Editorial: TCS’s Japan moment

Apr 23 2014, 03:22 IST
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SummaryOthers would do well to emulate its tie-up strategy

The Indian IT sector’s market share in the top outsourcing markets remains minuscule. It has less than 10% in the USA, globally the largest IT spender; and less than 0.5% in Japan, the second-biggest market globally. While Indian software services providers have made some headway with corporations in the US, where Japan is concerned they have not even managed to get their foot in the door, not, however, for want of trying. Which is probably why Tata Consultancy Services (TCS) is

taking a different approach altogether by teaming up with

Mitsubishi; TCS has merged its Japanese operations with Mitsubishi’s IT outfit creating a modest $600 million business. In what seems like a symbiotic relationship, TCS will now be able to access marquee clients and local talent while Mitsubishi gains from TCS’s implementation expertise.

It is a well thought out strategy that TCS has chalked out to give it a bigger footprint in what is a huge addressable opportunity and will help it scale up the business in Japan far more quickly than it could ever have hoped to do on its own. To be sure, there will be no instant reward in the form of a jump in revenues but the joint venture route should definitely pay off over the long term. Indeed, while its rivals struggle to defend market share, TCS has been able to grow the business even in markets such as Europe, a geography that yielded good revenues for the firm in Q4FY14. A year back, it acquired Alti SA, a France-based systems integrator; that, too, was a deal which will not fetch it revenues immediately but will give the IT major a presence in the world’s fifth-largest market for IT spends and a difficult market to penetrate. The geographical spread apart, TCS has also been cognisant of the fact that it needs to be positioned to cater for clients’ needs in some key areas such as digital technologies. At the current pace at which it is currently growing, TCS is tipped to become a R1 lakh crore corporation in FY16—reported revenues in FY14 were R81,809 crore. Should TCS manage to crack a couple of the world’s biggest markets, however, the next R1lakh crore should come much faster than the first one did.

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