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Business Str ategy Pr oject

Tata Consultancy Services
SubmittedTo: Prof. Michael J. Lenox
Foundations of Business Strategy
Table of Contents
Vision, Mission and Values........................................................................................................................3
Indian IT Industry Analysis........................................................................................................................3
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Porters 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).
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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
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The 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
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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 - positive
o 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
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computing, 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, water
consumption 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 : positive
o The copyright of computer software is protected under the
provisions of Indian Copyright Act 1957.
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o 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 : positive
o Depreciation on computers and computer software at 60
percent
o 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 India
Technology Center located at this park and employs
hundreds of multi disciplinary technology development
activities.
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Porters Five Forces Model Indian IT Industry
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Porters 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, J apan, 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 Strategy
Global Network Delivery Model (GNDM)
global strategy. GNDM is a u
company to choose the sourcing strategy best suited to business needs.
TCS takes a follow-the
customersbusiness 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 helpkeep 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 inChina.
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:
J oint innovation engagements
definingnew or improved solutions
J oint 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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Acquisitionsby TCS
Name Acquisition
date
Activities Country of
HQ
Value 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 November
2006
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 projects
o 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.com
http://en.wikipedia.org/wiki/Tata_Consultancy_Services
Tata Consultancy Services A Company Profile www.datamonitor.com
Forrester reports www.forrester.com
Gartner reports www.gartner.com