TCS / IT News : 15/17 September 2007
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PRAVEEN KUMAR
Sep 18, 2007, 6:45:56 AM9/18/07
to dj...@googlegroups.com, lions...@googlegroups.com
Hi friends,
A news about TCS - Ignite " Brilliance, by any degree…" appeared in yesterday's Business Line.
Look at the news of our Nareshbabu(Nat team in ieg) who had been selected for TCS and now working in TCS. It's very nice to see him in such a stage.
Source: Business Line, 17 September 2007
Brilliance, by any degree…
…is what TCS is looking for, as part of its Ignite programme, wherein it handpicks talented non-engineering graduates and gives them a chance to change their career code. eWorld met four youngsters who caught the IT heavyweight's eye.
S Ramadorai
A business reporter typically leads a humdrum life that can never be made into a motion picture. There are times when you wonder where the next exciting story is and wade past a blur of product launches, mindless numbers from quarterly results and press releases filled with inanities. Then comes a story that touches your heart. Here's one such.
This is not a story about an industry strapped for manpower. Nor is it about companies doing a good turn to society. This is a story about individuals whose capability has so far gone missed, not least because no one cared to ferret it out. And, this is as much a story about a company that dug deep to discover that ability. Read on…
Talent is not the exclusive preserve of any particular group of people. This was the lesson that Dr Raman Srinivasan of TCS took away after he spent six months ferreting out manpower skills outside the usual pool of fresh engineering graduates that the IT software services industry dips into every year.
And this, he says, was his CEO, S Ramadorai's vision before those six months began.
TCS decided in March 2006 that it had to seriously go after brilliant people who weren't engineering graduates. To this end, Ramadorai set out three goals for Dr Srinivasan. These three diktats were to become the pillars on which Ignite (TCS' training programme for fresh, non-engineering graduates who make the grade for software services) now stands:
Have a diverse talent pool
Make learning enjoyable, so as to awaken the inner child in adults
Make the programme socially inclusive.
Dr Raman Srinivasan
Dr Srinivasan and his team of six people took about six months from thought to the commencement of the programme for the inaugural batch. Ramadorai even hand-picked geographic areas that the team had to reach. This meant that the North-East, including Assam and Meghalaya, and Kerala, figured in the list of areas that the team had to visit.
Says Dr Srinivasan, "We had 100 candidates from Assam and another hundred from Kerala."
To recruit 500 candidates, the team reached and evaluated about 6,600 students across 215 colleges in the country. The recruiting team did this over 25 weekends or so.
Ask him flippantly if he has a count for the distance his team travelled across the country and Dr Srinivasan surprises you with "Seventy kilometres was the average distance my team travelled to rope in a candidate." He helps you recover from the shock of finding a piece of statistic even for this parameter, saying, "This is the TCS way. We measure all that can be measured."
Evaluation process
So, how did the team evaluate the candidates and decide that they were, in analytical skills, on a par with engineers? Simple, says Dr Srinivasan. "We made 125 fresh TCS employees, who were engineers, take a test that examined analytical skills. We took the average and used that as the benchmark to evaluate non-engineering candidates for the Ignite programme. The same test was given out to the latter. Those who met the benchmark were further evaluated with interviews and other analytical tests such as jigsaw puzzles." Many of these candidates were actually pursuing a higher degree when TCS evaluated them. Among those chosen, TCS had to initiate communication not only with the students, but also the parents.
Since quitting midway through a degree is uncommon, how did TCS manage to convince candidates?
"We explained to the candidates and to their parents that they were pursuing a degree to get a good job. Here, we were offering them a good job. And, once they are TCS employees, they become immediately eligible to pursue further degrees while on the job. So they weren't losing out by signing up with us."
The second batch of 1,500 students has started the seven-month training now, to be followed by the third batch of 3,000 candidates.
Obviously, the intensity with which Dr Srinivasan and his team pursued the candidates need not be the same for every succeeding batch. Part of it could run off the steam created for the first batch. Says Dr Srinivasan, "Our first batch of recruits is so happy with the way things have gone that they would automatically recommend juniors from their colleges and even their siblings. So, we would keep seeing the momentum."
Key takeaways
What other learning did TCS take away from the whole exercise? Says Dr Srinivasan, "We found that even those who had not cleared our tests were positive and said that they would apply again."
Another learning was the significant gap between what the industry needs and what is taught in institutions. In order to help match the curriculum with industry requirements TCS is having teachers from those colleges, where it recruits candidates, come in and sit through extended sessions at the Ignite programme. "This helps college teachers understand what we need."
'Clicker' and other technologies
Robes of pride.
One curious gadget that you find students at the programme carry in their hands all the time is the 'clicker'. It looks like a remote control gadget but is used for group communication.
One instance of its use is in giving feedback for a particular lecture, at the end of the class itself. Says Dr Srinivasan, "At the end of the class, the professor has an idea of what the students thought of it all: good, all right, bad… His score appears on the same screen that he has been using to impart knowledge. It is unnerving but makes things fully transparent."
One pillar that the technology infrastructure is built on is the premise that English is not the first language of most candidates at Ignite. Says Dr Srinivasan, "The thought process is in their own language. So, all three data channels, ie the PowerPoint presentations, black-board annotation and the faculty itself, are all captured over video." Students then have the choice to revisit and review lectures at any desktop located at Ignite. This helps them since it eliminates the need to take notes.
The other contribution that technology has made here is to ensure candidates' comfort with virtual work. Says Dr Srinivasan, "In the industry, teams placed at different remote locations work together virtually. We have designed our courseware such that they get comfortable with the concept early on. In the Ignite premises itself, the lecturer would make his presentation in one room and candidates would 'attend' that lecture from three different class rooms." In other words, candidates get used to the idea of proximity without physical presence.
The third contribution from technology at Ignite has been the immediate assessment of candidates' quality of code-work. That is, available technology tools evaluate the quality of code submitted and candidates immediately get to know whether they have got the coding right. "We are debating if that 'immediate' is too soon and whether we should permit candidates to resubmit another set of code in five minutes' time, and so on." Ignite also helps candidates with what it calls 'intelligent tutors of programming.' Dr Srinivasan says, "Non-computer science graduates take time to get used to 'instructing' a computer to do their bidding, with the help of code. Now, computer programs teach them to do this in an intuitive and fun way. It is no longer intimidating for them."
Answering the 'why'
But, isn't this form of training what other institutes, whose core competence is education, such as NIIT and Aptech, are doing? TCS could well have picked up fresh non-engineers out of these institutes.
He replies, "We do take people with such profiles but not directly from colleges or private institutes. When they enter our company, they come with a minimum of three years' experience at other software companies. We now wish to train fresh science graduates ourselves. This is our core competence that we do not want to outsource."
Bringing 'em into the loop
Finally, for social inclusivity. Candidates at Ignite come from diverse backgrounds. Interviews with a sample of four candidates were a revelation. Incidentally, these four, whose photos you see to the left, are not the exception to the rule at Ignite, but the rule itself.
IT's their story
Bindu C
'Constructive advice'
"He may not be well-educated, but he certainly knew how to plan my life!" You can't miss Bindu's pride in her father's ability when she says this. And surely, he must know a thing or two about stretching the rupee, too. After all, not only did he, a construction worker from Palghat in Kerala, put Bindu through B.Sc but also supported her financially to pursue her B.Ed, during which course TCS picked her.
Says Bindu, "My father decided for me that I should pursue my B.Sc. Later, I was not sure whether to pursue an M.Sc or a B.Ed. He suggested that I should do the latter, since for that academic year, it was only a one-year course and would convert into a two-year course the next academic year. My father decided my career path for me. Without the direction he provided, I might not even have landed up at TCS." With a smile, she preempts any further questions you may have about her father's capability when she says, "He certainly knew how to manage financially, since he supported us three siblings at the same time!"
Did she have any doubts as to whether she and her friends should accept the TCS offer at all? Bindu is emphatic in her reply. "No. This was such an opportunity. Five of us got selected and we are all still here."
Bindu has two sisters, one pursuing her degree and the other in her final year of school. Says Bindu, "It is my turn to support them. I send home money to help with the finances." Earlier too, she used to take tuition for other students. "That was a great experience, earning and supporting them, back then," she says.
A novel weave
M. Naresh Babu
"I am now my family's right hand!" says M Naresh Babu. His ability to now send home money is making a huge difference to his family comprising parents and three siblings.
Hailing from Dharmavaram, Andhra Pradesh, Babu, whose father is into textile weaving, had dreamt of becoming an engineer since his seventh standard. However, when the time did come, the finances did not. When he obtained an engineering seat, his parents offered to sell a plot of land to overcome the financial obstacle. But Babu put his foot down and refused. He now says, "Had I accepted the offer, my two brothers and sister would not have had anything to go on, for their studies."
He says he has enough to be grateful about. Restless neighbours questioned his parents' sending Babu and his siblings to private schools and 'wasting' money. Neighbours goaded his parents, saying initiation into weaving would earn them bread early on in life. But Babu's parents did not budge from their belief that education would take their children places. "My mother, who has passed SSC, felt that she and her husband were anyway struggling to make ends meet. She did not want her children to suffer similarly. Hence the stress on education," he says.
Babu, who kept his options open with regard to a career in lecturing for Math, enrolled himself at the Institute for E-Governance and moved to Hyderabad for training. At the time TCS picked him up, he was at the Jawaharlal Knowledge Centre, a part of the institute that helps candidates shape themselves for interviews and presentation.
With knowledge gathered from inside and outside the classroom, Babu had reached a level where he could take classes for engineering students on both hardware and software.
Other companies did visit his campus but made offers to only those with a Computer Science background. Says Babu, "I felt bad about this, since I had faith in my ability but could not get a job offer."
So, did he weave sarees to help his parents? No, he says. But, he was more interested in the front-end work or the creative part of the work. He helped give birth to some unusual designs. "I never was an outgoing type. Rarely did I mix with friends for games and sports," he admits with a smile.
Babu was one of four selected for the interview among 125 applicants.
When he got the offer from TCS, he was surprised. Add the fact that his well-wishers were sceptical and asked him not to take the offer. "How can you be sure about this opportunity? What if you are not eligible for salary during your training period?" were their questions. Also, he was the only one from his town to have got this offer from TCS. So, guidance from a senior was clearly missing. Fortunately for Babu, he says the Tata Brand helped him decide that taking the offer was the best thing he could do for himself.
Babu would like his younger brother to do his MBA. "If he does not make it, I'd like him to try his luck at Ignite. This is something I'd highly recommend to my siblings."
Changing course
S. Balaji
S Balaji is papa's boy. Indicate to him that he has obeyed his father's instructions at every stage in his career, he retorts with a smile and some mock surprise, "Isn't that what one should do?" Sure thing, especially since his father had lit up his son's path to success. Balaji fondly remembers his father, who passed away during his son's early days in undergraduate studies. "At the Plus Two level, it was my father who told me to opt for the Biology group at a school in Mayiladuthurai. Again, at the B.Sc level, he asked me to go for Computer Science."
"My family has never really found the going difficult for bare necessities, but with my father passing away, there was a reality check on the financial front."
After his father's demise, Balaji finished his B.Sc and began his MCA course at SASTRA University at Thanjavur. Says Balaji, "At the time of joining MCA, I didn't quite have all the money required for the fees. But we somehow managed." Balaji glosses over the details of the struggle in those years. It makes you wonder what the 'somehow' meant to him, the only child, and his mother at the time.
Typically, an MCA course lasts three years. But since Balaji had scored more than 60 per cent in his first degree, he went directly into the second year. There, in the first semester, under a professor's guidance, he opted to sit for the Ignite test. "I knew I'd be chosen since my professor had been building up my confidence by telling me that my logical skills were pretty good."
Now, his mother has moved from Kumbakonam to live with Balaji in Chennai.
But wasn't it a difficult decision, to take up employment mid-way through an educational degree? Balaji had only finished one semester at the MCA course. "Opting for TCS was the first decision I took on my own. Even my mother told me that I should decide what's best for myself. It's turned out for the better." You can't miss the optimism.
From saree to software
R. Ponnivalavan
Since his tenth standard, R Ponnivalavan has helped his father, a textile weaver, make sarees. It used to take him between three and four days to weave one cotton saree. That helped him generate some money (about Rs 600 per saree) for his parents, who, residing at Kumbakonam in Tamil Nadu, put him through a Bachelor of Science degree and then through a Master's in Science.
Now, Ponni writes software code at TCS.
"I was doing my M.Sc Maths second year, when I came across an advertisement in print for the TCS programme." As we speak, Dr Srinivasan gently interjects to inform us that Ponni scored among the highest in the case studies part of the training. The training he received at Ignite helped him apply his skills in developing 'a reasonably complex application using the C Language'.
Before TCS happened, Ponni wanted to make use of this exposure to Math to become a professor of Math. But he says that the financial constraints in his family might have forced him to think of other options and somehow move to Chennai to earn money, irrespective of choice of career.
The eldest son, Ponni now sends money back home to support his sisters, one of whom is doing her B.Com, while the other helps out in the saree business.
Ponni confesses that he never had a true idea of what computers were all about, his only exposure having been at school. But now he writes what Dr Srinivasan calls 'world-class enterprise software'. Ponni, and the other three candidates profiled in this page, write software for internal use by TCS. Ask Ponni the one big learning opportunity he had, other than writing code at TCS of course; he says with a bright smile, "I have finally learnt to cook, having to stay here without family."
Source: The Economic Times, 17 September 2007
The magic of thinking big
S Mahalingam, CFO, Tata Consultancy Services
It's hard being the CFO of an IT company in a year in which the rupee has appreciated close to 10% annually. But not for S Mahalingam , CFO of TCS, as the company has dealt with the rising rupee rather well. We caught up with Mr Mahalingam in a free-wheeling chat...S Mahalingam
How can a full services play help to deliver cost benefits?
When I have multiple offerings for a customer, the ability to serve the customer comes at a lower cost, as the same relationship manager now takes care of a larger business pie. This brings down the selling, general and administrative (SG&A) component of expenses. The other advantage comes into play when I also operate at the transaction level, running the system.
In such a case, since I know their system, I can optimise that as well. When I look at infrastructure management offerings, I can optimise a lot more. I not only develop the system, but also ensure that it is doing well. I can also maintain the database, giving information about processes and thus, contributing to business intelligence.
And all these services are further laid on a consultancy model, which can be architectural or governance consultancy. Optimisation at various levels leads to better margins in case of a full services play. The current play in TCS is about extending relationships with clients.
What is the current engagement ratio of TCS with clients?
This is difficult to say mainly because you are dealing with different kinds of customers. If the customer is among the top 10 clients, the engagement will also be very high. In the case of outsourcing, TCS may end up taking 40-50% of the entire pie.
It can also depend upon regional play. A client in Europe may not be as willing as the one in the US to give us the entire pie of deliverables. We ask our clients to think over increasing engagements with vendors. The engagement ratio for TCS has improved by at least 10-15% over the past few years. That's where the full services strategy comes into play.
What are the challenges you face in a full services play?
At times, we may not have the expertise to offer certain services. Sometimes, the client may find it very critical to go in for diversification of vendors and deliverables. But when the client is convinced about our expertise and benefits from such an association, we look for an engagement ratio of 70-80%.
Growth for TCS, so far, has come mainly from organic strategy. What is your approach regarding inorganic growth?
Talking about inorganic growth, we acquired Comicrom, a BPO firm in Chile, to address the South American market. Hence, it was a regional play. We made an investment in UK's Pearl to enter into UK's life and pensions industry. However, our greater thrust is on organic growth and that's how we have grown.
Is in sourcing an in-thing for TCS?
We do provide BPO services in the UK, Chile and Budapest through regional set-ups. Our approach towards insourcing is need-based. For instance, in order to sort out the language barrier, we acquired Comicrom in Chile. In this case, outsourcing was not feasible due to the language difference.
What is the impact of the US subprime woes on TCS?
About 30% of our revenues come from the banking, financial services and insurance (BFSI) space. The subprime problem will have a great impact if any of our clients provide mortgage-related services. In our case, the extent of exposure to such clients providing specialised services is negligible. So, subprime woes have no impact on TCS.
You had hedges at around Rs 42 in the last quarter. Please comment.
Yes, these things keep changing. Basically, you look at the revenue for the year and build hedge positions accordingly. Often, we have large hedging positions for the immediate quarters. But then, there is also a cost involved in building these positions. At present, we have hedges at around Rs 41.5.
Will we see any improvement in margins in the September quarter, now that the rupee is stable and you have done a lot to improve utilisation?
We are reasonably proactive when it comes to protecting margins. In the last quarter, when the rupee was trading at Rs 40.5 against the dollar, we thought it would touch Rs 40 in this quarter. But we were proved wrong - probably the right kind of way to be wrong! If you dissect the margin story, there are a few angles to it. One, we have a natural hedge to a certain extent in terms of dollar expenses. In addition, we do hedging. Hedging gains and losses are part of other income. The operating income and thereby, margins then become a function of operational efficiency.
What are the levers to improve operational efficiency?
Firstly, pricing is a major factor. At the moment, the pricing environment is reasonably decent, with room for renegotiation. This helps us to improve pricing by 3-5%. Apart from negotiating contracts, we also focus on productivity improvement, which is the second lever. When you run a large corporation like TCS with more than 90,000 employees, it becomes essential to monitor that resources are employed productively.
This makes it extremely important to make sure that the demand and supply patterns match. Further, fixed priced projects may offer scope to improve productivity. The third lever is the portfolio of services. Some services like project management and solutions delivery attract better rates. And the last lever is to control communications and travel costs.
What type of projects provides good margins to TCS?
We live in a comparative world. So, when I quote for a fixed price project, we face a lot of competition and we ultimately arrive at the normal margin that we can achieve. Pricing power comes in a situation where there is only one service provider in the game.
Margins are then a question of rigours of profit management. You have to make sure you don't exceed the deadlines.If we consider some of our mature verticals like banking insurance, telecom and retail, there is a lot of capability that TCS brings in. Naturally, we expect better margins from these areas.
Do infrastructure management services provide better margins?
The big advantage of such services is that these are executed as offshore services to a large extent, which means profitability is somewhat better. The question is, what happens when scales in such services go up substantially and you have to manage the assets, or even own them? At the moment, the manner in which we look at them is that these should deliver margins similar to the overall business.
How beneficial is this model of owning assets in the infrastructure services space? Does it help to improve engagement with clients?
Any company which has done that is not showing margins of 10-12%. Owning assets attracts capital cost to the company. This acts as a dragger on margins. If it is part of the total outsourcing deal, then you are essentially taking on everything on your balance sheet, which is a non-discretionary spend. In case of discretionary spend, like developing a new system, the client may wish to approach someone else. With certain assurance of revenue in future, there can be optimisation of costs over a period of the contract.
Source: The Hindu, 17 September 2007
China joint venture, advantage Tata Consultancy Services
Indian Information Technology majors have been dipping a cautious toe in Chinese waters for several years now
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A partnership with TCS will be a substantial learning opportunity
for China.
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Framed by the rolling bulk of Beijing's Western Hills, the blue and white TATA logo adorns a 2,000 square metre-large building that is home to the new joint venture between India's top software exporter Tata Consultancy Services (TCS) and three Chinese partners. Located amidst the giant glass and chrome structures that dot Zhonguancun Software Park, the Chinese capital's showcase high-tech zone, the TCS (China) building is, in fact, the physical embodimen t of the first real example of the long-hyped potential for Sino-Indian collaboration in information technology (IT).
Indian IT majors have been dipping a cautious toe in Chinese waters for several years now. Apart from TCS, Infosys, Satyam and Wipro have China operations, as do a slew of smaller, specialised companies such as iGate Global Solutions, Newgen Software and Zenzar Technology.
However, despite ambitious plans and a strong commitment to the Chinese market, Indian companies have, on the whole, struggled to ramp up their operations across the Great Wall. Even after four or five years in the country, majority of Indian IT heavyweights in China, thus, remain surprisingly light, with an average of 300-600 employees largely restricted to servicing the China needs of existent multinational clients.
The lucrative domestic Chinese market for software, valued at $50 billion plus, has remained out of reach for most Indian companies. According to Jonathan Lam, CEO for TCS (China), the reasons for this inability of Indian firms to crack the domestic market are manifold.
"For a foreign company in China there is the question of lacking relationships with key decision makers in government," he says, adding that language and cultural barriers are obstacles as well. Moreover in the IT sector, foreign-owned companies have usually been kept out of the really large, multimillion dollar deals at the state-owned enterprises.
This is where the new TCS joint venture (JV), with its strong government backing and partly Chinese ownership, is set to make a real breakthrough, fundamentally changing the nature of the Indian IT game in China thus far.
The joint venture was formally established in February with TCS taking a 65 per cent stake. A further 25 per cent is owned by three Chinese partners — Beijing Zhonguancun Software Park Development Co. Ltd (where the joint venture is located), Tianjin Huayuan Software Park Construction and Development Co. Ltd. and Uniware Co. Ltd. The remaining 10 per cent is expected to be taken up by Microsoft.
Domestic contracts
Already TCS (China) is winning substantial domestic contracts including a $100-million one for providing banking solutions to the Bank of China. Another multi-million dollar contract to implement a comprehensive international trading system for the China Foreign Exchange Trade System (CFETS), a sub-institution of the People's Bank of China, has also been bagged.
"We are finally being able to make real inroads into the banking and financial sectors in the domestic market in China," says Mr Lam. This is, in fact, an area with strong growth potential in China. The country is now undertaking massive IT-related projects including the computerisation of its banking behemoths. Moreover, last December China fully opened up its banking sector to foreign competition under its WTO (World Trade Organization) obligations, creating even more opportunities.
Mr. Lam says the TCS joint venture will be in a prefect position to leverage and benefit from these developments because partnering with the Chinese government has put it in a unique position. Indeed the joint venture is the first and last such company that has the backing of the powerful National Development and Reform Commission (NDRC), a supra-ministry that was formed out of the erstwhile Planning Commission.
Obliging Chinese Govt.
But while the joint venture clearly provides TCS with a prized break into China's domestic market it is also pertinent to ask why the Chinese government has been so obliging. The answer, says Mr. Lam, is that China wants the joint venture to act as a "role model for Chinese industry that sets the standards and which other local companies can then imitate."
Indeed, for the Chinese side, a partnership with TCS will be a substantial learning opportunity. Both quality standards and processes that the Indian titan brings with it as well as its experience in handling large, industrial-scale projects are lacking in most Chinese IT firms.
The joint venture plans to employ at least 5,000 people over the next five years (up from its current workforce of around 1,000) which would make it one of the largest IT companies in China. Although the Chinese software industry has been growing at around 30-40 per cent annually in recent years, it remains fragmented and lacks scale. Only about ten Chinese IT firms, among some 8,000, employ more than 1,000 people; the very largest numbers only some 10,000.
From the Chinese point of view, the TCS joint venture is, thus, one with the classic strategy of opening up a market to foreign investment, learning best practices from the world's star performers and then encouraging local competitors to imitate and perfect these.
Following precisely this strategy, Chinese companies have gone on to become world beaters in the manufacturing sector. But will this approach meet similar success in IT?
The market intelligence firm IDC predicted in a report out earlier this year that when it came to the software sector "Chinese cities were nipping at India's heels" and would overtake Indian cities as the preferred destination for offshore back-office functions by 2011.
The reasons, the report identified, for this China optimism were the government-supported massive investments in infrastructure, Internet connectivity and English-language training.
However, Mr Lam is dismissive of the report. "The day China can catch up with India is the day that customers feel as comfortable that they will get the same quality and security in China as in India and that day is not close," he says.
Just the size of China's software exports when compared to India's is an indication of the gulf between the two. In the fiscal till March 2007, the software and services exports segment in India was worth $31.4 billion, compared to $2.5 billion for China
Biggest drawbacks
China's biggest drawbacks, according to Mr. Lam, are its reputation for lax intellectual property rights protection, continuing inadequacy of English-language skills and lack of mid-level project management talent.
While China graduates an impressive 6.50 lakh engineers a year (compared to 4.50 lakh in India and 1.20 lakh in the U.S.) he says only around ten percent of these are usable on Day One. Moreover, while it is easy to find code writers with competence levels and salaries on a par with their Indian equivalents, qualified middle-level managers are in short supply. They are, thus, both more expensive and more difficult to retain than their counterparts in India.
Mr. Lam predicts that within the next few years China may begin to give India some competition in the lower-segment of the IT and IT-enabled services world. However, on the really lucrative, value-added, high-end services India will retain an advantage for a while to come, he says.
Nonetheless, the TCS (China) CEO cautions that China should not be dismissed either. Over time, China's evolution into an IT power is more or less assured. It is the only country comparable to India in terms of the size and cost of its skilled labour force. In addition, given its infrastructure and manufacturing prowess the market for related IT solutions is likely to keep growing.
It is thus small wonder that virtually every Indian IT company of consequence not only has a China strategy but is, in fact, in the process of expanding China operations. Infosys Technologies recently announced plans to open two development centres in China that will eventually employ 6,000 people. Earlier this year, Satyam Computer Services also began construction of a 2,500 seat software development centre in the eastern city of Nanjing.
HCL Technologies is the latest Indian IT major to look to China. It has opened up an office in Shanghai and is close to finalising three collaborations with local Chinese partners in the fields of enterprise software, engineering and application testing
In all the India vs China debate, the point that is sometimes obscured, is that ultimately the growth of China's IT industry will only be to the advantage of Indian companies operating out of China.
According to Gartner, a research agency, Indian companies could come to account for up to 40 per cent of the domestic Chinese market for software. Mr. Lam believes this to be a conservative estimate.
"In banking, insurance and finance we can take over the majority of the market," he smiles pointing out that IDC already rates TCS (China) as the best provider of call banking solutions in China.
"So far we have been walking," concludes Mr. Lam, "Now its time for us to run."
Source: The Financial Express, 17 September 2007
'India is on its way to self-reliance in aerospace technology'
US aircraft manufacturer Boeing Company is looking forward to expand its long relationship with India. It has set its sights on the country's defence sector with Boeing Integrated Defense Sysytems (IDS), a $32.4-billion unit of the Boeing Company. The unit is one of the world's largest space and defence businesses specialising in innovative and capabilities-driven customer solutions. "India is a strategically important market for Boeing," says Vivek Lall, vice-president and country head, Boeing IDS.
The company has worked with India's premier software development companies, including Wipro, Infosys and TCS on numerous IT projects such as application rehosting porting, systems reengineering and development, web enabling, e-business applications and long-term application maintenance.
In a recent chat with Huma Siddiqui, Lall details that the company's strategy includes understanding the art of using current and emerging technologies to improve the capabilities of existing products and delivering new solutions. Excerpts:
Having taken over the Indian operations of Boeing IDS, what are your plans to strengthen the presence here?
For us, the multi-role combat aircraft (MRCA) deal is very important. We have offered India, the F/18 Super Hornet. It is the first tactical combat aircraft designed to carry out both air-to-air and air-to-ground missions. There are a lot of different technologies involved in the aircraft. Boeing has made modifications in the F/A-18 Super Hornet, thereby bringing down the production cost per aircraft from $82 million to $49.9 million, and converting it from analogue to digital.
There's also the outsourcing bonanza. Are you in talks with Indian companies about the offset business?
If media reports are to be believed, we have about 50% of offset business for Indian companies. However, this has not been conveyed to us as yet. Nevertheless, we are ready to meet the requirements.
Boeing is already in a strategic partnership with L&T and hopes to expand it to other companies. The company has been in negotiations for collaboration with Hindustan Aeronautics Limited (HAL), TCS, Infosys and HCL. The Indian government is looking to increase its supply chain with the private industry and we hope to be part of the process.
What about partnerships with Indian companies in the technology space?
We would like to be seen as the preferred partner in the aerospace sector. I feel hopeful and encouraged that India is truly on its way to self reliance in technology. Boeing is developing a collaborative technology environment in India, where we can co-invest in innovative new technologies that will benefit Indian aerospace infrastructure and the company.
Boeing's research and development organisation—Phantom Works Division —has been evaluating the Indian science and technology sectors with increasing interest since 2004, with an eye towards expanding the company's global reach.
In 2005, Phantom Works selected the Indian Institute of Science (IISc) to serve as the seventh Boeing Strategic University, focusing on the critical area of materials and manufacturing technologies. Boeing has also contracted with HAL for the manufacture of aircraft components and assemblies and the digitisation of engineering drawings.
Boeing has been working closely with the Indian Institute of Technology (IIT), Kanpur, for a collaborative research programme in the area of RFID technology. We are also in the process of working with National Aerospace Laboratory (NAL) and the Advanced Research & Design Centre (ARDC) at HAL, to explore a collaborative research programme in the area of composite design and manufacturing.
How are Boeing's sourcing plans from India shaping up?
Boeing has contracted with HAL for the manufacture of aircraft components and assemblies and the digitisation of engineering drawings. HAL's manufacturing role has grown to becoming the single source for 757 over-wing exit doors and 777 main landing gear uplock boxes. Today, HAL continues to provide the 777 uplock boxes for all of Boeing's production requirements and digitisation services on demand.
What initiatives is Boeing undertaking to popularise the concept of network-centric operations?
Network-centric operations (NCO) is a form of collaboration in which the entities in an activity are linked or networked by a communications and information systems infrastructure that lets them share relevant data across geographic borders. Obviously, this is one area where we are looking forward for partnerships in India.
Source: Business Standard, 17 September 2007
BPOs augur well for old economy firms
Mumbai
The $9.5-billion business process outsourcing (BPO) sector is once again hogging the limelight. Old economy companies such as Hero, M&M (Tech Mahindra), Aditya Birla, Essar, Hindujas and Larsen & Toubro have sprung into action with large acquisitions and major deals.
The BPO subsidiaries of manufacturing companies were earlier dismissed as captive units lacking any service culture, with the exception of Tata Consultancy Services (TCS), the country's largest IT services provider. But this changed a couple of years ago.
Hardly 10 days back, Gurgaon-based HeroITES — the Rs 400 crore BPO subsidiary of the two-wheeler company Hero group - acquired Scotland's biggest BPO Telecom Services Centres (TSC) for nearly Rs 330 crore. The company's acquisition plan does not end there. "We will make more acquisitions to scale up our offerings," said Rohit Chanana, president, HeroITES.
In October 2006, the Hindujas-owned HTMT Global Solutions acquired US-based BPO company AFFINA for an undisclosed sum. The acquisition, according to the company, is expected to nearly double its combined revenues to over $130 million (around Rs 600 crore) and catapult it into the top five pure-play BPO companies in India. The integrated company has a total headcount of over 9,000 employees. The company is also planning four buyouts in the range of $20-$100 million.
This February, Essar Global acquired Global Vantedge, a BPO company owned by Chrys Capital, to have a larger footprint in the BPO segment through its wholly owned subsidiary, Aegis BPO. The acquisition is expected to contribute over $25 million to the BPO business of Essar and is its fourth acquisition in the last one year. The other three were Customer First and Orion in India and Technion in the US. "Most of the manufacturing companies started BPO units to serve their internal needs. They now see the valuations that an Infosys or Wipro can get," says Pradeep Uddhas, global head (sourcing advisory), KPMG.
For these BPO units to run successfully, "they need to get a free-hand just like the Tatas gave FC Kolhi the autonomy to run TCS". "Manufacturing units generally are not known for their service culture. Moreover, the manufacturing pay scales are lower than that of the service industry. When a group gets into IT, there's generally a constant cultural struggle. It's when the groups spin off the subsidiary as a business unit that it tends to become successful," explains a Frost & Sullivan spokesperson.
Take the case of the Aditya Birla Minacs (formerly Transworks), the BPO arm of the Aditya Birla Nuvo group. It kept a low-profile till a couple of months back despite the $125-million acquisition of Canada-based Minacs Worldwide last May. However, in just four years, it has grown from a $3 million company to a $350-million (around Rs 1,400 crore) one.
The 11,000 employee-strong BPO has chalked out an ambitious strategy and has plans to acquire companies in specific sectors and geographies. Dev Bhattacharya, group executive president, IT and BPO business, said, "The decision to get into the ITeS industry was taken after a portfolio analysis in 2002. When you enter into a new business in the group, it is very difficult to stay small. We had to re-focus and re-position ourselves and there was strong traction in the BPO industry. TransWorks was doing pretty good, but we wanted to grow fast and get a global footprint."
HeroITES was demerged into a separate independent entity in 2005 "for greater focus and implementing an aggressive growth strategy". The Anil Dhirubhai Ambani group-promoted Reliance BPO, which was set up in 2002 with a manufacturing parentage, is also firming up plans. It has over 7,800 employees and caters to the BFSI, telecom, utility, media and entertainment and infrastructure verticals.
Said an analyst, "The sleeping giants have woken up to the potential of offshoring and outsourcing. This is just the beginning."
Source: The Economic Times [print only], 15 September 2007
Kochi edition of TCS IT Wiz on Sept 22
The 2007 Kochi edition of interschool IT quiz of Tata Consultancy Services will kick off here on September 22. The TCS IT Wiz which started from Chennai in August will end in Mumbai in December visiting 11 cities with an expected student participation of 12,000.The TCS IT Wiz to be held in TOC H auditorium is open to students studying from class 8 to 12. Last year, over 900 students participated in the quiz in Kochi.
Regards,
Padma
Library & Information Centre
Tata Consultancy Services
"Chennai One" , Thoraipakkam
Ph:- 91 44 66168506
Mailto: pad...@tcs.com
Website: http://www.tcs.com
Please visit the Library Homepage @ http://172.20.32.203/LMS/libhome.nsf/pages/index1024
____________________________________________
Experience certainty. IT Services
Business Solutions
Outsourcing
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Thanks and Regards from:
Praveen Kumar. V
Assitant Engineer - Testing, IVS
Infosys, Hyderabad
Work:040 - 67023091 Mobile:9912062060.
"Face Your Fears And Live Your Dreams"
A news about TCS - Ignite " Brilliance, by any degree…" appeared in yesterday's Business Line.
Look at the news of our Nareshbabu(Nat team in ieg) who had been selected for TCS and now working in TCS. It's very nice to see him in such a stage.
Source: Business Line, 17 September 2007
Brilliance, by any degree…
…is what TCS is looking for, as part of its Ignite programme, wherein it handpicks talented non-engineering graduates and gives them a chance to change their career code. eWorld met four youngsters who caught the IT heavyweight's eye.
S Ramadorai
A business reporter typically leads a humdrum life that can never be made into a motion picture. There are times when you wonder where the next exciting story is and wade past a blur of product launches, mindless numbers from quarterly results and press releases filled with inanities. Then comes a story that touches your heart. Here's one such.
This is not a story about an industry strapped for manpower. Nor is it about companies doing a good turn to society. This is a story about individuals whose capability has so far gone missed, not least because no one cared to ferret it out. And, this is as much a story about a company that dug deep to discover that ability. Read on…
Talent is not the exclusive preserve of any particular group of people. This was the lesson that Dr Raman Srinivasan of TCS took away after he spent six months ferreting out manpower skills outside the usual pool of fresh engineering graduates that the IT software services industry dips into every year.
And this, he says, was his CEO, S Ramadorai's vision before those six months began.
TCS decided in March 2006 that it had to seriously go after brilliant people who weren't engineering graduates. To this end, Ramadorai set out three goals for Dr Srinivasan. These three diktats were to become the pillars on which Ignite (TCS' training programme for fresh, non-engineering graduates who make the grade for software services) now stands:
Have a diverse talent pool
Make learning enjoyable, so as to awaken the inner child in adults
Make the programme socially inclusive.
Dr Raman Srinivasan
Dr Srinivasan and his team of six people took about six months from thought to the commencement of the programme for the inaugural batch. Ramadorai even hand-picked geographic areas that the team had to reach. This meant that the North-East, including Assam and Meghalaya, and Kerala, figured in the list of areas that the team had to visit.
Says Dr Srinivasan, "We had 100 candidates from Assam and another hundred from Kerala."
To recruit 500 candidates, the team reached and evaluated about 6,600 students across 215 colleges in the country. The recruiting team did this over 25 weekends or so.
Ask him flippantly if he has a count for the distance his team travelled across the country and Dr Srinivasan surprises you with "Seventy kilometres was the average distance my team travelled to rope in a candidate." He helps you recover from the shock of finding a piece of statistic even for this parameter, saying, "This is the TCS way. We measure all that can be measured."
Evaluation process
So, how did the team evaluate the candidates and decide that they were, in analytical skills, on a par with engineers? Simple, says Dr Srinivasan. "We made 125 fresh TCS employees, who were engineers, take a test that examined analytical skills. We took the average and used that as the benchmark to evaluate non-engineering candidates for the Ignite programme. The same test was given out to the latter. Those who met the benchmark were further evaluated with interviews and other analytical tests such as jigsaw puzzles." Many of these candidates were actually pursuing a higher degree when TCS evaluated them. Among those chosen, TCS had to initiate communication not only with the students, but also the parents.
Since quitting midway through a degree is uncommon, how did TCS manage to convince candidates?
"We explained to the candidates and to their parents that they were pursuing a degree to get a good job. Here, we were offering them a good job. And, once they are TCS employees, they become immediately eligible to pursue further degrees while on the job. So they weren't losing out by signing up with us."
The second batch of 1,500 students has started the seven-month training now, to be followed by the third batch of 3,000 candidates.
Obviously, the intensity with which Dr Srinivasan and his team pursued the candidates need not be the same for every succeeding batch. Part of it could run off the steam created for the first batch. Says Dr Srinivasan, "Our first batch of recruits is so happy with the way things have gone that they would automatically recommend juniors from their colleges and even their siblings. So, we would keep seeing the momentum."
Key takeaways
What other learning did TCS take away from the whole exercise? Says Dr Srinivasan, "We found that even those who had not cleared our tests were positive and said that they would apply again."
Another learning was the significant gap between what the industry needs and what is taught in institutions. In order to help match the curriculum with industry requirements TCS is having teachers from those colleges, where it recruits candidates, come in and sit through extended sessions at the Ignite programme. "This helps college teachers understand what we need."
'Clicker' and other technologies
Robes of pride.
One curious gadget that you find students at the programme carry in their hands all the time is the 'clicker'. It looks like a remote control gadget but is used for group communication.
One instance of its use is in giving feedback for a particular lecture, at the end of the class itself. Says Dr Srinivasan, "At the end of the class, the professor has an idea of what the students thought of it all: good, all right, bad… His score appears on the same screen that he has been using to impart knowledge. It is unnerving but makes things fully transparent."
One pillar that the technology infrastructure is built on is the premise that English is not the first language of most candidates at Ignite. Says Dr Srinivasan, "The thought process is in their own language. So, all three data channels, ie the PowerPoint presentations, black-board annotation and the faculty itself, are all captured over video." Students then have the choice to revisit and review lectures at any desktop located at Ignite. This helps them since it eliminates the need to take notes.
The other contribution that technology has made here is to ensure candidates' comfort with virtual work. Says Dr Srinivasan, "In the industry, teams placed at different remote locations work together virtually. We have designed our courseware such that they get comfortable with the concept early on. In the Ignite premises itself, the lecturer would make his presentation in one room and candidates would 'attend' that lecture from three different class rooms." In other words, candidates get used to the idea of proximity without physical presence.
The third contribution from technology at Ignite has been the immediate assessment of candidates' quality of code-work. That is, available technology tools evaluate the quality of code submitted and candidates immediately get to know whether they have got the coding right. "We are debating if that 'immediate' is too soon and whether we should permit candidates to resubmit another set of code in five minutes' time, and so on." Ignite also helps candidates with what it calls 'intelligent tutors of programming.' Dr Srinivasan says, "Non-computer science graduates take time to get used to 'instructing' a computer to do their bidding, with the help of code. Now, computer programs teach them to do this in an intuitive and fun way. It is no longer intimidating for them."
Answering the 'why'
But, isn't this form of training what other institutes, whose core competence is education, such as NIIT and Aptech, are doing? TCS could well have picked up fresh non-engineers out of these institutes.
He replies, "We do take people with such profiles but not directly from colleges or private institutes. When they enter our company, they come with a minimum of three years' experience at other software companies. We now wish to train fresh science graduates ourselves. This is our core competence that we do not want to outsource."
Bringing 'em into the loop
Finally, for social inclusivity. Candidates at Ignite come from diverse backgrounds. Interviews with a sample of four candidates were a revelation. Incidentally, these four, whose photos you see to the left, are not the exception to the rule at Ignite, but the rule itself.
IT's their story
Bindu C
'Constructive advice'
"He may not be well-educated, but he certainly knew how to plan my life!" You can't miss Bindu's pride in her father's ability when she says this. And surely, he must know a thing or two about stretching the rupee, too. After all, not only did he, a construction worker from Palghat in Kerala, put Bindu through B.Sc but also supported her financially to pursue her B.Ed, during which course TCS picked her.
Says Bindu, "My father decided for me that I should pursue my B.Sc. Later, I was not sure whether to pursue an M.Sc or a B.Ed. He suggested that I should do the latter, since for that academic year, it was only a one-year course and would convert into a two-year course the next academic year. My father decided my career path for me. Without the direction he provided, I might not even have landed up at TCS." With a smile, she preempts any further questions you may have about her father's capability when she says, "He certainly knew how to manage financially, since he supported us three siblings at the same time!"
Did she have any doubts as to whether she and her friends should accept the TCS offer at all? Bindu is emphatic in her reply. "No. This was such an opportunity. Five of us got selected and we are all still here."
Bindu has two sisters, one pursuing her degree and the other in her final year of school. Says Bindu, "It is my turn to support them. I send home money to help with the finances." Earlier too, she used to take tuition for other students. "That was a great experience, earning and supporting them, back then," she says.
A novel weave
M. Naresh Babu
"I am now my family's right hand!" says M Naresh Babu. His ability to now send home money is making a huge difference to his family comprising parents and three siblings.
Hailing from Dharmavaram, Andhra Pradesh, Babu, whose father is into textile weaving, had dreamt of becoming an engineer since his seventh standard. However, when the time did come, the finances did not. When he obtained an engineering seat, his parents offered to sell a plot of land to overcome the financial obstacle. But Babu put his foot down and refused. He now says, "Had I accepted the offer, my two brothers and sister would not have had anything to go on, for their studies."
He says he has enough to be grateful about. Restless neighbours questioned his parents' sending Babu and his siblings to private schools and 'wasting' money. Neighbours goaded his parents, saying initiation into weaving would earn them bread early on in life. But Babu's parents did not budge from their belief that education would take their children places. "My mother, who has passed SSC, felt that she and her husband were anyway struggling to make ends meet. She did not want her children to suffer similarly. Hence the stress on education," he says.
Babu, who kept his options open with regard to a career in lecturing for Math, enrolled himself at the Institute for E-Governance and moved to Hyderabad for training. At the time TCS picked him up, he was at the Jawaharlal Knowledge Centre, a part of the institute that helps candidates shape themselves for interviews and presentation.
With knowledge gathered from inside and outside the classroom, Babu had reached a level where he could take classes for engineering students on both hardware and software.
Other companies did visit his campus but made offers to only those with a Computer Science background. Says Babu, "I felt bad about this, since I had faith in my ability but could not get a job offer."
So, did he weave sarees to help his parents? No, he says. But, he was more interested in the front-end work or the creative part of the work. He helped give birth to some unusual designs. "I never was an outgoing type. Rarely did I mix with friends for games and sports," he admits with a smile.
Babu was one of four selected for the interview among 125 applicants.
When he got the offer from TCS, he was surprised. Add the fact that his well-wishers were sceptical and asked him not to take the offer. "How can you be sure about this opportunity? What if you are not eligible for salary during your training period?" were their questions. Also, he was the only one from his town to have got this offer from TCS. So, guidance from a senior was clearly missing. Fortunately for Babu, he says the Tata Brand helped him decide that taking the offer was the best thing he could do for himself.
Babu would like his younger brother to do his MBA. "If he does not make it, I'd like him to try his luck at Ignite. This is something I'd highly recommend to my siblings."
Changing course
S. Balaji
S Balaji is papa's boy. Indicate to him that he has obeyed his father's instructions at every stage in his career, he retorts with a smile and some mock surprise, "Isn't that what one should do?" Sure thing, especially since his father had lit up his son's path to success. Balaji fondly remembers his father, who passed away during his son's early days in undergraduate studies. "At the Plus Two level, it was my father who told me to opt for the Biology group at a school in Mayiladuthurai. Again, at the B.Sc level, he asked me to go for Computer Science."
"My family has never really found the going difficult for bare necessities, but with my father passing away, there was a reality check on the financial front."
After his father's demise, Balaji finished his B.Sc and began his MCA course at SASTRA University at Thanjavur. Says Balaji, "At the time of joining MCA, I didn't quite have all the money required for the fees. But we somehow managed." Balaji glosses over the details of the struggle in those years. It makes you wonder what the 'somehow' meant to him, the only child, and his mother at the time.
Typically, an MCA course lasts three years. But since Balaji had scored more than 60 per cent in his first degree, he went directly into the second year. There, in the first semester, under a professor's guidance, he opted to sit for the Ignite test. "I knew I'd be chosen since my professor had been building up my confidence by telling me that my logical skills were pretty good."
Now, his mother has moved from Kumbakonam to live with Balaji in Chennai.
But wasn't it a difficult decision, to take up employment mid-way through an educational degree? Balaji had only finished one semester at the MCA course. "Opting for TCS was the first decision I took on my own. Even my mother told me that I should decide what's best for myself. It's turned out for the better." You can't miss the optimism.
From saree to software
R. Ponnivalavan
Since his tenth standard, R Ponnivalavan has helped his father, a textile weaver, make sarees. It used to take him between three and four days to weave one cotton saree. That helped him generate some money (about Rs 600 per saree) for his parents, who, residing at Kumbakonam in Tamil Nadu, put him through a Bachelor of Science degree and then through a Master's in Science.
Now, Ponni writes software code at TCS.
"I was doing my M.Sc Maths second year, when I came across an advertisement in print for the TCS programme." As we speak, Dr Srinivasan gently interjects to inform us that Ponni scored among the highest in the case studies part of the training. The training he received at Ignite helped him apply his skills in developing 'a reasonably complex application using the C Language'.
Before TCS happened, Ponni wanted to make use of this exposure to Math to become a professor of Math. But he says that the financial constraints in his family might have forced him to think of other options and somehow move to Chennai to earn money, irrespective of choice of career.
The eldest son, Ponni now sends money back home to support his sisters, one of whom is doing her B.Com, while the other helps out in the saree business.
Ponni confesses that he never had a true idea of what computers were all about, his only exposure having been at school. But now he writes what Dr Srinivasan calls 'world-class enterprise software'. Ponni, and the other three candidates profiled in this page, write software for internal use by TCS. Ask Ponni the one big learning opportunity he had, other than writing code at TCS of course; he says with a bright smile, "I have finally learnt to cook, having to stay here without family."
Source: The Economic Times, 17 September 2007
The magic of thinking big
S Mahalingam, CFO, Tata Consultancy Services
It's hard being the CFO of an IT company in a year in which the rupee has appreciated close to 10% annually. But not for S Mahalingam , CFO of TCS, as the company has dealt with the rising rupee rather well. We caught up with Mr Mahalingam in a free-wheeling chat...S Mahalingam
How can a full services play help to deliver cost benefits?
When I have multiple offerings for a customer, the ability to serve the customer comes at a lower cost, as the same relationship manager now takes care of a larger business pie. This brings down the selling, general and administrative (SG&A) component of expenses. The other advantage comes into play when I also operate at the transaction level, running the system.
In such a case, since I know their system, I can optimise that as well. When I look at infrastructure management offerings, I can optimise a lot more. I not only develop the system, but also ensure that it is doing well. I can also maintain the database, giving information about processes and thus, contributing to business intelligence.
And all these services are further laid on a consultancy model, which can be architectural or governance consultancy. Optimisation at various levels leads to better margins in case of a full services play. The current play in TCS is about extending relationships with clients.
What is the current engagement ratio of TCS with clients?
This is difficult to say mainly because you are dealing with different kinds of customers. If the customer is among the top 10 clients, the engagement will also be very high. In the case of outsourcing, TCS may end up taking 40-50% of the entire pie.
It can also depend upon regional play. A client in Europe may not be as willing as the one in the US to give us the entire pie of deliverables. We ask our clients to think over increasing engagements with vendors. The engagement ratio for TCS has improved by at least 10-15% over the past few years. That's where the full services strategy comes into play.
What are the challenges you face in a full services play?
At times, we may not have the expertise to offer certain services. Sometimes, the client may find it very critical to go in for diversification of vendors and deliverables. But when the client is convinced about our expertise and benefits from such an association, we look for an engagement ratio of 70-80%.
Growth for TCS, so far, has come mainly from organic strategy. What is your approach regarding inorganic growth?
Talking about inorganic growth, we acquired Comicrom, a BPO firm in Chile, to address the South American market. Hence, it was a regional play. We made an investment in UK's Pearl to enter into UK's life and pensions industry. However, our greater thrust is on organic growth and that's how we have grown.
Is in sourcing an in-thing for TCS?
We do provide BPO services in the UK, Chile and Budapest through regional set-ups. Our approach towards insourcing is need-based. For instance, in order to sort out the language barrier, we acquired Comicrom in Chile. In this case, outsourcing was not feasible due to the language difference.
What is the impact of the US subprime woes on TCS?
About 30% of our revenues come from the banking, financial services and insurance (BFSI) space. The subprime problem will have a great impact if any of our clients provide mortgage-related services. In our case, the extent of exposure to such clients providing specialised services is negligible. So, subprime woes have no impact on TCS.
You had hedges at around Rs 42 in the last quarter. Please comment.
Yes, these things keep changing. Basically, you look at the revenue for the year and build hedge positions accordingly. Often, we have large hedging positions for the immediate quarters. But then, there is also a cost involved in building these positions. At present, we have hedges at around Rs 41.5.
Will we see any improvement in margins in the September quarter, now that the rupee is stable and you have done a lot to improve utilisation?
We are reasonably proactive when it comes to protecting margins. In the last quarter, when the rupee was trading at Rs 40.5 against the dollar, we thought it would touch Rs 40 in this quarter. But we were proved wrong - probably the right kind of way to be wrong! If you dissect the margin story, there are a few angles to it. One, we have a natural hedge to a certain extent in terms of dollar expenses. In addition, we do hedging. Hedging gains and losses are part of other income. The operating income and thereby, margins then become a function of operational efficiency.
What are the levers to improve operational efficiency?
Firstly, pricing is a major factor. At the moment, the pricing environment is reasonably decent, with room for renegotiation. This helps us to improve pricing by 3-5%. Apart from negotiating contracts, we also focus on productivity improvement, which is the second lever. When you run a large corporation like TCS with more than 90,000 employees, it becomes essential to monitor that resources are employed productively.
This makes it extremely important to make sure that the demand and supply patterns match. Further, fixed priced projects may offer scope to improve productivity. The third lever is the portfolio of services. Some services like project management and solutions delivery attract better rates. And the last lever is to control communications and travel costs.
What type of projects provides good margins to TCS?
We live in a comparative world. So, when I quote for a fixed price project, we face a lot of competition and we ultimately arrive at the normal margin that we can achieve. Pricing power comes in a situation where there is only one service provider in the game.
Margins are then a question of rigours of profit management. You have to make sure you don't exceed the deadlines.If we consider some of our mature verticals like banking insurance, telecom and retail, there is a lot of capability that TCS brings in. Naturally, we expect better margins from these areas.
Do infrastructure management services provide better margins?
The big advantage of such services is that these are executed as offshore services to a large extent, which means profitability is somewhat better. The question is, what happens when scales in such services go up substantially and you have to manage the assets, or even own them? At the moment, the manner in which we look at them is that these should deliver margins similar to the overall business.
How beneficial is this model of owning assets in the infrastructure services space? Does it help to improve engagement with clients?
Any company which has done that is not showing margins of 10-12%. Owning assets attracts capital cost to the company. This acts as a dragger on margins. If it is part of the total outsourcing deal, then you are essentially taking on everything on your balance sheet, which is a non-discretionary spend. In case of discretionary spend, like developing a new system, the client may wish to approach someone else. With certain assurance of revenue in future, there can be optimisation of costs over a period of the contract.
Source: The Hindu, 17 September 2007
China joint venture, advantage Tata Consultancy Services
Indian Information Technology majors have been dipping a cautious toe in Chinese waters for several years now
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A partnership with TCS will be a substantial learning opportunity
for China.
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Framed by the rolling bulk of Beijing's Western Hills, the blue and white TATA logo adorns a 2,000 square metre-large building that is home to the new joint venture between India's top software exporter Tata Consultancy Services (TCS) and three Chinese partners. Located amidst the giant glass and chrome structures that dot Zhonguancun Software Park, the Chinese capital's showcase high-tech zone, the TCS (China) building is, in fact, the physical embodimen t of the first real example of the long-hyped potential for Sino-Indian collaboration in information technology (IT).
Indian IT majors have been dipping a cautious toe in Chinese waters for several years now. Apart from TCS, Infosys, Satyam and Wipro have China operations, as do a slew of smaller, specialised companies such as iGate Global Solutions, Newgen Software and Zenzar Technology.
However, despite ambitious plans and a strong commitment to the Chinese market, Indian companies have, on the whole, struggled to ramp up their operations across the Great Wall. Even after four or five years in the country, majority of Indian IT heavyweights in China, thus, remain surprisingly light, with an average of 300-600 employees largely restricted to servicing the China needs of existent multinational clients.
The lucrative domestic Chinese market for software, valued at $50 billion plus, has remained out of reach for most Indian companies. According to Jonathan Lam, CEO for TCS (China), the reasons for this inability of Indian firms to crack the domestic market are manifold.
"For a foreign company in China there is the question of lacking relationships with key decision makers in government," he says, adding that language and cultural barriers are obstacles as well. Moreover in the IT sector, foreign-owned companies have usually been kept out of the really large, multimillion dollar deals at the state-owned enterprises.
This is where the new TCS joint venture (JV), with its strong government backing and partly Chinese ownership, is set to make a real breakthrough, fundamentally changing the nature of the Indian IT game in China thus far.
The joint venture was formally established in February with TCS taking a 65 per cent stake. A further 25 per cent is owned by three Chinese partners — Beijing Zhonguancun Software Park Development Co. Ltd (where the joint venture is located), Tianjin Huayuan Software Park Construction and Development Co. Ltd. and Uniware Co. Ltd. The remaining 10 per cent is expected to be taken up by Microsoft.
Domestic contracts
Already TCS (China) is winning substantial domestic contracts including a $100-million one for providing banking solutions to the Bank of China. Another multi-million dollar contract to implement a comprehensive international trading system for the China Foreign Exchange Trade System (CFETS), a sub-institution of the People's Bank of China, has also been bagged.
"We are finally being able to make real inroads into the banking and financial sectors in the domestic market in China," says Mr Lam. This is, in fact, an area with strong growth potential in China. The country is now undertaking massive IT-related projects including the computerisation of its banking behemoths. Moreover, last December China fully opened up its banking sector to foreign competition under its WTO (World Trade Organization) obligations, creating even more opportunities.
Mr. Lam says the TCS joint venture will be in a prefect position to leverage and benefit from these developments because partnering with the Chinese government has put it in a unique position. Indeed the joint venture is the first and last such company that has the backing of the powerful National Development and Reform Commission (NDRC), a supra-ministry that was formed out of the erstwhile Planning Commission.
Obliging Chinese Govt.
But while the joint venture clearly provides TCS with a prized break into China's domestic market it is also pertinent to ask why the Chinese government has been so obliging. The answer, says Mr. Lam, is that China wants the joint venture to act as a "role model for Chinese industry that sets the standards and which other local companies can then imitate."
Indeed, for the Chinese side, a partnership with TCS will be a substantial learning opportunity. Both quality standards and processes that the Indian titan brings with it as well as its experience in handling large, industrial-scale projects are lacking in most Chinese IT firms.
The joint venture plans to employ at least 5,000 people over the next five years (up from its current workforce of around 1,000) which would make it one of the largest IT companies in China. Although the Chinese software industry has been growing at around 30-40 per cent annually in recent years, it remains fragmented and lacks scale. Only about ten Chinese IT firms, among some 8,000, employ more than 1,000 people; the very largest numbers only some 10,000.
From the Chinese point of view, the TCS joint venture is, thus, one with the classic strategy of opening up a market to foreign investment, learning best practices from the world's star performers and then encouraging local competitors to imitate and perfect these.
Following precisely this strategy, Chinese companies have gone on to become world beaters in the manufacturing sector. But will this approach meet similar success in IT?
The market intelligence firm IDC predicted in a report out earlier this year that when it came to the software sector "Chinese cities were nipping at India's heels" and would overtake Indian cities as the preferred destination for offshore back-office functions by 2011.
The reasons, the report identified, for this China optimism were the government-supported massive investments in infrastructure, Internet connectivity and English-language training.
However, Mr Lam is dismissive of the report. "The day China can catch up with India is the day that customers feel as comfortable that they will get the same quality and security in China as in India and that day is not close," he says.
Just the size of China's software exports when compared to India's is an indication of the gulf between the two. In the fiscal till March 2007, the software and services exports segment in India was worth $31.4 billion, compared to $2.5 billion for China
Biggest drawbacks
China's biggest drawbacks, according to Mr. Lam, are its reputation for lax intellectual property rights protection, continuing inadequacy of English-language skills and lack of mid-level project management talent.
While China graduates an impressive 6.50 lakh engineers a year (compared to 4.50 lakh in India and 1.20 lakh in the U.S.) he says only around ten percent of these are usable on Day One. Moreover, while it is easy to find code writers with competence levels and salaries on a par with their Indian equivalents, qualified middle-level managers are in short supply. They are, thus, both more expensive and more difficult to retain than their counterparts in India.
Mr. Lam predicts that within the next few years China may begin to give India some competition in the lower-segment of the IT and IT-enabled services world. However, on the really lucrative, value-added, high-end services India will retain an advantage for a while to come, he says.
Nonetheless, the TCS (China) CEO cautions that China should not be dismissed either. Over time, China's evolution into an IT power is more or less assured. It is the only country comparable to India in terms of the size and cost of its skilled labour force. In addition, given its infrastructure and manufacturing prowess the market for related IT solutions is likely to keep growing.
It is thus small wonder that virtually every Indian IT company of consequence not only has a China strategy but is, in fact, in the process of expanding China operations. Infosys Technologies recently announced plans to open two development centres in China that will eventually employ 6,000 people. Earlier this year, Satyam Computer Services also began construction of a 2,500 seat software development centre in the eastern city of Nanjing.
HCL Technologies is the latest Indian IT major to look to China. It has opened up an office in Shanghai and is close to finalising three collaborations with local Chinese partners in the fields of enterprise software, engineering and application testing
In all the India vs China debate, the point that is sometimes obscured, is that ultimately the growth of China's IT industry will only be to the advantage of Indian companies operating out of China.
According to Gartner, a research agency, Indian companies could come to account for up to 40 per cent of the domestic Chinese market for software. Mr. Lam believes this to be a conservative estimate.
"In banking, insurance and finance we can take over the majority of the market," he smiles pointing out that IDC already rates TCS (China) as the best provider of call banking solutions in China.
"So far we have been walking," concludes Mr. Lam, "Now its time for us to run."
Source: The Financial Express, 17 September 2007
'India is on its way to self-reliance in aerospace technology'
US aircraft manufacturer Boeing Company is looking forward to expand its long relationship with India. It has set its sights on the country's defence sector with Boeing Integrated Defense Sysytems (IDS), a $32.4-billion unit of the Boeing Company. The unit is one of the world's largest space and defence businesses specialising in innovative and capabilities-driven customer solutions. "India is a strategically important market for Boeing," says Vivek Lall, vice-president and country head, Boeing IDS.
The company has worked with India's premier software development companies, including Wipro, Infosys and TCS on numerous IT projects such as application rehosting porting, systems reengineering and development, web enabling, e-business applications and long-term application maintenance.
In a recent chat with Huma Siddiqui, Lall details that the company's strategy includes understanding the art of using current and emerging technologies to improve the capabilities of existing products and delivering new solutions. Excerpts:
Having taken over the Indian operations of Boeing IDS, what are your plans to strengthen the presence here?
For us, the multi-role combat aircraft (MRCA) deal is very important. We have offered India, the F/18 Super Hornet. It is the first tactical combat aircraft designed to carry out both air-to-air and air-to-ground missions. There are a lot of different technologies involved in the aircraft. Boeing has made modifications in the F/A-18 Super Hornet, thereby bringing down the production cost per aircraft from $82 million to $49.9 million, and converting it from analogue to digital.
There's also the outsourcing bonanza. Are you in talks with Indian companies about the offset business?
If media reports are to be believed, we have about 50% of offset business for Indian companies. However, this has not been conveyed to us as yet. Nevertheless, we are ready to meet the requirements.
Boeing is already in a strategic partnership with L&T and hopes to expand it to other companies. The company has been in negotiations for collaboration with Hindustan Aeronautics Limited (HAL), TCS, Infosys and HCL. The Indian government is looking to increase its supply chain with the private industry and we hope to be part of the process.
What about partnerships with Indian companies in the technology space?
We would like to be seen as the preferred partner in the aerospace sector. I feel hopeful and encouraged that India is truly on its way to self reliance in technology. Boeing is developing a collaborative technology environment in India, where we can co-invest in innovative new technologies that will benefit Indian aerospace infrastructure and the company.
Boeing's research and development organisation—Phantom Works Division —has been evaluating the Indian science and technology sectors with increasing interest since 2004, with an eye towards expanding the company's global reach.
In 2005, Phantom Works selected the Indian Institute of Science (IISc) to serve as the seventh Boeing Strategic University, focusing on the critical area of materials and manufacturing technologies. Boeing has also contracted with HAL for the manufacture of aircraft components and assemblies and the digitisation of engineering drawings.
Boeing has been working closely with the Indian Institute of Technology (IIT), Kanpur, for a collaborative research programme in the area of RFID technology. We are also in the process of working with National Aerospace Laboratory (NAL) and the Advanced Research & Design Centre (ARDC) at HAL, to explore a collaborative research programme in the area of composite design and manufacturing.
How are Boeing's sourcing plans from India shaping up?
Boeing has contracted with HAL for the manufacture of aircraft components and assemblies and the digitisation of engineering drawings. HAL's manufacturing role has grown to becoming the single source for 757 over-wing exit doors and 777 main landing gear uplock boxes. Today, HAL continues to provide the 777 uplock boxes for all of Boeing's production requirements and digitisation services on demand.
What initiatives is Boeing undertaking to popularise the concept of network-centric operations?
Network-centric operations (NCO) is a form of collaboration in which the entities in an activity are linked or networked by a communications and information systems infrastructure that lets them share relevant data across geographic borders. Obviously, this is one area where we are looking forward for partnerships in India.
Source: Business Standard, 17 September 2007
BPOs augur well for old economy firms
Mumbai
The $9.5-billion business process outsourcing (BPO) sector is once again hogging the limelight. Old economy companies such as Hero, M&M (Tech Mahindra), Aditya Birla, Essar, Hindujas and Larsen & Toubro have sprung into action with large acquisitions and major deals.
The BPO subsidiaries of manufacturing companies were earlier dismissed as captive units lacking any service culture, with the exception of Tata Consultancy Services (TCS), the country's largest IT services provider. But this changed a couple of years ago.
Hardly 10 days back, Gurgaon-based HeroITES — the Rs 400 crore BPO subsidiary of the two-wheeler company Hero group - acquired Scotland's biggest BPO Telecom Services Centres (TSC) for nearly Rs 330 crore. The company's acquisition plan does not end there. "We will make more acquisitions to scale up our offerings," said Rohit Chanana, president, HeroITES.
In October 2006, the Hindujas-owned HTMT Global Solutions acquired US-based BPO company AFFINA for an undisclosed sum. The acquisition, according to the company, is expected to nearly double its combined revenues to over $130 million (around Rs 600 crore) and catapult it into the top five pure-play BPO companies in India. The integrated company has a total headcount of over 9,000 employees. The company is also planning four buyouts in the range of $20-$100 million.
This February, Essar Global acquired Global Vantedge, a BPO company owned by Chrys Capital, to have a larger footprint in the BPO segment through its wholly owned subsidiary, Aegis BPO. The acquisition is expected to contribute over $25 million to the BPO business of Essar and is its fourth acquisition in the last one year. The other three were Customer First and Orion in India and Technion in the US. "Most of the manufacturing companies started BPO units to serve their internal needs. They now see the valuations that an Infosys or Wipro can get," says Pradeep Uddhas, global head (sourcing advisory), KPMG.
For these BPO units to run successfully, "they need to get a free-hand just like the Tatas gave FC Kolhi the autonomy to run TCS". "Manufacturing units generally are not known for their service culture. Moreover, the manufacturing pay scales are lower than that of the service industry. When a group gets into IT, there's generally a constant cultural struggle. It's when the groups spin off the subsidiary as a business unit that it tends to become successful," explains a Frost & Sullivan spokesperson.
Take the case of the Aditya Birla Minacs (formerly Transworks), the BPO arm of the Aditya Birla Nuvo group. It kept a low-profile till a couple of months back despite the $125-million acquisition of Canada-based Minacs Worldwide last May. However, in just four years, it has grown from a $3 million company to a $350-million (around Rs 1,400 crore) one.
The 11,000 employee-strong BPO has chalked out an ambitious strategy and has plans to acquire companies in specific sectors and geographies. Dev Bhattacharya, group executive president, IT and BPO business, said, "The decision to get into the ITeS industry was taken after a portfolio analysis in 2002. When you enter into a new business in the group, it is very difficult to stay small. We had to re-focus and re-position ourselves and there was strong traction in the BPO industry. TransWorks was doing pretty good, but we wanted to grow fast and get a global footprint."
HeroITES was demerged into a separate independent entity in 2005 "for greater focus and implementing an aggressive growth strategy". The Anil Dhirubhai Ambani group-promoted Reliance BPO, which was set up in 2002 with a manufacturing parentage, is also firming up plans. It has over 7,800 employees and caters to the BFSI, telecom, utility, media and entertainment and infrastructure verticals.
Said an analyst, "The sleeping giants have woken up to the potential of offshoring and outsourcing. This is just the beginning."
Source: The Economic Times [print only], 15 September 2007
Kochi edition of TCS IT Wiz on Sept 22
The 2007 Kochi edition of interschool IT quiz of Tata Consultancy Services will kick off here on September 22. The TCS IT Wiz which started from Chennai in August will end in Mumbai in December visiting 11 cities with an expected student participation of 12,000.The TCS IT Wiz to be held in TOC H auditorium is open to students studying from class 8 to 12. Last year, over 900 students participated in the quiz in Kochi.
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