TCS begins major change in biz mix

Tata Consultancy Services (TCS) will be undergoing "a real structural transformation by changing its business mix," says N Chandrasekaran, executive vice president and global head of sales and operations, adding that "it will not happen in a day but take a few years."

For this TCS has identified five main growth areas - products, BPO, infrastructure, engineering services and consulting. "We want to scale up each one of these," adds Chandrasekaran.

Today, more than 85-90 per cent of TCS?s stand alone revenue comes from core IT services (applications development, maintenance, enterprise solutions implementation), that is $1.7-1.8 billion out of the 2004-05 turnover of $2.3 billion.

"Our goal is to bring this share of IT services down. In each of the other five areas mentioned we look to go to anywhere between 5-10 per cent of total turnover. Each of these will have to grow to $500-800 million. So we will be seeking to build a $3 billion plus business out of these five in the next few years."

"If these five can bring 25-30 per cent of our revenue, then the share of core IT services revenue will decline to anywhere between 60-70 per cent," explains the global head of sales.

This is a rapid clip but TCS has already been announcing deals at a furious rate. Its India based BPO work is no more than $50 million. But recently it has announced a massive $800 million plus BPO deal with the Pearl Group of the UK.

It has followed this up with an announcement of acquisition of Comicrom, a Chilean BPO company which is likely to give it a Latin American revenue of $100 million next year (2006-07).

It has also moved in the field of products where current revenue, which includes licensing fees and solution implementation, is no more than 3-3.5 per cent of turnover. But just over a fortnight ago TCS acquired Sydney-based Financial Network Services (FNS), a core banking solutions vendor.

TCS has also identified markets which present opportunities in order to achieve the growth. "We realised there were major customers in Latin America "" leading banking, telephone and oil companies. We want to be able to build a sizeable business in Latin America," says Chandrasekaran.

This is significant as TCS is ahead of the other leading Indian software companies in tapping the Latin American potential.

In fact, Latin America, Japan and Europe play a critical role in derisking TCS' business, by further reducing reliance on the US which already accounts for a lower proportion of its turnover than is the case of other large Indian software companies.