TCS outlines its Asian ambitions

Tata Consultancy Services, India’s leading IT and outsourcing group, hopes to quadruple its market share in Asia outside India within five to seven years, according to its top executive for the region.

Girja Pande, TCS’s Asia-Pacific chairman, said the group had achieved compounded annual growth averaging 40 per cent a year in the region for the past nine years, and was budgeting for 35 per cent growth this year.

“We think we can sustain these growth levels – I’m talking about the next five years – because we still have only 1 or 2 per cent market share,” Mr Pande said in an interview with the Financial Times at the group’s Singapore headquarters for Asia east of India.

Mr Pande said TCS aimed to take 7 or 8 per cent of the fragmented market for IT services in the Asia Pacific region outside India, where global IT service providers such as IBM, HP Services and Accenture compete with local providers.

“I think in five to seven years we should get there,” he said. “Our plans are to grow. We are positioned for growth. Our investments are for growth – whatever investments are required whether they are in brand building, adding additional sales teams, training [or] hiring.”

Analysts said TCS was well positioned to increase its Asia-Pacific market share, but would have to spend heavily to build a bigger local presence and might have to cut prices below the levels achieved by its core European and North American operations.

“I think they will able to give healthy competition to the incumbent players,” said Rajiv Mehta, senior research analyst at India Infoline in Mumbai. “If they compete with these local and regional vendors on price then they should be able to increase market share.”

Gartner, the IT research group, said recently that IT spending in the Asia-Pacific region was expected to grow by 5 per cent in 2010 to $515.6bn.

TCS said in January that global revenues for the quarter to the end of December rose by 10.3 per cent, compared with the equivalent quarter on 2008, with net profit up 38.9 per cent to $384m.

The improved results followed a severe setback in 2008 as the global financial crisis hit its businesses in North America and Europe, which together account for about 80 per cent of revenues.

Mr Pande said TCS expected Asia-Pacific growth in gross domestic product to outpace economic growth in Europe and North America during the next decade, steadily increasing the region’s 5.5 per cent share of TCS’s $6bn in global revenues.

However, he said growth was also being driven by a move towards global procurement of IT services by major multinationals that were dramatically reducing the number of suppliers they were willing to deal with.

This had helped TCS to pick up contracts from companies such as BP, the UK oil company, which had not previously been a customer, he said.

Mr Pande said the group expected to grow in Asia, mainly by expanding its relationships with existing customers and adding new ones, but was also open to potential acquisitions.

“We are a cash-rich company, sitting on a billion and a half [dollars] in cash,” he said. “We are always looking for opportunities, and we believe this is a good time to be looking. We are looking closely.”