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Sunday, 10/09/2005 3:40:50 PM

Sunday, October 09, 2005 3:40:50 PM

Post# of 593604
Q&A: Tata’s Chandrasekaran

The TCS executive talks about the biggest outsourcing deal ever for an Indian outsourcer.
September 1, 2005

Tata Consultancy Services, India’s No. 1 information technology outfit, got a little bigger Thursday. The firm, based in Mumbai, secured the largest deal ever by an Indian outsourcer. The contract to provide application support and enhancements to Dutch bank ABN Amro is expected to generate some $247 million in revenue over five years.

TCS’ cut is part of a much larger $2.24-billion contract, one of the biggest yet in outsourcing, that the bank also inked with other Indian outsourcers Infosys and Patni Computer Systems. Global majors including IBM and Accenture are also in on the deal, which will help ABN Amro with in-house consolidation, partial outsourcing, multi-vendor strategies, and offshoring.



Working with TCS and the other companies, the bank expects to save $322 million a year beginning in 2007. Infosys and TCS will share the application support and enhancements projects and all five companies will be involved in application development. The IT infrastructure contract was awarded to IBM.


‘In India, we are the largest player in terms of revenues, profits, and margins and this will only enhance our position.’

-N. Chandrasekaran,

Tata

As part of the deal, more than 500 TCS consultants will work from the company’s global delivery centers in Brazil and Hungary to service ABN Amro’s operations in the Netherlands and Brazil. That’s in addition, of course, to staff who will be based at its large Indian development center. Long an offshoring partner with U.S. companies, TCS is expanding rapidly in Europe, where it logged 60 percent growth last year.



Under the contract, about 2,000 full-time equivalent employees at ABN Amro will be transferred to the selected IT vendors, with a majority of them going to IBM. The bank is expected to cut its staff by 1,500 over the next 18 months.



N. Chandrasekaran, TCS executive vice president and head of global operations, has helped play a part in the landmark deal, handling TCS' delivery operations globally and overseeing the company's sales in Europe, the Middle East, Africa, India, and Latin America. Based in Mumbai, Mr. Chandrasekaran is responsible for the formulation and execution of TCS' global strategy. At TCS for 18 years, Mr. Chandrasekaran has helped establish and manage the company's key client and partner relationships.



RedHerring.com spent some time with Mr. Chandrasekaran to discuss implications of this deal for the company and the global outsourcing industry.



Q: What does this deal mean to TCS?

A: The deal is the largest IT services deal for an Indian IT company. It is very significant from multiple points of view. It has a global nature and (TCS) will serve ABN Amro from Brazil, Netherlands, and the American market. It will fully leverage our global delivery model, and the committed revenue for us is $250 million, which is two-third’s of the (application support) contract. We are the most significant supplier who has won a large deal. The other thing is, it’s the largest deal outside the U.S. (for TCS) and shows our spread in Europe’s banking and financial services industry. The transition will be for a period of 12 months.



Q: What do you mean when you say global delivery model?

A: TCS operates all its development on a global level—not only do we have development centers in India but also in Europe, Brazil, and China. We do work for some clients where we serve them with different development centers. In this case, we are fully exploiting all our capabilities, the regional skill sets, and know-how.



Q: Which was the largest deal for TCS before this one?

A: We signed another large deal with a global financial services institution based in the U.S. We don’t have the permission to reveal the name but we announced it last quarter and it was a $100-million committed deal. We also announced a deal with GE Healthcare.



Q: What is the significance of this contract to the outsourcing industry in India as a whole?

A: This deal was won by TCS competing not only with Indian companies but also with global majors like IBM and Accenture. The fact that we are all in the race and they decided to go with TCS—that’s a big move. We think that this will invite Indian companies for deals on the same footing as Western integrators and it will act as a reference for many other deals in the financial services industry.



Q: How important is the European territory for TCS?

A: It is very important. We have been doing a lot of deals in Europe and U.K. but not so large, and U.K. is not part of continental Europe. This is our largest deal in continental Europe.



Q: Will TCS take over some of the 2,000 full-time equivalent employees, a majority of which are expected to go to IBM?

A: We will be taking over and rehiring some of them in Europe and Brazil. The number will be in a few hundreds.



Q: What is TCS’s current position and how will it change with this contract?

A: In India, we are the largest player in terms of revenues, profits, and margins and this will only enhance our position. Last year, TCS had $2.2 billion in revenues and $512 million in profits, and we have 49,000 employees. We are looking to continue to grow at that pace and are quite bullish about the future. Globally, 60 percent of our revenues come from North America, 23 percent from continental Europe, 10 percent from India, 6 percent from Japan and the rest of Asia, and about 1 percent from Latin America. We are expecting growth in North America, Europe, and across verticals such as manufacturing and retail.

http://www.redherring.com/Article.aspx?a=13426&hed=Q&A:%20Tataג€™s%20C...

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