Kolkata: Information technology (IT) firm Tata Consultancy Services Ltd, or TCS, is looking to ally with smaller overseas companies that are willing to share resources such as manpower, and jointly bid for and execute government contracts.
India’s largest software provider by revenue is at “various stages of discussion” with potential partners, Tanmoy Chakrabarty, head of TCS’s government solutions business, said.
This business segment currently contributes just about 2-3% of the company’s revenues. But in “a couple of years, it could go up to 10%”, said Chakrabarty, according to whom governments across the globe are expected to expand spending on IT solutions.
In the year to 31 March, TCS’ gross revenues stood at Rs27,813 crore, 23% higher than the preceding fiscal year.
The company aims to grow its government solutions business with minimal increase in payroll costs by creating “an integrated ecosystem” of small and medium IT companies with which TCS could share contracts it secures, said Chakrabarty. “We are working with four-five companies on government projects and have already created such an ecosystem in India,” he added.
Around 60% of TCS’ revenue from its government solutions unit comes from India.
Tholons Inc., a US-based investment research advisory, said this could help TCS reduce its so-called onsite employees. “Partnering smaller IT companies that do not have the manpower to undertake big IT projects on their own should create a win-win situation for both,” said Vinu B. Kartha, a partner at Tholons.
But Kartha isn’t sure there would be substantial increase in government spending on IT solutions. “Though governments are likely to spend more money, that money would be spent mostly in the form of tax breaks, subsidies and on infrastructure development such as highways, schools, healthcare, unemployment insurance and projects that would create jobs,” he said.
TCS, however, sees great opportunities in the US because President Barack Obama has announced plans to spend up to $80 billion (Rs4 trillion) to boost IT infrastructure. Chakrabarty said TCS offers IT support to four state governments in the US on unemployment insurance. The company is in talks with two-three other states to offer the same solution, he said. “With more and more people losing jobs in the US, there is an immediate need to augment the infrastructure,” he said. Although TCS wants to keep payroll costs down, the number of people working on the government solutions unit could go up from 1,800 to 4,500 by 2011, Chakrabarty said. The company would hire new people and transfer employees from other divisions to meet the staffing need, he said.