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  1. Technology
February 3, 1999


By CBR Staff Writer

Tata Consultancy Services (TCS) is curiously reticent when it comes to talking about itself. Best known in Europe as a supplier of offshore programming services, the $201m computing services and consulting arm of the $9.7bn Indian conglomerate Tata Sons Ltd, insists on keeping a low profile – both about its current contracts and its future plans. This has not stopped industry analysts debating whether TCS would not be able to grow faster if it floated, became more aggressive toward making international acquisitions, and adopted a more professional stance in its approach to marketing. A TCS spokesperson says the company is not expecting to make any acquisitions in the next year. Neither is it considering an IPO. It has enough money to fuel its expansion organically – something that’s backed by the comparison of net worth $109.9m to borrowings, $35.2m. As regards its decidedly low profile in the European market, he said it would be against the culture of the company if it were to go in for any hard-sell marketing drive. In the main TCS’s clients come from the recommendations of previous customers, he claimed. This is a sign of the company’s strengths. This may be a refreshing attitude but it is also one that has allowed more aggressive rivals, such as Mastech in the US, to gain ground on TCS. If TCS did come to the market analysts have estimated that TCS could raise as much as $1bn or $2bn. The move might also help reduce staff turnover if employees were offered stock options as an incentive. The issue of staff churn is a problem for TCS that has seen its staff turnover increase from 12% to 15% in the last year. This adds up to a headcount of 1,040 out of a total of 9,800. This year TCS expects to recruit 3,000 more staff, to replace the employees it’s lost but also to sustain growth. Revenue per employee is relatively low. It stands at about $20,500 per employee. This figure is slightly misleading, however, due to the collapse in India’s exchange rate since 1997. TCS revenues increased by 50% to Rs1084Crore, although in US dollars it held steady at $201m, year-on-year and profits before tax increased by 59%, to $66.6m. The company expects to grow at a similar run rate over the next couple of years, although revenue streams are expected to alter slightly. Up to 90% of existing revenues come from consultancy services provided on a fixed-time, fixed-price basis. Only 7% is derived from the sale of software products such as its EX branded accounting package, though by 2001 product sales are expected to generate 30% of TCS revenues. The company’s consulting division offers a variety of IT and management services. TCS claims it has facilities management contracts, and is involved with projects in support of capacity planning, system migration and integration, web server applications development, multimedia, data and telecommunications networks, databases, process control, office automation, bespoke application software, CAD/CAM/CAE and Y2K services. Despite its exhaustive list, TCS is able to provide only one European reference site – Sun Life Assurance. Y2K fix work generates 15% of TCS’s revenues. The work is carried out from a dedicated IBM mainframe center in Chennai, India staffed with up to 2,000 people. It has similar set-ups in Mumbai (dedicated to Tandem hardware) and Calcutta (set aside for work on Digital Equipment systems). The company often avoids hiring additional staff by sub-contracting the work off to other companies, providing that they do the work at TCS’s facility to maintain quality. This is an aspect of the business that should help reduce the impact on revenues once millennium work dries up, as it will not have to keep excess staff. Offshore development work accounted for 43% of TCS’s revenues last year with international customers providing 55% of TCS’s revenues. TCS has 54 offices in 50 countries in all the main continents apart from South America.

This article is part of ComputerWire’s European Computer Services information service. Some articles from the service are being provided to ComputerGram subscribers for a trial period only.

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