SDA: TCS recently reported its Q3 results at .5 billion—a 6 percent quarter on quarter increase. Could you comment on these results?
Girija Pande(GP):Globally, our revenues grew 6 percent quarter on quarter which also represented a 37 percent increase compared to the same time last fiscal year. This growth enhances TCS’ leadership position. We are experiencing balanced growth across markets like US, UK, Europe, APAC, Latin America, and India.
We have been able to sustain growth in this dynamic environment due to our focus on major and emerging markets, full service offerings and innovative customer engagement models.
TCS experienced success in the Asia Pacific region, enjoying a 12 percent quarter on quarter revenue increase. Our nine month total for fiscal 2008 is 221 million compared to 125 million for fiscal 2007, which shows a growth of 44 %.
For TCS, India is considered as a separate geography. The revenue contribution of Asia Pacific including India is 15% to the TCS total revenues. Asia Pacific is TCS’ fastest growing region and our revenue contribution will continue to grow in the year ahead.
SDA: Which areas of your business did you see contributing most to these results and what drove the growth?
GP:First of all, TCS has been making continuous investments over the last few years which allow us to offer high-level services such as consulting, business intelligence and assurance services, and these have continued to grow over the last quarter.
Growing market presence in all markets has also been a significant driver of our growth. We continue to make large investments in Latin America and Asia Pacific and we now have operations in 47 countries with 179 offices worldwide, which is proof of TCS’ Global Delivery Model.
Our full services play, strategic acquisitions creating new capabilities, asset based offerings and our innovations agenda helping TCS in driving growth.
SDA: TCS announced on January 22nd that it has signed an agreement with Sony Pictures Entertainment. Could you tell us more about this deal and what it entails?
GP:We signed an agreement with Sony Pictures Entertainment to develop and deploy SOA solutions that will allow Sony and their customers to better use all of its IT assets to advance their business goals. Together with Sony Pictures we created a SOA framework that enables organizations to quickly sense and respond to changing market conditions.
SDA: How does TCS position itself in the SOA space and what would you say is your competitive advantage against the bigger SOA players?
GP:SOA adoption is a key enabler for the 21st century enterprise and we are committed to helping our clients develop and implement state-of-the-art solutions. TCS has been heavily involved in SOA activities for clients all over the globe and have the processes, methodologies and skills in place to help them maximize their success.
For the past seven years, TCS has provided global support and IT services expertise for BEA customers. We provide IT services including integration, migration and development of BEA-powered solutions.
Earlier this year you also announced that you have consolidated all your Eastern Europe, Middle East, Africa and Latin America business into one strategic business unit in order to increase your market leadership in these emerging markets, which at the moment only accounts for 25.5% of your global IT services. What steps is TCS taking to increase its market share in emerging markets and how does this new strategy tie in with its plans?
GP:Emerging markets offer a great opportunity for TCS. It is estimated that these regions account for 25.5 percent of the 730 billion global IT services market, growing at a faster annual rate of 8 percent versus the developed market growth rate of 6 percent.
We are looking to increase our presence in emerging markets such as Eastern Europe, West Asia, Africa and Latin America. To do this we will consolidate our operations in these regions into a strategic business unit.
Already, these emerging markets account for almost 7 percent of our revenues. We have built expertise in these regions, besides adding local clients to our portfolio. We also have our existing clients from other geographies who wish to have a presence in emerging markets. We get added business from them in terms of solutions and consultancy.
Over the last five years, we set up operations in 14 countries, including major centres in Argentina, Brazil, Chile and Uruguay, employing over 5,000 professionals (98 percent of who are locals) and catering to more than 150 clients.
Eastern Europe and Latin America are quickly gaining in popularity, primarily due to a concept called “near-shoring” and “time-zone” advantage. Mexico, Argentina, Brazil and Costa Rica are the most mature sourcing destinations in South or Central America.
Mexico’s benefits include its cultural ties and physical proximity to the US and Canada, including shared time zones and frequent flights with short travel times that make it the most accessible low-wage market for the North American companies.
Brazil is well placed to supply labour to the global off-shoring market with its strong telecom infrastructure, attractive market for IT vendors and relatively low costs.
Could you tell us more about TCS’s strategies for APAC in 2008?
GP:We have bolstered staff numbers to nearly 5,000 in the Asia Pacific region. Fueled by a record number of client wins over the last year, our headcount is set to increase with plans to recruit another 2700 employees in 2008. Last quarter we hired another 368 new employees in APAC. More than 30% per cent were local hires, underlining our focus to build local in-country talent in the region.
Yes, innovation is also a focal point for our growth and success in Asia Pacific and you will see this will various activities in this area. For example, this coming year we will build three innovation centers in the Asia Pacific region. These innovation labs will be the first TCS labs in Asia Pacific (excluding India) and will add to the 19 innovation labs we already have globally. The TCS Innovation Labs will provide a unique experience centre where new domain solutions can be developed, incubated and piloted using the latest technologies in a cost-effective environment before enterprise-wide deployment. They give our customers ‘on-demand’ access to innovation and creativity with a team comprising of domain experts, business process analysts, technology specialists and an R&D team.
Could you tell us more about these Innovation Labs project? E.g. what technologies it will be focused on?
GP:The three innovation labs will be in Singapore, Japan and China. The Singapore lab will be a centre for financial solutions, given that most of the global financial institutions are headquartered here.
In Japan, our innovation lab will be dedicated to embedded systems research in key verticals like automotive, consumer electronics, telecom, and office automation to fuel innovative solutions focused on the needs of the Japanese market. The new lab will be based in Yokohama, Japan. Japan, the second largest market in terms of technology spend globally, is a key strategic market for us. Being a world-class manufacturing and hi-tech hub, we have identified Embedded Systems as one of the key focus areas for our growth strategy in Japan.
In China, we will build a Microsoft Center of Excellence which we will use to test the latest Microsoft solutions. The center will deliver value to both our existing and prospective TCS customers in China and the region.
Which areas do you forecast will be major growth areas for TCS in 2008? What challenges do you anticipate and how do you plan to overcome them?
GP:The major growth areas for TCS in the coming year will be our focus on high-end consulting services like consulting, infrastructure, and platform-based BPO. We’ve been the leader in the downstream IT services for some time but now we've become a major force in high-end consulting that allows us to offer an end-to-end IT service.
Our strategic investments in new geographic markets will also help to accelerate growth and diversify our revenue base, thereby reinforcing our full service capability
The anticipated US economic slowdown will have an impact on the global IT and outsourcing industry. But on the flipside, a slowdown in the US can be good for IT outsourcers as the focus on cost optimization increased.
The weakness of the dollar and increasing employee costs will continue to be major challenges this year. While we expect the demand for IT services offered by firms like TCS will continue to be strong this year, further appreciation of the Indian currency against the dollar will pose more challenges. TCS will continue to effectively mitigate these challenges through strong cost controls, increasing prices, and improving the ratio of work done in off-shore locations like India, China, and South America. |
