TCS in JV with Mitsubishi for Japan mkt

To invest $5 million in JV, have 60% holding in Nippon TCS Solution Centre to increase its penetration in Japan, the world?s No. 2 IT market

Tata Consultancy Services, India’s largest information technology services provider, on Wednesday announced a joint venture (JV) with Mitsubishi Corporation, to increase penetration in Japan, the world’s second largest IT market.

With an initial investment of $5 million (Rs 24.5 crore) from TCS, the company will have 60 per cent holding in the JV, to be named Nippon TCS Solution Centre. It will also establish a nearshore delivery centre in Japan and have 1,500 employees.

For TCS, the JV is part of a strategy to increase presence in that market. At present revenue from Japan is less than $100 million for the firm. With this JV, it expects  revenue to touch $500 million in the next four to five years.

“This is part of TCS strategy, to focus on markets like Germany and Japan. We think the partnership with Mitsubishi will significantly accelerate our presence in Japan. The new joint venture will provide strong local market knowhow and deep domain knowledge, as well as bring in best practices to help Japanese corporations effectively respond to their global IT needs. Mitsubishi is also a large industrial house and will give TCS opportunity to look at a business opportunity,” said N Chandrasekaran, managing director and chief executive officer of TCS.

Nippon TCS Solution Center will offer a full-service suite of IT, business process outsourcing and infrastructure services to Japanese corporations.

This is only the second time that TCS has opted for a JV route to enter a new market. TCS had presence in China since 2002 and chose the JV route with the government there in in 2007, as it started to expand into the domestic Chinese market. TCS has had presence in the Japan market for close to 20 years.

Several other companies have been trying to enter the Japanese IT services market but none have met great success. For Infosys, Wipro and others, revenue from Japan as a proportion of the total is still in single digits.

When asked if Japanese clients were now much more open to work with Indian service providers, Chandrasekaran said: “We have seen much more traction from Japanese enterprise in the last few years for services from players like us. The entry also validates two developments — one, Japanese clients and markets are much more open to partner with players like us and, two, TCS has also become a scale player. Which gives us the ability to make serious investment in new markets.”

The JV comes against the backdrop of a strong yen, the globalisation of supply chains and a growing trend toward mergers and acquisitions abroad, all a catalyst for the increasing globalisation of Japanese companies. This has brought heightened interest in the role of ‘global IT services’ to link domestic and foreign operations.

In recent times, Japanese IT service companies have also become aggressive in increasing  their presence in India. NTT Corporation is an instance.

Last year, NTT Data Corp, the IT services company of the group, had acquired Hyderabad-based Intelligroup Inc for $200 million. It had also acquired US-based Keane International, that has significant presence in India, for $1.2 billion. The Fujitsu Group, another leader in the Japanese market, has been increasing its presence in the Indian market, both as a service provider and a delivery point.