The Latinization of TCS: Five Nearshore Growth Strategies for 2010

Moves by Tata Consultancy Services (TCS) to make  Latin America a big part of its future reflects a carefully constructed strategy that is going to be felt in a variety of ways across the Americas in the next few years.
Frankly, LatAm affords TCS what it can’t find at home in India – a business consultant population equipped with an obligatory cultural saviness that plays well with US customers, accomodating time zones, growing prominence as a services player that in South America enables TCS to go toe-to-toe with Accenture and IBM,  and a shrewd and well-connected executive leadership team that have skillfully helped TCS become a regional powerhouse.

“More and more customers prefer to have dual strategy and they are looking at India plus one more geographical presence” – Gabriel Rozman,  EVP Emerging Markets at TCS

In the course of the last seven years, TCS  Iberoamerica has gone from running a tiny 15-person  office in Uruguay to now employing over 6,000 consultants and establishing global delivery centers in four countries. The driving force behind TCS’s success in LatAm is undoubtedly  Gabriel Rozman,  EVP Emerging Markets at TCS, a native of Uruguay who has literally opened the door to Latam, through which others like Wipro, Cognizant and Infosys have now traversed.

The abilty of TCS to move swifty and nimbly through Latin America may have been architected by Rozman, but a key contributor to the journey was a global sales and operations leader who seized the same vision. That person, a man still in his mid-forties, is N. Chandrasekaran who only two weeks ago was named CEO over the$6 billion global IT services powerhouse. Chandra’s deep familiarity with South America, both politically and socially, is sure to influence the company’s alliances and acquisitions.

LatAm operations – forecasted to draw 10% of TCS’s global revenue in 2010 – compliments global positioning for the company. “More and more customers prefer to have dual strategy and they are looking at India plus one more geographical presence. That is where Latin America is being preferred. Currently, one-third of work that happens in Latin America caters to customers in the US, while the rest of the work is for local clients,” said Rozman recently.

The key question during the next year will be how TCS chooses to expand its presence. Chandra says the company will not buy its way into revenue growth, but instead seek out strategic purchases that add niche capabilities to its existing portfolio.
Our Top Five Nearshore Growth Strategies for 2010 include:
1. Expand public sector business. Brazil’s government services work, for example, is dominated by top tier firms such as Accenture and IBM. The core of TCS Brazil business is built on application development and management. Better diversification in service areas is critical.
2. Build through key acquisitions. Columnists and editors at  Nearshore Americas are skeptical about a huge TCS buying binge. However,  sources expect acquisition of one or two established Nearshore providers in the next 12 months. Popular options would be: Hildebrando,  Softtek and Stefanini.
3. Strengthen FAO and Shared Services competencies. Up-leveling to FAO territory dominated by Accenture, Capgemini and Genpact is essential to growing an edge. New technology tools are starting to level the playing field, according to a recent report from Everest. “Platform based FAO is in fact emerging as a key lever to create competitive differentiation in an increasingly competitive supplier market,” said Gaurav Gupta a Principal at Everest.
4. Leverage second-tier LatAm locations. High wages in Brazil are not sustainable. TCS would be wise to explore and establish service centers in emerging nations such as Colombia and Guatemala. Such “subsourcing” within the region taps emerging labor pools while protecting margins.
5. Take advantage of LatAm positioning to re-shape the perception of being an “Indian” outsourcer. It may take a few years, but TCS is one of the best positioned India-based providers to shed its perception as “Indian” and truly become a multi-dimensional and multi-cultural provider – ultimately transcending nation and race.

TCS Journey in Latin America:

2002:

• TCS Iberoamerica founded with a team of 15 in Uruguay
• First Indian firm to enter this region
• Spain office becomes part of “Iberoamerica”

2003:

• Expanded operations into Brazil, Chile and Mexico
• Set up the first CMMI® level 5 center in this region

2004:

• Won a mega outsourcing deal with ABN Amro worth US$250 million
• Expanded into Andean and Caribbean region

2005:

• Acquisition of leading Chilean BPO firm Comicrom for US$23 million
• Announced new office in Portugal

2006:

• Expanded into Colombia
• Won major BPO deals in Chile with banks and government

2007:

• Won US$140 million Banco Pichincha deal, launched new center in Ecuador
• Set up regional training center in Uruguay
• Launched new center in Mexico, won major government projects
• Consolidated Argentina and Uruguay as single unit
• Crossed 5000 employees

2009:

• TCS opens its seventh and eighth LatAm delivery centers in Argentina and Queretaro Mexico
• In Latam, TCS employs 2,000 Chileans, 1,700 Brazilians, 1,000 Mexicans, 800 Uruguayans, 150 Argentines and a few hundred Ecuadorians and Colombians. Latin Americans form 48 percent of the non-Indian staff of TCS worldwide.