Tata Consultancy Services Grows in Europe with Localized Capabilities Based on Global Standards

Last December, Tata Consultancy Services (TCS) held an Analyst Day in Paris at which it provided an update on European activities, including the company's French operation and newly opened French headquarters. The company also provided insights into TCS' Enterprise Solutions strategy and recent initiatives such as "Digital Reimagination," designed to transform business processes and business models using a combination of digital technologies. While maintaining traditional outsourcing-based IT services at competitive cost, the company has ramped up its consultative capabilities to provide increased value for clients.

Client testimonials by leading French banking, telecom, and utility companies revealed that TCS creates both cost and value benefits for its customers.

TCS: A Socially Responsible Peer of the "Big Four"

Kumar Narayanan, head of the French operations hosted and opened the meeting. The three key messages he conveyed were:

1. Due to its strong client focus, 99 percent of TCS's business comes from existing clients. Customers are supported by a stack that includes innovation, a "global network delivery model (GNDM)," an end-to-end or full-services portfolio, and vertical industry expertise. As of March 2014, the company had set up 40 delivery centers in 22 countries outside India. Over the last ten years, the number of delivery centers has increased more than four times. Revenues from new services have recorded impressive 37-fold growth since fiscal 2006.
2. A global IT services company, TCS was the fastest growing brand in its industry worldwide in 2014, with a brand value of US$8.2 billion, according to BrandFinance, a brand valuation consultancy. In terms of market capitalization, income and employees, the company is part of the "Big Four." With double-digit growth, the company is likely to improve its position further in the coming years.
3. The company is part of the Tata Group, a $135 billion industrial conglomerate that includes chemicals and steel production and car manufacturing. These companies compete in global markets, but their income flows back in part to society because two-thirds of the group holding is controlled by trusts created since the end of the 19^th Century by the Tata family. These trusts are active in a wide range of educational, medical, artistic, scientific, and philanthropic activities.

European and French Operations

Over the last ten years, the company enjoyed 34 percent CAGR in Continental Europe. TCS continues to invest in delivery centers across Europe and worked to ensure the same delivery and service standards everywhere. With 51 percent annual growth, the European region currently represents the fastest growing region for TCS. The UK provides an important base for European operations. Established in 1975, TCS's UK organization now has 38,000 consultants working for UK customers in 30 delivery centers. In the early nineties, the company opened offices in the Netherlands, Luxemburg, France, Switzerland and Germany. Since then, it opened additional offices in Scandinavia, Spain, Hungary, Italy, and Portugal.

In 2013, TCS acquired the French IT services company, Alti, with 1,200 consultants in three delivery centers. Since the acquisition, the company has recruited several hundred people locally for its French operations. Equivalent technical resources are available in India to support the French offices and clients. The French headquarters of TCS are now established in La Défense, Paris' business district. If TCS can sustain its current growth, it is likely that the company will be one of the leading IT service providers in France within several years.

Consistent with the global strategy, the company strives to make customer centricity its primary focus. To be able to serve customers optimally, the Alti organization was aligned with the TCS structure. Teams with appropriate domain background serve key accounts and prospects.

Secondly, the services portfolio is designed to have strengths that line up with the local markets. According to the company, the main strengths are application development and maintenance; engineering and industrial services; assurance; infrastructure services; SAP competence; and "digital" solutions, including mobility, social media, business intelligence and analytics. In addition, the SAP Innovation Center experiments with innovative SAP solutions for testing and demonstration purposes.

Lastly, the company has initiated a number of localization efforts, including technical and solution training for French locals in India (further supported by Indian expats in France), hiring local graduates for French delivery centers, and French language training for Indian staff to support off-shore and branding activities. Today's client base in France includes major and blue chip companies in discrete and process manufacturing, banking and insurance, retail, and transportation.

Enterprise Solutions Transform Customers

The Enterprise Solutions organization serves all industries across geographical regions, with enterprise-level functions such as ERP, SCM, CRM, or Business Intelligence based on technology partner platforms. It also provides recent digital products such as cloud, mobile, support for social media, artificial intelligence (AI), robotics and big data used together in emerging digital solutions. The organization has an impressive growth of 28 percent. Krishnan Ramanujam, Vice President and Global Head of Enterprise Solutions observes the following trends:

• New digital solutions are a priority investment area for many customers
• Cloud and SaaS are gaining gain momentum at the expense of custom applications
• Simplification, Digital Reimagination, and governance are key topics driving business transformation and outsourcing initiatives
• Business executives have increased influence on IT spending, with speed to deployment, agility, and flexibility as the main drivers

For TCS, "Digital Reimagination," means disruptive innovation based on digitally enabled solutions that impact business models, products, and services (e.g., crowd-sourcing), new customer segments and channels, business processes, and work places. While ARC Advisory Group uses different terminology, this resonates well with our own thinking.

"Transformation" goes beyond providing IT services at lower cost. TCS uses the term to refer to consulting activities and solution implementations that impact work processes and culture. These provide added value both to TCS and its clients.

According to Mr. Ramanujam, the group adopted a strategy designed to maintain growth in the more traditional solutions, innovate in application management services by growing the proportion of transformational business, focus on the needs of the influential "business buyers," and leverage global technology alliances.

Enterprise Solutions transforms its own capabilities by branding based on innovation and thought leadership, developing domain and business consulting expertise, continuous skills and competency development, and making strategic acquisitions.

In conclusion, Mr. Ramanujam referred to a survey of US and UK business transformation leaders that concluded that "innovation without operational excellence equals mediocrity." This reflects the frustration of users of new solutions struggling with bugs. ARC agrees that bringing innovative new solutions to the market successfully requires flawless execution and implementation.

TCS developed its solution lifecycle management model to identify and create sustainable value from IT solutions.

Client Testimonials

Three client testimonials at TCS's Analyst Day event supported the above.

Thierry Seignol, VP of Sales Support at Alcatel-Lucent Enterprise, reported how both companies commonly do R&D to come up with innovative solutions for Alcatel-Lucent, TCS, and each other's clients. The partnership enables Alcatel-Lucent to produce locally and sell globally, reduce TCO, transfer Capex to Opex, provide flexible "resourcing" that is not available on the French market, and benefit from reduced time-to-market and service level agreement-driven services. Cross-pollination between the two companies also supports innovation.

Mr. Seignol mentioned that an open and continued dialogue is necessary between partnerships of this kind and that the full benefits come gradually over time, as mutual understanding increases. The company succeeded in transferring Alcatel-Lucent headcount to TCS to benefit all parties. Both entities continue to work at the same site.

Olivier Vandelaer, head of IT sales and marketing at GDF Suez, explained that as an energy and utility giant, it's critical for the company to adapt to decreasing energy consumption by its clients, which is related to sustainability and economic reasons.

Facing this challenge, the company issued a performance plan for IT to reduce IT maintenance costs while maintaining high service levels, IT quality, and shortening time to deployment for new IT solutions. In other words, IT must respond with agility and efficiency to the company's needs. The company decided to start a new approach including outsourcing for the SAP ISU (IT solution for utilities industries) and CRM applications, while maximizing use of common components for different countries.

GDF Suez ultimately selected TCS/Alti for the project based on cost, clarity of responsibilities and accountabilities, and good references. After a year of cooperation, the five targeted applications have been transitioned successfully and at constant quality. Mr. Vandelaer's objective for the second year is to improve quality and "industrialize" best practices. In his view, the companies cannot just renegotiate an extra 5 percent every year; to achieve additional efficiency. "We must specify our needs, not the solutions; but work those out together."

Conclusions

ARC believes TCS has a clear strategy that's well adapted to the market and technology evolution. Testimonials show that the company is capable of creating deep relationships with its clients and technology partners to create both value and cost benefits, leading to TCS' strong customer satisfaction record. The combination of innovation, cost competitiveness, operational excellence, and tight client relationships help explain the company's growth.

TCS has successfully localized itself in European markets and has proven to be an attractive partner for European companies across all service lines it operates in Europe as well as for complex programs and strategic initiatives.

As a result of its capabilities, client orientation, and marketing efforts the company has increased its brand awareness to the level of top global IT services providers.

(Note: Digital Reimagination is a trademark of TCS. All other trademarks mentioned in this report are the property of the respective trademark owners.)

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Keywords: TCS, IT Services, Digital, Europe, Tata Consultancy Services, France.