TCS' Asia-Pacific business to grow faster than overall company

India’s largest IT firm, Tata Consultancy Services (TCS), believes that revenue growth from the Asia-Pacific (Apac) region will be faster than the overall growth of the company.

This despite the fact that the Apac market became a concern for the company after its fourth quarter results saw volatility in the region.

In an earlier interview, Chief Operating Officer N Chandrasekaran had voiced this concern and said TCS was taking some measures. The impact was also evident on the overall revenue contribution, which fell to 4.7 per cent in FY09 from 5.2 per cent in FY08.

TCS’ head for Apac, Girija Pandey, feels the region will continue to be volatile till they reach a certain level.

“We have a good pipeline and strong growth from verticals like BFSI (banking, finance, services & insurance) and telecom. While this year the growth rate might be a tad slower, we will still manage to grow,” added Pandey.

Japan, China and Australia are the three big markets that constitute the Apac region, along with other geographies. Pandey says that a lot of Apac countries were directly hit by the global slowdown, as most of them are huge exporters to the US. And, like the US market, pricings have been under pressure.

TCS’ Apac region, with a 6,000-employee base, has a revenue of $300 million (around Rs 1,440 crore). If India is added to the Apac region, which many MNCs do, then the revenue contribution will be 12-13 per cent. In case of most MNCs, it ranges between 12 per cent and 19 per cent.

A trend that has clearly emerged in this downturn has been larger IT budgets and for a longer period of time. Pandey says that in Apac, deal sizes generally range between $20-50 million.

“Also, these firms are increasingly looking at offshoring,” he said. For instance, according to Pandey, Japanese firms are increasingly making an effort to understand the Indian offshore story, “...and this is clearly the indication of things to come.” He also points out that Apac is a very different market.

“One, we cannot adopt the offshore development centre strategy, like in the US and the UK markets. These markets are not too aware of Indian IT firms, language is a huge issue and they prefer to work with local partners. So, the challenge is to build a brand. Similarly, when we sell solutions, it’s project by project,” said Pandey.

These are some challenges that have hampered ramp-up in regions like Japan, which is the second largest market in terms of IT spent.