[May 20, 2013] TCS plans to create billion-dollar business from Tata group firms Tweet BANGALORE, May 20, 2013 (Mint - McClatchy-Tribune Information Services via COMTEX) -- In March, Natarajan Chandrasekaran, chief executive of India's largest software services firm Tata Consultancy Services Ltd (TCS), addressed a group of customers in Chennai that together spend nearly $2 billion on information technology (IT) every year, over half of which could be potentially delivered by his company. These customers were not the usual Fortune 100 firms from the top markets of the US and Europe, but chief information officers and senior executives from the $100 billion Tata group across the businesses of manufacturing, auto and services. Chandrasekaran's address was part of new Tata chairman Cyrus Mistry's plan to encourage closer collaboration between companies within the group and in that process increase the business earned by TCS from other Tata firms. Currently, TCS earns around $100 million annually from other Tata firms that give away projects worth 10 times that amount to rivals International Business Machines Corp. (IBM)and Capgemini. The plan is to reverse that and create a billion-dollar business for TCS from group firms, according to at least four people familiar with the strategy. They requested anonymity because it's an internal plan. "There's no push to impose TCS. The idea is to increase collaboration with a group software firm, which is as good as any other technology services company in the world. The ambition is to increase TCS's business from the group firms," the first person, an executive at one of the group companies, said over phone last week. The $100 billion Tata group has 31 publicly traded companies across energy, services, consumer products, chemicals and IT. On its part, TCS has already started winning back the lucrative group business it lost to global rivals including IBM. In October, the company won fresh outsourcing business worth $385 million from Tata Motors Ltd and Jaguar Land Rover Ltd, most of which was earlier managed by IBM. To be sure, TCS is yet to win a large contract from any of the group firms since Mistry took over, but executives at rival firms, especially those working with Tata companies, say it's a matter of time before the transition starts. "We are not complaining of any unfair practices. It's a call the group has taken because they have expertise within the group. It will be a loss for us," said an executive at a foreign technology firm. He requested anonymity. When contacted, a TCS spokesperson said the company approaches customers both outside and from within the group. "In any opportunity with the Tata group, our teams would have the same approach in the case of a Tata group company as with any other global corporation," the spokeswoman said. A Tata group official had not responded to an email questionnaire sent on 15 May. Experts tracking spending on IT and strategy by Indian conglomerates said there's nothing wrong in using the home advantage. "Barring the power industry, where IBM has some unique solutions and global footprints, there are no major differences between the skill sets of TCS and IBM. Competencies, cost advantages and the possibility to preserve workflows and IP (intellectual property) are weighing for TCS. Cyrus Mistry's decision is rational," said T.R. Madan Mohan, founder of management consulting firm Browne and Mohan, which advises firms on corporate strategy. By ensuring more business from group firms, TCS will also gain a more predictable source of revenue. "This will be another channel for revenue generation," said Sridhar Vedala, founder of outsourcing firm QS Advisory, which specializes in European business. Apart from earning some $20 million annually from Tata Motors, TCS gets $65 million from Tata Teleservices Ltd and around $5 million every year from Tata Steel Ltd as part of ongoing contracts, experts said. "The Tata group could benefit from a common centre for IT, economies of scale on KM (knowledge management), and standardization of solutions. Functional areas like procurement, HR (human resources) can use a common solution and therefore gain on efficiencies. For TCS, it means a predictable and sustainable source to implement and grow their capabilities," said Mohan. Some experts warned against giving any advantage to TCS while seeking technology vendors and illustrated how Japanese companies lost on external innovation by choosing to work only with group firms. "Encouraging more collaboration between TCS and Tata group companies is a good idea. Conversely, switching from IBM to TCS just because TCS is a group company would be a bad idea. Inter-company cross-selling initiatives should always be market- and merit-based," said Peter Schumacher, founder of Germany-based Value Leadership Group that advises companies on their Europe strategy. "The Tata group should always seek out the best suppliers and partners, regardless of whether they are internal or not. The collapse of many once great Japanese companies is a warning and shows just how ruinous such practices are," Schumacher said. ___ (c)2013 the Mint (New Delhi) Visit the Mint (New Delhi) at www.livemint.com Distributed by MCT Information Services [ Back To TMCnet.com's Homepage ]