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According to the NASSCOM Strategic Review 2006, the revenues of the Indian IT services sector are estimated to US$

36.3 billion in 2005-2006. The growth of this sector is 5 times higher as the global IT industry. In India, the domestic IT market has been evaluated at US$ 10,2 billion and the IT services sector to US$ 4,5 billion in 2005-2006. The total amount of exports of the Indian IT services industry has reached US$ 17.7 billion in 2004-2005. The first destination is Americas with 68,5% (among which 66,5% for the USA), then 23% for Europe (among which 14% for the UK). According to the NASSCOM McKinsey Report of December 2005, quoted in TCS annual report 2005-2006, India has a leading position in the global outsourcing industry and this will continue in the next five years as only 10% of the market size has been addressed so far. By 2010, relocation to low-cost destinations is expected to take place in more than 30% of this potential market. The dynamism of the industry will also be accentuated by innovations of the firms. The growth will be driven by sectors like hardware and software maintenance, network administration, and help desk services. India is still the most attractive offshore destination, according to the NASSCOM Strategic Review 2006. The forecasts of Gartner Dataquest Market Databook (cited in TCS annual report 2005-2006) shows that the IT industry will continue its growth. The total worldwide IT spending will reach 3203.2 in 2009, compared to 2479.9 in 2004. TCS Value chain is composed of several aspects. The most salient are marketing and sales, business practices, strategic practices and alliances. According to Ms Deepti, the core of the value creation comes before all from the true combination of these activities and also from delivery excellence and operational excellence. The ability to develop technologies also plays a very important role in the value creation of TCS. Organizational attributes have an impact on competitive advantage of TCS, and especially the internal structure, through the ability to respond and even drive the changes in the market. For all the strategic customers, there is a special organizational structure to fulfill their needs. Firstly, a dedicated team is in charge of their needs. As a relationship is built, TCS can develop a better knowledge and insights of the customers needs. Secondly, the organizational structure tries to better know and address customers needs through a dedicated support working in a particular geographic area. Furthermore, the person working with a customer knows the sector (for example, if the client is a bank, somebody who has already worked for a bank will be in charge of this client). This also allows to better respond to the customers needs. What is to stress is that TCS is a service organization and they dont compare themselves with companies working on the same industry but product oriented, like for example IBM. TCS has developed a lot of client-specific capabilities. In fact some initiatives are made to better meet specific needs of clients. For

example, they have developed specially for certain customers different services that they normally do not provide because it was what customers needed. This creates value for TCS. According to her, this is a rare capability in the industry to develop client-specific capabilities at such a point. The real strengths of TCS are its flexibility and rapidity in responding to the customers needs. For her, this capability, because of these unique strengths, is hard to imitate and could be imitated only on the very long term. Currently, it is not imitable. This resource is traduced in the organizational structure of TCS through the creation of competency centers or centers of excellence which are based on the way the clients is working. A second resource that creates value for TCS is the project management capability developed by TCS. A project manager at TCS must have the ability to manage his own resources, and also to create additional capabilities. This resource is critical for TCS success, so TCS has emphasized it and developed it to a level which is rare in the industry. The imitation is not really possible because of the size of TCS and its leading position on the Indian market. The scale and complexity of the projects also prevent imitation from the competitors. The organization of TCS is made to reap the full benefit of this capability. For example, they have a fairly structured process to develop talents for project managers. TCS has also a valuable capability: learning by doing. The company benefits from a big advantage compared to the competitors because of the number and the scale of the projects they are working on. For this reason, such a capability does not only create value for TCS but it is also rare on the industry because TCS is working on high-scale projects. This advantage is not easily imitable according to her because of the experience TCS has on in sector (the company was created very early and it had dealt with many projects since then, compared to its competitors). She really insists on the fact that learning by doing is a very importance source of competitive advantage for TCS. Then, the selection of human resource plays also a role in TCS competitive advantage according to her. The selection is different depending on the background. For the technical staff, a technical level of education is required. More generally, all are selected through an evaluation process (screening and continuous evaluation programs). Continuous education programs also exist to help people acquiring knowledge or developing competencies based on their carriers plans. For her, this resource is not particularly rare in so far as each company goes through such processes to select its workforce. The strength of TCS in this field is that it benefit from a first mover advantage and that its belonging to the Tata Group allows TCS to have access to all the groups programs. For her, that is why this capability is rare and hard to imitate. TCS organization also allows to get the maximum benefits of this capability: access to all the Tata Group programs is possible and these

programs are sponsored by the company (for example, partnerships with IIM Bangalore or Calcutta to get certifications or diplomas). Managerial capabilities also plays a role in TCS competitive advantage. It creates value in so far as TCS is able to attract and retain competent and well-trained managers. For example, TCS managers are recruited internally as well as on the market. Then, they also use programs of the Tata Group to make leadership grow internally. Here again, for her, it is the fact that TCS benefit from a first-mover advantage, the early identification of the leaders and the use of management by objectives that has created the rareness and the inimitability of this TCS resource. To fully benefit from this capability, TCS uses a balance scorecard developed at the Tata Group scale for its managers. It is also interesting to notice that TCS has helped customers to develop their own balance scorecard (this move reflects the client-specific capabilities developed by TCS). Then, organizational culture is also a source of value creation for TCS. For her, employees are highly involved in the processes and their implementation. For example, the departure point of most of the programs in TCS was a need identified by employees. Moreover, there is a strong set of cultural values for a long time. She identifies the most important values as: respect for individuals, learning and sharing; then integrity and excellence. She also emphasized once again the capacity to adapt to changes as a key value for TCS. For her, this is a very critical asset in TCS industry. This is a rare resource in the industry because in TCS it is really part of the organization and as TCS is part of a very old group, values like excellence and integrity have played a very important role. For example, she stressed the fact that integrity was a critical value in the Indian context, for a company involved in a business which requires that they work intensively with the Government. The culture has for example a direct impact on practices like bribery. For her, the importance of the culture and the fact that integrity is deeply rooted in TCS make this resource impossible to imitate for a competitor. The organization of the company tries to get all the benefits of the culture, through a senior management very attached to this culture and a very particular structure that insists on flexibility, networking, incentives (for example, financial incentives) Finally, the perceived organizational reputation also plays a role in the creation of TCSs competitive advantage. TCS is credited with a very favorable reputation : it was elected best employer in India and that constitutes a good achievement for the company. TCS also want to imply all stakeholders and its good reputation is reflected by a high market capitalization from a market

perspective, as well as one of the highest customer retention rate (89.4) from a marketing point of view. For her, what is rare in this resource, is the balance which is made by TCS. Competitors are often focused on one aspect (generally the market capitalization). What is rare is that all stakeholders are taken into account. Imitation of this resource may be possible but she evaluates the necessary time to 3 to 5 years because of the advance already taken by TCS. TCS is organized in a way that allows it to benefit a maximum of this resource, through high retention rate. According to her, two other factors can explain the competitive advantage enjoyed by TCS : the types of services proposed and the wide culture of R&D innovation. Key learning The resources that seem to play a very important role in creating a sustainable competitive advantage for TCS are : development of clientspecific capabilities, project management capabilities, learning by doing, selection of human resources, managerial capabilities, organizational culture, organizational reputation, types of services provided, and culture of R&D innovation. What was particularly interesting in this interview was that she insisted that some resource may not be rare in the industry on themselves but that the extent to which TCS has developed them or the way it has applied them that has made them valuable, rare, and difficult to imitate.