Tata Consultancy Services Limited: The Pioneer in the Indian IT Industry
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Case Code: BSTR125 Case Length: 22 Pages Period: 1990-2004 Pub Date: 2004 Teaching Note: Available |
Price: Rs.500 Organization: TCS Industry: Information Technology, Software Countries: India Themes: Business Practices |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Best Practices
Over time, TCS pioneered several best practices in the Indian IT industry. The company followed a unique factory approach in managing its functions including product development, creating new infrastructure and human resource management. For TCS, most of the product research and development was undertaken by its research wing - Tata Research Development and Design Centre (TRDDC) in Pune. The centre viewed the development of software products as a capital-intensive activity. Explaining this, Kesav V Nori (Nori), former executive Vice-President, Software Research, TRDDC and currently, Chief Information Officer, TCS, said, "We want to mimic the industrial revolution and make software development a capital-intensive activity. This has been a major theme for software research here since the centre's inception." TCS had realized from the very beginning that with technology changing at a rapid pace, it was not feasible every time for it to write a new code from beginning while developing new applications...
The Growth Strategy
In the late 1990s, to accelerate its revenue growth, TCS decided to employ a three-pronged strategy. This involved developing new products with high revenue earning potential, tapping domestic & other fast growing markets and focusing on inorganic growth through mergers & acquisitions. TCS identified high potential areas in terms of technology and industries on which it would concentrate. For instance, in late 1998, the company decided to concentrate on new revenue opportunities including Y2K and Euro conversion. A major area of focus in the late 1990s was e-business. All TCS products and platforms were web-enabled. It also decided to specialize in e-business consulting. The company offered e-business solutions and consulting in various functional processes including customer relationship management (CRM), supply chain management (SCM), enterprise resource planning (ERP), business intelligence, management information systems (MIS), customer support services, integrated knowledge management (Groupware) and more (Refer Exhibit IV for e-business solutions of TCS)...
The Result
TCS' efforts in recent years in aggressively pursuing its growth strategy helped it script one of India's greatest success stories and earned the company worldwide recognition. TCS successfully passed through the global technology meltdown in the late 1990s. Its success could be judged from its improving financials and from the fact that it continued its recruitment drive in the beginning of the new millennium when several other IT companies stopped new recruitment. For the fiscal 2003-04, TCS' revenues amounted to Rs. 59.395 bn, an 18.85% growth over the previous fiscal year. With exports of $ 1.2 bn in the fiscal 2003-04, TCS was ahead compared to its competitors - Infosys ($ 1 bn) and Wipro ($ 854 mn). Though most of India's leading software companies, including Infosys, Wipro and Satyam had a large clientele; TCS led the pack (Refer Table IV for the number of clients of top Indian IT companies). In June 2004, TCS formally announced its decision to launch its initial public offering (IPO)...
The Challenges Ahead
Notwithstanding TCS' rapid growth in the past, analysts expressed doubts whether this momentum could be maintained in the future. The company was witnessing declining revenue growth since the late 1990s. Its growth rate of revenues had decreased from a high of 56% in the fiscal 1998-99 to 19.97% in 2002-03 and further down to 18.85% in 2003-04. Analysts commented that TCS had witnessed high revenue growth in the late 1990s partly due to the depreciating Indian currency as compared to the US dollar. TCS was viewed by analysts as a company which was aggressive in pricing, but very slow in decision making. It was also considered to be conservative, especially in disclosing its future plans to the media and general public. TCS was described by media as 'India's best kept secret.' However, analysts felt that after the IPO, the company had to bring in more transparency in its operations. TCS had several issues to address. A serious challenge which the company faced was the business process outsourcing (BPO) backlash in the US. Several states in the US had been bringing legislations to ban outsourcing, primarily to protect the interests of local citizens...
Exhibits
Exhibit I: TCS - Consolidated Statements of Income (2001-04)
Exhibit II: TCS - Statement Of Assets And Liabilities (2001-04)
Exhibit III: TCS - Organizational Structure
Exhibit IV: E-Business Solutions of TCS
Exhibit V: International Sales and Marketing Network of TCS
Exhibit VI: Business Segments of TCS
Exhibit VII: Key Acquisitions by TCS (October 2001 - July 2004)
Exhibit VIII: A Note on the Indian Software Industry
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