Source:www.ovum.com

Last week we met with TCS’s managers responsible for Europe, Germany, France and Switzerland to discuss their vision for this region. In FY 07, TCS grew its European revenue by 82% to $1.2bn, which represents 28% of global revenues. The lion share of this was generated in the UK. Continental Europe had revenues of about $365m, accounting for 8.5% of total revenues.

Comment: Having become well-established on the UK market, TCS is now targeting more business on the continent, specifically Germany. Indeed, TCS’s VP Natarajan Chandrasekaran has previously summarized TCS’s strategy for Continental Europe as ‘Germany, Germany, Germany!’ This makes good sense since Germany is the second largest IT services market after the UK in Europe, and TCS already generates €100m in annual revenue from the country. But despite Chanrasekaran’s exuberance, TCS’s ambitions don’t stop at the German borders.

It has defined 8 regions which it targets for growth: Nordics, Benelux, Central (Germany, Austria), Switzerland, France, Eastern, Southern (Italy, Greece), and North Africa. It is targeting these regions with outsourcing (application, infrastructure and BPO), value-added transformation services (engineering, SAP, CRM and BI solutions), as well as telecom product engineering. This is across four verticals: financial services, travel hospitality & transportation, manufacturing and telecommunication. In the mid-term, the vendor intends to win the top 10 leading brands in the targeted verticals and countries as clients.

But the big challenge for TCS will be to overcome cultural and language barriers in these regions to establish a successful business. In Switzerland and France, TCS has pursued a partnership strategy, working for around 20 years with TKS-Teknosoft which re-sold its services into these countries. TCS acquired TKS-Teknosoft in November last year, and has been positive about the benefits of entering a European country in this way, claiming that the local face and reputation that TKS-Teknosoft brings helps to win over new clients as well as attract senior onshore staff.

Both of these things are vital for growth in Continental Europe, where clients are more cautious of working with unproven offshore firms, and also like to have a significant proportion of the work provided onshore. To support this requirement for proximity to the client, TCS has already set up near shore centres in Luxemburg, Hungary and Morocco and is looking into opening further centres in Eastern Europe and Egypt.

We wouldn’t be surprised if TCS uses a similar partnering/acquisition model to access more business in its 8 targeted regions. The only challenge will be identifying the right partners and building good relationships with them. But TCS is already the largest offshore player in Europe, and this, combined with its deep wallet, will be a strong incentive for potential partners. As TCS pushes this strategy further, we expect the established vendors to feel more competition from India, India, India…

Source:economictimes.indiatimes.com

India, popularly known as the world’s back office for IT and BPO services, is all set to threaten China’s position as the world’s backyard for manufacturing in the next 3-5 years, says a new report.

“India could challenge the position of China as the manufacturing centre of the world in next three to five years. Companies are planning to offshore manufacturing activities primarily to India that will surpass its IT and BPO activities,” global consulting, technology and outsourcing services major Capgemini said in its latest report.

At present, manufacturing is the least offshored activity to India, but the survey respondents expected the country to become the number one outsourced manufacturing destination due to its competitive cost advantages over China, Capgemini added.

“Current developments suggest that some of the main manufacturing locations in China are becoming too expensive relative to other countries in the region, which includes India,” the report added.

Emerging economies like India and China have the largest market share of offshoring activities. India is diversifying from its stronghold in the IT and BPO segment to the manufacturing segment, which is currently dominated by its neighbour.

The report, however, highlights that India has to make significant investments for improving its infrastructure to cater to the increased demand of manufacturing and supply chain operations.

The Indian government is eager to attract foreign manufacturing activities, but it will need to make significant investments to harvest this potential, Capgemini added.