Bangalore: India’s largest information technology (IT) services firm, Tata Consultancy Services Ltd (TCS), expects to see more gains from consolidation of IT deals following global mergers and as companies curb technology costs and move work offshore to low-cost countries, a top executive said.
In August, TCS was among three Indian IT vendors that won a part of a $1.5 billion (Rs7,320 crore) outsourcing contract from British oil firm BP Plc, which cut its total vendor base to five from 40. Infosys Technologies Ltd, Wipro Ltd, IBM Corp. and Accenture Ltd were the other vendors.
“You talk about integration of BofA (Bank of America Corp.) with ML (Merrill Lynch); we definitely see integration deals coming along,” S. Ramadorai, outgoing chief executive officer (CEO) of TCS, told reporters on Monday. There are deals out there similar to the BP one, he said. “We are working on it.”
New role: Ramadorai will step down as CEO on 5 October after 12 years at the top post to assume the title of non-executive vice-chairman. Adeel Halim / Bloomberg
Ramadorai will step down as CEO on 5 October after 12 years at the top post and assume the title of non-executive vice-chairman. On Monday, he was named chairman of Tata Elxsi Ltd, the Tata group’s industrial software service provider.
Bank of America bought Merrill Lynch in September 2008 at the peak of the financial crisis in the US, a period that saw several other mergers involving financial firms. TCS earns nearly 40% of its revenue from the banking, financial and insurance vertical.
India’s software lobby, the National Association of Software and Services Companies, has forecast that software exports will grow at 4-7% to $48-50 billion in 2009-10.
In 2008-09, the industry grew at 16.3% to $46.3 billion, the slowest rate of expansion in the previous six years that saw an average growth of 30%.
Ramadorai said the pricing environment was stable and deal pipelines were good in businesses such as banking, financial services and insurance, retail and life sciences. However, the manufacturing and telecom businesses have not recovered yet, he added.
Analysts say that while Indian IT firms are winning contracts through vendor consolidation, their customers are driving them to lower prices.
“Business is coming at a cost. people want more work (to be done) at the same cost,” said Anil Advani, head of research at SBI Capital Markets.
TCS has won a few integrated back-office and IT service deals following its acquisition of Citigroup Global Services Ltd, the back-office arm of Citigroup Inc., in October, Ramadorai said.
The firm will hire fewer employees this year than the 33,000 people it added in 2008. Of that, around 12,500 people came from the Citigroup Global Services acquisition.
As for its domestic deals, Ramadorai said TCS plans to build the IT infrastructure to manage the National Rural Employment Guarantee Scheme (NREGS) in three states—Madhya Pradesh, Gujarat and West Bengal.
NREGS guarantees 100 days of work in a year for one member of every poor household in rural areas.
TCS has a joint venture with the Andhra Pradesh government, called AP Online, to manage NREGS in the state. This includes a biometric system to ensure that the programme benefits the poor.
“It is a state-run programme. We are partnering with these states. It will be on the Andhra model,” Ramadorai said.