low cost technologies is presenting new challenges and & opportunities for Indian IT industry -positive

Environmental

Environmental conservation and protection positive

This has been taken very seriously by different stakeholders in the society including the government and legislations and movements are creating pressure for an environment friendly business.

Companies are focusing on reducing the carbon footprints, energy utilization, waterconsumption etc.

Legal

IT Act 2000 : positive o The arrival of the Internet and the World Wide Web made it

possible for people to communicate and transact over cyber space. It also created a significant need for the regulation and governance of these activities, a requirement that lead to the creation and implementation of cyber laws across the globe. India became the 12th nation in the world to adopt a cyber law during 2000.

o Companies are able to carry out electronic commerce using the legal infrastructure provided by the Act.

o Digital signatures have been given legal validity and sanction in the Act.

o The Act allows Government to issue notification on the web thus heralding e-governance.

Indian Copyright Act : positiveo The copyright of computer software is protected under the

provisions of Indian Copyright Act 1957.

7o Major changes to Indian Copyright Law were introduced in 1994 and came into effect from 10 May 1995.

o Copyright Act explained: The rights of a copyright holder Position on rentals of software The rights of the user to make backup copies

o Most importantly the amendments imposed heavy punishment and fines for infringement of copyright of software

Indian Income Tax Act : positiveo Depreciation on computers and computer software at 60

percento IT companies can set up SEZ with minimum area of 10

hectares and enjoy a host of tax benefits and fiscal benefits.o Setting up of industrial parks like Electronic City set up in

1991 accommodates more than a hundred electronic industries including Motorola, Infosys, Siemens, ITI, and Wipro, in an area of around 330 acres.

o The Export Promotion Industrial Park , built near International Technology Park ,gives an exclusive 288 acres of area for export oriented business. GE has its IndiaTechnology Center located at this park and employs hundreds of multi disciplinary technology development activities.

8Porters Five Forces Model Indian IT Industry

9Porters Five Forces Analysis TCS

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SWOT Analysis TCS

Key Differentiators of TCS

Pioneer in the industry & Brand Having started in 1968, TCS has established himself as the industry leader. Being part of the trusted Tata group is also a big differentiator for TCS giving it a strong brand strength.

Integrated full-services player Portfolio of offerings extends from consulting to implementation, testing and support; from engineering services to BPO; from products to end-to-end solutions.

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Collaboration with multiple stakeholders Having worked on large global scale enterprise projects, TCS appreciates the need for flexibility to work with multiple stakeholders from customers, partners, and other service providers. TCS have developed innovative engagement models that have proven TCS ability to deliver significant value to its customers in managing their projects as the sole solution provider, or prime/lead partner, or supporting partner.

Global Network Delivery Model Unique network of 79 Delivery Centers in Brazil, Uruguay, Chile, China, Hungary, UK, Japan, Australia, Singapore and India that operate at the same quality, security and skill levels, giving customers the same experience of certainty across the organization globally with a lower total cost of ownership.

High Quality and Maximum security In 2005, TCS was awarded enterprise-wide triple certification for:

Quality (ISO 9001:2000), Security (BS 7799-2:2002) & Services (BS 15000-1:2002)

Innovation Network TCS has established 19 labs with strong links to start-ups, academia and alliance partners to continuously develop innovative solutions for their customers.

TCS Technology Partnerships and Relationships

Tata Consultancy Services combines its system integration expertise, flexible global delivery model and deep industry insights with the technological expertise and capabilities of its renowned alliance partners to offer competitive advantage to its customers. The alliances enable TCS to deliver cutting edge technological solutions and enhanced services to help customers integrate their business applications

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effectively while improving the operational efficiencies and ROI. Strategic partner relationships of TCS include leading industry players like SAP, Oracle, IBM, and Microsoft among others.

Strategic Partners

IBM - Global System Integrator Partner Oracle - Global System Integrator and Global Certified Advantage

Partner Microsoft - Global System Integrator Partner SAP - Global Consulting Partner

Growth Engine Partners

Siebel - Consulting Partner Web Methods - Global System Integrator, Preferred Offshore

Partner BEA - TCS is BEA Strategic Partner SUN - System Integrator Partner, GSS Partner

Generic Business Strategy Low cost Global delivery 24X7 model. Focus on customer relationship management, customer retention

(for repeat business revenue which is 95.6%). Timely delivery with the help of proven delivery & quality

framework iQMS. Differentiation in low end services in terms of cost, resources. Differentiation in high end services such as consulting in term of

niche offerings, expertise. Protection from currency fluctuations with the help of currency

hedging.

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Due to its strong knowledge management system and resource strength, TCS has been successful in getting the cost leadership in the industry.

Since last decade, TCS has been following a more focused strategy where they are going as per local needs of customer and their nature of business. E.g. Middle East, Australia. They are being more focused region wise and customer wise rather than being generic.

Focus on the Centers of Excellence (CoE) to strengthen capability so as to build state-of-the-art solutions in specific technologies such as service-oriented architecture, testing, and virtualization. These high-end skills and scale will help TCS to tackle larger projects aimed at transforming clients IT applications and infrastructures.

TCS Service Practice Revenue

TCS has a heavy exposure to IT Solutions Application Development & Maintenance 48.6%.

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TCS has traditionally been a low cost outsourcing player which provides application development and maintenance services, which till date account for almost half of its revenue. Though TCS has managed to bring down this percentage significantly in last decade by entering into niche areas like, BPO, infrastructure services, business consulting, IT consulting, asset leveraged solutions etc. TCS sees a strong growth potential especially into consulting, BPO and infrastructure services. Thus TCS is investing heavily into these areas to explore new market segments.

BCG Matrix of TCS

Global StrategyGlobal Network Delivery Model (GNDM)global strategy. GNDM is a ucompany to choose the sourcing strategy best suited to business needs. TCS takes a follow-thecustomers business is located, providing a seamless experience across all operations.

Follow the Sun Strategy

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Global Network Delivery Model (GNDM) is in the heart of TCSs GNDM is a unique global engagement model allows

to choose the sourcing strategy best suited to business needs. the-sun approach, meaning that no matter where

business is located, TCS can help keep it running 24/7, while providing a seamless experience across all operations..

is in the heart of TCSs nique global engagement model allows a

to choose the sourcing strategy best suited to business needs. sun approach, meaning that no matter where

keep it running 24/7, while

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Since last few years TCS is successfully leveraging labor cost in Eastern Europe, South America and China.

Getting big foreign names on board of directors is also one of the key strategies for TCS. The current three foreign directors are: Clayton M Christensen (HBS Professor, joined in 2006), Dr. Ron Sommer (former Chairman of the Board of Management of Deutsche Telekom AG, joined in 2006) & Laura M Cha (member of the Executive Council of the Hong Kong Special Administrative Region (SAR) and Non-Executive Chairman of HSBC Investment Asia Holdings Limited)

Look beyond US and UK for growth and beyond India for skills to emerge as a global firm. Clearly bullish with successes such as ABN Amro in continental Europe, Qantas in Australia, and almost 18% to 20% revenue from the Asia Pacific market, TCS wants to grow its businesses in global markets including India.

Recent acquisitions in Ireland and Latin America demonstrate its ambition to create delivery centers of respectable size outside of India.

TCS was the first one to set up a delivery centre in China.

Strategic Alliances TCS has strategic relationships with various global technology vendors. These relationships are in various dimensions such as Customer, Service Provider, Supplier, and Alliance Partner. Extending collaborative research to several global technology vendors has made relationships with them more holistic. TCS and these technology vendors collaborate on joint research leveraging each others strengths to research and to the development of best-of-breed offerings. The intent is to define and develop solutions with associated services and offer the same as an

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integrated business model to customers. Some of the strategic alliances are listed below.

Intel: Intel and TCS provide information technology products and services that complement each other. The companies are engaging in a technology alliance model in which the two organizations collaborate on research and develop solution offerings to deliver customer-specific solutions to the marketplace.

This alliance has matured over the last two years of collaborative work, with the companies implementing a well-defined model for collaboration using a three-stage approach:

Joint innovation engagements defining new or improved solutions Joint go-to-market strategies for the solutions

The companies have completed two significant virtualization and balanced compute research projects with these objectives:

Virtualization: Demonstrate server consolidation through virtualization using multi-core Intel Xeon processors and Intel Virtualization Technology on a real-life customer application to reduce total cost of ownership.

Balanced Compute: Demonstrate and validate balanced compute model usages in real end-user scenarios, showcasing central manageability and client side computing using a combination of OS and application streaming technologies on Intel vPro technology-based platforms.

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SAP: SAP as a leading technology and product vendor is one of the key partners of TCS. The partnership with SAP has been a long-standing one and multi-dimensional. Leveraging and extending this existing partnership to collaborate for joint research and innovation was a logical next step for both SAP and TCS.

Senior Research Scientists of SAP and TCS initiated this collaboration setting the objectives and defining the modus operandi for carrying out research in a collaborative manner. And they committed to cause by undertaking the responsibility to be Executive Sponsors in the respective organizations.

Collaboration with SAP Research was initiated after detailed discussions and exchange of research interests from both SAP and TCS. Identified areas include Model-driven Architecture and Integration of Enterprise-Data, Web 2.0, Internet of Services, and Internet of Things.

Hewlett-Packard: HP and TCS have initiated discussions for joint research in the areas of SaaS, Power Management & Cooling, Utility/Grid Computing, Cloud Computing, Green IT and Next

Acquisition Strategy

TCS is looking at growth from two ways first through organic means and second through the inorganic way. The inorganic way of growth is through acquisitions of those companies that make business sense to TCS. The companies should add great value to TCS. Like for instance TCS acquisition of CMC is helping it taking a sharper look at the domestic IT business. Both the companies have synergies in the government sector, since both the companies are well known for doing work for the government.

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Acquisitions by TCSName Acquisition

dateActivities Country of

HQValue Headcount

(at acquisition)

Notes

CMC Limited October 2001

IT Services India US$33.89 m (51%)

3,100 Access to domestic capability; continues to be a separately run company.

Airline Financial Support Services India (AFS)

January 2004

BPO India $5.1 m 316 BPO expertise in Airline and Hospitality sector

Aviation Software Development Consultancy India (ASDC)

May 2004 IT Services India n/a 180 ASDC was a Singapore Airlines-TCS JV; Acquired Singapore Airlines as a major client

Phoenix Global Solutions

May 2004 BPO India $13 m 350 Acquire expertise in insurance

Swedish Indian IT Resources AB (SITAR)

May 2005 IT Services Sweden $4.8 m n/a Acquire blue-chip European customers like Ericsson, IKEA, Vattenfall and Hutchison; SITAR was TCS exclusive partner in Sweden and a non-exclusive partner in Norway.

FNS October 2005

Core Banking Product

Australia $26 m 190 Acquired core banking solution product and access to 116 customers in 35 countries; FNS was an existing partner for TCS

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Pearl Group October 2005

Insurance United Kingdom

$94.7 m 950 Acquired life and pension outsourcing business from Pearl Group; Domain knowledge of life and pension underwriting business

Comicrom November 2005

Banking BPO Chile $23.7 m 1,257 Entry into Latin America; Access to payment processing platform

Tata Infotech February 2006

IT Services India n/a n/a

TCS Management

November 2006

IT Services Australia $13.0 m 35 Access to Australian clients

TKS-Teknosoft November2006

Banking Product

Switzerland $80.4 m 115 Expand product portfolio by acquiring rights to Quartz and ownership of Alpha and e-portfolio, enhanced presence in Switzerland and France

Citi Global Services Limited

8 October 2008

Business Process Outsourcing

India $505 m 12,472 TCS acquired key BFS domain knowledge.

Supervalu Services India

8 October 2010

Supervalu USA self Software Service company

India 612 TCS had a deal with Supervalu to have their Software Outsourcing to TCS and acquired Supervalu India.

Computational Research Labs

August 2012

High Performance Computing

India $34 m N/A Acquire expertise in High Performance

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Computing (HPC) applications and Cloud services

Recommendations TCS must continue to work to reduce the bargaining power of

customers by trying to move the purchase decision away from price. This means that TCS must deliver more than undifferentiated programming by moving up the value chain. customers understand that if they outsource the strategic consulting, then their bargaining power will be reduced. TCS must develop sufficient expertise so as to make outsourcing these tasks a compelling value proposition. Of course, it is exactly in these realms that the multinational outsourcing firms such as IBM, Accenture, and EDS are the most ferocious competitors.

A key concern for TCS is competition from existing players as it has generated competition for existing business and created significant pricing pressures. Globally, firms such as EDS have positioned themselves as capable of undertaking large, turnkey projects in order to differentiate themselves from competitors such as IBM and Accenture that focus on higher value-added work such as consulting. This suggests an organically-driven growth strategy for TCS: that TCS continue to do the same kinds of work that it currently does, but try to capture a greater portion of the value-addition by undertaking larger projects.

TCS should grow in software services through :o Acquisition of a medium-sized American firm with strong

client relationships focusing on software-intensive areas

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complementary to TCS, such as system design and systems integration in financial services

o Organic growth through undertaking larger projectso Adding domain capabilities in step with the development of

such skills in India.

Make large investment in BPO : The greatest asset for TCS is its long-established domain expertise in financial services that could help the firm obtain BPO work in the financial services industry. Further, TCSs credibility in software services should assist in securing BPO business from the same firm. Also, the BP operations can leverage off a similar set of IT-infrastructure management capabilities as are required for software services, such as remote project management and network management. However, unlike software, a more cautious approach is required. TCS should grow organically rather than through acquisitions, with a focus on those domains (primarily financial services, but also manufacturing and telecommunications) in which it already has skills that have been used in its software services work.

References

Tata Consultancy Services www.tcs.comhttp://en.wikipedia.org/wiki/Tata_Consultancy_ServicesTata Consultancy Services A Company Profile www.datamonitor.comForrester reports www.forrester.comGartner reports www.gartner.com