Bangalore: India’s biggest software exporter, Tata Consultancy Services Ltd (TCS) has won fresh outsourcing business worth $385 million (Rs.2,040 crore) from Tata Motors Ltd and Jaguar Land Rover—an indication that it’s beginning to win back contracts from Tata group companies that it had lost to global rivals.
For years, TCS has been losing lucrative outsourcing deals from group companies to International Business Machines Corp. (IBM), the world’s biggest computer services firm.
Tata Motors, the country’s biggest auto maker, is moving information technology (IT) projects from IBM to TCS as part of a bigger exercise to consolidate its IT operations with a single vendor, three executives with direct knowledge of the plan said last week.
They requested anonymity because they are not authorized to speak on the deal.
“IBM was informed of the decision in July this year and the work has already started moving to TCS,” one of them said. This is part of an aggressive push to increase TCS’s share of IT business from Tata group companies, which combined is worth nearly $1 billion annually, he said.
A spokesman for Tata Motors said his company would not comment on “matters internal to the company”.
A spokeswoman for IBM, which still works with some of the largest Tata group companies including Tata Steel Ltd, said the firm will not “discuss details of confidential client contracts”. TCS wouldn’t comment because the company is in the so-called silent period ahead of its earnings announcement on 19 October.
In a year when deals from the US and Europe, the top outsourcing markets, are slowing, India’s government organizations and enterprises are expected to spend $66.4 billion on IT, according to research firm Gartner Inc. Of this, $9.2 billion will be spent on IT services alone, setting up a battleground for new outsourcing contracts this year.
Outsourcing experts tracking IT budgets of large conglomerates said any decision to give work to an affiliate will depend more on the capabilities of the company rather than group fealty.
“In TCS’s case, they clearly have domain knowledge in auto now, so they are naturally positioned better to win deals like these,” said Sridhar Vedala, chief executive of QS Advisory, which advises customers in Europe on their outsourcing decisions. “The same cannot be said of Mahindra Satyam if the parent auto maker Mahindra was evaluating an IT vendor.”
Globally, TCS counts Chrysler Group Llc and Italian auto maker Ferrari SpA among its top customers in the auto sector.
To be sure, IBM is still regarded as being ahead of Indian service providers by some Tata group companies.
“In many ways, IBM helped us with some global best practices when we needed to compete with rivals outside India,” said an official at one of the Tata group companies.
He requested that he not be named because he is not authorized by his company to speak with the media.
The $100 billion Tata group has 31 public listed companies across energy, services, consumer products, chemicals and IT.
An expert with a top technology consulting firm based in India, who advises some Tata group companies on their IT buying, said that the group spends more than $1 billion annually on IT.
“However, unlike many other conglomerates who prefer a group IT subsidiary, the Tatas evaluate potential IT vendors, including TCS, with the same diligence,” he added, speaking on condition of anonymity because of a non-disclosure agreement with customers.
Note: An earlier version of this story gave an incorrect status for an HDFC Standard Life Insurance deal.