VENDOR PROFILE. TCS UK Profile IDC OPINION

Transcription

1 VENDOR PROFILE TCS UK Profile IDC OPINION IDC sees TCS UK as a strong and healthy services provider with strong human and intellectual assets, commitment to customer satisfaction, and a mature business model that has taken it beyond its origins as an offshore player to becoming a global services provider with a significant onshore presence in the U.K. TCS is a top 10 IT services player in the U.K. and is investing in adjacent market segments beyond its traditional strong position in applications services, including infrastructure management and business process outsourcing (BPO). It has a strong business model that should allow it to keep gaining market share in the U.K. for the foreseeable future. TCS has traditionally had strong brand permission in the U.K. in application services and is extending this in other areas, such as business process outsourcing and infrastructure management. It is investing in its business consulting capabilities, giving it the potential to go to market with a more consulting-led, business-oriented approach to supplement its traditional technology transformation story. It has a credible infrastructure management strategy built around the "you control, we manage" concept in which it transforms the client's IT infrastructure without taking control and ownership. Overall, TCS should be well placed to expand its business and brand outside its traditional markets and seems determined to continue to make the investments necessary in the U.K. to support this. Filing Information: September 2012, IDC #IDCVS03U, Volume: 1

2 SITUATION OVERVIEW U.K. Company Overview Established in the U.K.: Ownership: Part of Tata Group (worldwide revenues $83 billion in the year to March 31, 2012). U.K. CEO: Shankar Narayanan. Headquarters: 33 Grosvenor Place, London SW1X 7HY. Regional offices: Edinburgh, Nottingham, Manchester, Peterborough, including an innovation lab and financial services delivery center in Peterborough. Employees: Over 9,000 employees in the U.K. Revenues: Published U.K. revenues of $1.6 billion (over 1 billion) in the financial year to March 31, 2012 (U.K. revenue grew more than 15% in FY12). IDC estimates that in the calendar year 2011, TCS had total U.K. revenues of just over 960 million. TCS' worldwide revenues were more than $10 billion in FY12, up 23% in local currency terms. Customer base: TCS reports 160 customers, including 24 FTSE 100 companies. Main Offerings in the U.K. Globally, TCS reports revenues across nine service lines, which consist of: Application Development and Maintenance (ADM). The original focus of TCS and still accounting for nearly 45% of TCS revenues globally. ADM services consist of customer application development, application management, application modernization, system integration, and performance engineering services. ADM forms part of the "IT Solutions" offering in the U.K. Enterprise Solutions. Implementation of enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM), enterprise content management (ECM), and other critical enterprise software systems. This includes both implementation of the technologies themselves, but also the transformation of clients' associated technology and business processes where appropriate. Key technologies implemented include Oracle, SAP, Microsoft, Salesforce.com, Right Now, Oracle Siebel, EMC, OpenText, Autonomy-Interwoven, and niche products such as Infor, Lawson, QAD, and Progress. Globally, Enterprise Solutions comprise around 11% of TCS' revenues. Enterprise Solutions forms part of the "IT Solutions" offering in the U.K. Assurance Services (testing services). Assurance Services is a suite of services across the whole software test life cycle. This includes end-to-end 2 #IDCVS03U 2012 IDC

3 services including consulting, static, functional, non-functional, niche, and test support services. TCS uses domain knowledge, re-usable assets, frameworks, test packs, and technology-led offerings in SAP, Oracle, and other ERP platforms, as well as clients' in-house tools. Globally, Assurance Services accounts for around 7.5% of TCS' revenues. Assurance Services forms part of the "IT Solutions" offering in the U.K. Consulting. TCS offers standalone IT consulting and business consulting services, and uses its consulting capabilities to deliver end-to-end implementations of its offerings. The focus of its consulting offerings is the provision of transformational services, including technology transformation but also business transformation (for example, business process redesign). Globally, Consulting accounts for around 3% of TCS' revenues. Business Process Outsourcing (BPO). TCS offers a mixture of cross-industry BPO services based on global processing "platforms" (essentially a core software package combined with process/workflow models etc.) and industryspecific BPO services that also draw on software global processing platforms. Globally, BPO accounts for around 11% of TCS' revenues. Engineering and Industrial Services (EIS). These are outsourced research and product life-cycle management services that aim to help customers accelerate product life-cycle times and to develop more innovative and cost-effective offerings. Globally, Engineering and Industrial Services accounts for around 3% of TCS' revenues. IT Infrastructure Services (IT IS). TCS does not (with very few exceptions) offer traditional datacenter outsourcing services in which it takes over ownership of its clients' datacenters. Instead, it offers what is essentially a "you own, we manage" service in which it manages (but does not own) clients' infrastructure, with an emphasis on transforming the infrastructure to make it more cost-efficient, agile, and easier to manage. Globally, IT Infrastructure Services accounts for around 10% of TCS' revenues. Asset Leveraged Solutions (aka Products). These are essentially offerings based on the supply of TCS' proprietary software products, typically industry focused. Asset Leveraged Solutions are also known in the U.K. as Products services. Globally, Asset Leveraged Solutions account for around 4% of TCS' revenues. The most notable software offering is the BaNCS package for financial services. Other packages include Business Support System (BSS) in telecoms, TCS Rewardz in retail, and the Legal Management System (LMS) for law firms. These products can either be bought in a standalone manner and implemented in-house or through an independent system integrator, or (more usually) they can be implemented by TCS as part of an overall services contract. Business Intelligence (BI). TCS has a suite of Business Intelligence (BI) and Performance Management offerings that aim to manage the challenge of rapidly growing volumes of business data. As part of this TCS offers its SOLAR framework of integration and information management services designed to 2012 IDC #IDCVS03U 3

4 optimize and monitor business processes, by orchestrating business intelligence, business process management, enterprise data management, integration and knowledge management/enterprise content management initiatives. Globally, Business Intelligence accounts for around 5% of TCS' revenues. New and Emerging Services Within these service lines, TCS offers a number of next-generation services including: Cloud Computing: Cloud services. TCS offers a cloud/saas (software-as-a-service) version of its well-established BaNCS software suite for financial services. It also offers its cross-industry BPO software "platforms" for human resources (HR), finance and accounting (F&A), procurement, and analytics as cloud/saas services. TCS will provide managed services for clients' private cloud, and if necessary provide hosting through a partner, but this is not a special focus area. Cloud professional services. TCS offers cloud-related services including advisory, migration, development and assurance, deploy and manage services. ION. TCS also has an offering for small and medium-sized organizations, ION, which it currently offers in India but not the U.K. ION offers a complete "stack" of infrastructure and business applications on a cloud/saas basis, including cross-industry applications such as ERP document management and collaboration software, and also industry-specific applications. Mobility. TCS offers application development services, application testing services, and proprietary intellectual property in both licensed and hosted models, with the aim being to help clients to transform their business processes and their customer service through mobile applications deployed on tablets and smartphones. Social Computing. TCS has social computing offerings including cloud-based platforms, solutions, and services aimed at improving clients' end-customer experience, helping clients generate new revenues and improving its clients' customer contact strategies through reduced cost and greater reach. These offerings include insight, customer intimacy, collaborative, and enterprise integration solutions. Big Data. The term "Big Data" refers to the management of the rapidly increasing volume, variety, and velocity of enterprise data. To assist clients with Big Data implementations, TCS is creating niche analytical business solutions for problems not solved easily using traditional architectures. It is using domain expertise across industries, in analytics and in visualization technologies to build intellectual property that addresses specific business problems using Big Data. Eco-sustainability services. TCS has consulting capability and offerings in compliance management, reporting, sustainability performance management, energy management, green IT and datacenter, renewable energy, water and waste management, green engineering, low-carbon logistics, etc. 4 #IDCVS03U 2012 IDC

5 U.K. Industry Specialization TCS has historically been strongest in the U.K. in telecoms, banking, financial services and insurance, retail and consumer products, energy, resources, and utilities. It also has domain expertise and offerings in the public sector, healthcare, high tech, life sciences, manufacturing, travel, and media sectors. Worldwide, the company has a number of products and intellectual assets (e.g., the BaNCS offering for financial services) which it has implemented in the U.K., and in some cases has adapted these to the specific needs of U.K. organizations. TCS UK's reference customers include Aviva, Boots, British Airways, BT, National Grid, Thames Water, and NEST. The company reports that 24 of the FTSE 100 are its customers. In telecom, media, and entertainment (TME), clients include BT, which is one of TCS' largest telecom customers worldwide. Globally, TME accounts for around 13% of TCS' revenues. In banking, financial services, and insurance (BFSI), TCS serves the top 5 of the tier 1 global players in the U.K... Globally, BFSI accounts for 43% of TCS' revenues. In retail and consumer packaged goods, U.K. top 10 retail customers include six of the top 10 retailers in the United Kingdom.. Globally, retail and CPG accounts for 12% of TCS' revenues. In utilities, four of the major U.K. electricity and gas companies, seven of the major water utility companies, and three of the largest energy and resources companies are customers of TCS. Government has recently become a focus area for TCS UK, and it has won significant contracts with NEST (the government-backed stakeholder pension provider), Cardiff City Council, and the Child Maintenance Enforcement Commission. Key Recent U.K. Customer Wins Friends Life. A 1.4 billion contract to provide a "closed book" life and pensions processing contract. By mid-2012, TCS had migrated 5 million policies to its BaNCS platform with a further 2 to 3 million scheduled for the remainder of 2012 and a further 3 to 4 million in the following year. Tier 1 U.K. bank. A leading tier 1 U.K. bank selected TCS as a global "strategic IT partner" in March 2012, putting TCS onto its group-wide global procurement frameworks across the IT landscape. This gives TCS the opportunity to scale up its work with the banking group. Leading U.K. energy company. A business process outsourcing contract to provide customer services to a leading U.K. energy company's end-user customer base. This was a consolidation of an existing relationship; TCS previously shared the contract with a very large U.S.-based global services provider, but the energy company decided to consolidate all of the customer services work into one supplier, which is TCS. Tier 1 bank. TCS was selected as a Consulting Partner for a transformation initiative to reduce service complexity and enhance customer experience for the bank IDC #IDCVS03U 5

6 Leading retailer. A leading U.K. retailer, with over 21 million people visiting its stores each week, partnered with TCS for its multichannel platform to offer a seamless and customized shopping experience for its customers in-store, online, and by telephone. Financial services company. The retail and commercial banking IT division of a U.K.-based financial services company used TCS as a partner for a continuous process improvement program using agile, CMMI, and Lean methodologies. City council. TCS was selected by a U.K. city council to help transform the group procurement function, creating a strategic sourcing function. U.K. Company Strategy Recent Growth and Business Model Evolution TCS' U.K. growth, which is well above that of the U.K. IT services industry as a whole, is currently almost entirely organic. TCS is a tier 1 IT services player in the U.K., in terms of size, capability, and brand with a full services portfolio. With the growth of its "Diligenta" subsidiary, TCS is also establishing itself as a significant player in the life and pensions market. However, TCS is willing to make occasional "deal-led" acquisitions (typically by absorbing the "captive" IT or business processing operations of clients), to kick-start its presence in key markets or geographies. A good U.K. example of a deal-led acquisition of services capabilities is the acquisition of U.K. insurer Pearl Group's pension processing operation through a BPO deal with Pearl Group in Over the last seven years or so, TCS has taken a series of important steps that reflect its growing maturity and its transition from its roots as an application-focused offshore IT services player to being a global services player with a wide offering portfolio. For example, in 2008 the company reorganized itself globally around vertical (industry) market teams to drive greater industry understanding among its staff and create closer relationship with customers. More recent U.K. management initiatives have focused on supplementing traditional IT engineering skills with IT and business consulting skills as well as stronger customer/account management skills, including significant investment in recruiting onshore (and offshore) personnel in account management, program and project managers, IT architecture, and investment in sales and marketing. TCS has continued to win symbolic "landmark" deals in the U.K. for example, it won a major contract with a local authority (Cardiff Council, in 2009), it won a significant 750 million+ deal with a national public body (PADA/NEST, in 2010), and most recently it won a 1 billion deal (with Friends Life, in late 2011). "Localization" of Services TCS has demonstrated that it is serious about tailoring its delivery and indeed its offerings to the needs of local customers in the U.K. For example, it has created a separate U.K. variant of its global BaNCS software and service offering, aimed at organizations in the U.K.. TCS has a delivery center and an innovation lab in Peterborough. 6 #IDCVS03U 2012 IDC

7 TCS pioneered the offshore-based delivery model in the late 1990s, and has since refined the model to balance offshore, onshore, and nearshore delivery by changing the mix of these delivery locations as its customers' needs evolve (a shift to what IDC calls "offshore 2.0"). TCS is an industry leader in global delivery, having developed over many years its GNDM (Global Network Delivery Model) to optimize the remote/local balance of delivery resources. Investing in Driving Customer Satisfaction TCS has a focus on investing in service delivery quality in order to build strong relationships with customers. TCS reference customers frequently report that the company displays a "can-do" attitude and a commitment to solving problems quickly, and for clients this "fix first, negotiate later" attitude to problem-solving can be a refreshing contrast to some traditional services suppliers. Reference customers have also reported spending less they have historically done on services from their traditional suppliers while experiencing equal or higher delivery quality, and they add that TCS UK is, relative to their traditional onshore-based outsourcers, more flexible during the bidding and contract negotiation processes, and in the subsequent delivery phase. Investment in Differentiating Intellectual Property TCS pioneered the "land and expand" model of selling small application services contracts and then up-selling/cross-selling larger deals, but has long since matured its delivery model, now selling mostly fixed-price services and increasingly services with a high element of intellectual property. IDC believes that TCS understands the need to supplement traditional labor/timebased services with more automated services built around scalable and repeatable intellectual assets such as packaged software (e.g., BaNCS, or the cloud-based Business Support System for telcos), application and process design and management tools, methodologies, and so on. Intellectual property-based services tend to lower project risks, lower service delivery costs, raise service quality predictability, and protect suppliers' margins, thus encouraging them to maintain and reinvest in their offerings. FUTURE OUTLOOK The current TCS model in the U.K. is clearly working, given the supplier's continued rapid growth and its steady winning of market share from longer-established traditional rivals. Nevertheless, vendors cannot stand still; their business and operating models need continually to evolve, and TCS has several areas on which it should focus if it is to continue its success in the U.K. Future drivers of growth in the U.K. include: Cloud consulting, implementation, and service management. IDC considers TCS' positioning in cloud to be logical and pragmatic. In terms of "public cloud" (e.g., applications such as salesforce.com, Microsoft's Office 365, etc.), TCS will focus in the U.K. on client-side 2012 IDC #IDCVS03U 7

8 integration and service management work, rather than on challenging the public cloud vendors. With infrastructure-as-a service (IaaS, essentially, the supply of datacenter services over the cloud for example Amazon Cloud), TCS will mostly play a service management and integration role, although it offers IT infrastructure management services (see below). We think this is the right position for a supplier with an application-transformation heritage that has traditionally not outsourced its clients' large-scale datacenter operations. TCS clearly intends to target the market for private cloud infrastructure consulting and implementation and management services particularly for its existing and new infrastructure customer base, and will also provide management and even cloud hosting via partners or its own datacenters (for private cloud) if necessary. While this is an opportunity, we don't expect it to become a substantial revenue driver over the next few years. Direct cloud provision services. As well as helping clients migrate to the cloud and to manage their cloud services providers by acting as a client-side "cloud services broker," we see TCS playing a role in supplying specialist cloud services (such as supplying software-as-a-service and business-process-as-a-service offerings) based on its process and industry domain expertise. Next-generation offerings. TCS aims to increase the share of next-generation offerings particularly intellectual property rich offerings such as platform-based business process outsourcing (BPO) in its U.K. revenue mix over the next few years. Although application services will remain its bread-and-butter business, IDC sees the company driving growth of more repeatable/scalable offerings, and selling more offerings to the line-of-business and functional leaderships, supplementing the main focus on the CIO and IT leadership. For more details, see the "New and Emerging Services" section above. IT infrastructure management. TCS offers IT infrastructure transformation and management services, although it does not usually take over ownership of existing client infrastructure assets. The company's slogan in IT infrastructure management is "we manage, you control," and the focus is on transformation of clients' IT infrastructure. For example, TCS was selected in 2011 to provide complete end-to-end infrastructure services to a major communications company in the U.K. and another European country. The project centered on the highly complex modernization and subsequent consolidation of the client's infrastructure assets. Targeted outsourcing deals bringing new service capabilities. TCS is relatively bold in its willingness to take bets on transformational outsourcing deals that bring new capabilities to the company. For instance, globally it bought the back-office processing operations of Citibank in In the U.K. TCS acquired the life and pensions processing operations of Pearl Group in 2005, which it subsequently rebranded as Diligenta. It devoted considerable resources to creating a variant of its global BaNCS financial services package specifically for the U.K. life and pensions industry through Diligenta. This investment has now begun to pay off substantially, 8 #IDCVS03U 2012 IDC

9 for example with Diligenta's 1.5 billion outsourcing deal with Friends Life, announced in November Public sector. The public sector in the U.K. has not traditionally been a strong focus for TCS. However, the U.K. public sector in recent years has shown itself open to delivery models that use global resources, particularly where the offshore and nearshore resources complement established onshore delivery capabilities and do not overlap with them. This is particularly the case where onshore skills are lacking or are in short supply and with "greenfield" projects (such as the PADA/NEST contract to build a pensions processing infrastructure from scratch). As a player with a substantial onshore workforce complemented by very significant onshore and nearshore resources, and as a player with intellectual property developed specifically for government (e.g., the DigiGov framework which is being deployed in the Cardiff City Council contract), TCS has the opportunity to target the U.K. public sector in the same terms as the traditional IT services players. Significantly, TCS has begun to win significant (> 100 million) public sector deals in the U.K. and has been appearing on shortlists alongside the traditional onshore-based public sector services specialists. In IDC's view, TCS has "come ashore" and is now established as part of the U.K. public sector scene. Large, complex, and/or transformational programs. TCS was originally known for delivering focused standalone application services projects. The company has, however, evolved into a broad-range supplier delivering large and complex IT services and BPO projects, sometimes involving a significant element of transformation both technology transformation and business process transformation. For example, TCS won its first > 1 billion deal in the U.K. (with Friends Life) in This change in focus toward transformational services was a necessary part of TCS' evolution into a tier 1 provider that can supply end-to-end outsourcing and project services, particularly for large and midsize enterprises and government bodies. In the case of both infrastructure management services and BPO services, TCS uses asset-based technology and process transformation to differentiate itself against the traditional market players. ESSENTIAL GUIDANCE Advice for TCS IDC offers the following advice and guidance for TCS if it is to continue its rapid growth in the U.K.: Focus on building senior business relationships. Traditionally, TCS has a strong relationship with the CIO and the technology function in U.K. enterprises, but does not have the same strong relationship with the rest of the CxO suite, particularly the CEOs. Consequently, the company can sometimes be seen as more technology focused and less business-focused. Moving forward, therefore, 2012 IDC #IDCVS03U 9

10 a key priority for TCS should be to build strong relationships with senior business leaders beyond the technology function in U.K. organizations. A key way to build stronger CxO relationships will be through continuing to expand the business consulting force. TCS has a good capability in IT consulting and has for a long time used IT consultants to help implement its projects successfully. In recent years, it has been rapidly building a business consulting force in the U.K., with consultants recruited from the tier 1 layer such as McKinsey and PA Consulting. We believe that this is the right step to create brand permission to drive enterprise wide business change among its clients and to be recognized for thought leadership in business as well as technology terms. Break down the traditional barriers to client "pushback." While enterprises and public bodies do not want to deal with arrogant or aggressive services providers, some end users have told IDC that sometimes TCS has a tendency not to "push back" to the clients hard enough. For TCS to develop more strategic "trusted advisor" relationships with clients and to become more deeply involved in supporting or even driving business and technology innovation among clients, it needs to act earlier and more robustly in challenging clients. The challenge, of course, is to do this without degrading the strong customer service ethic for which TCS is known among many of the customers to whom IDC has spoken. Focus more on integrated cross-selling and up-selling of services. TCS has made great progress in the last decade or so in selling and successfully delivering discrete, focused, and often best-in-class services particularly the core application services in its ADM portfolio (see the discussion of Application Development and Maintenance in the "Main Offerings in the U.K." section, above). Over this period it has also, in parallel, developed an extensive and maturing range of other services that complement the ADM portfolio in both IT services and BPO and which now form the majority of TCS' revenues worldwide. The different services are still sometimes sold discretely in parallel, often precisely because customers want to buy services discretely. Yet we have met TCS customers that would like to have known more about the company's portfolio beyond the services they had already been buying. The next step for TCS is to strengthen its ability to sell these services in a more integrated way, by cross-selling/up-selling between services, and by selling these services more as end-to-end packages. This more holistic approach to customer relationships will dovetail well with the more strategic, business-oriented relationships that TCS is investing in to build with its customers though its strengthened business consulting operations (see our advice on building senior business relationships, above). TCS' strong industry focus in the U.K. will be important here. TCS reorganized itself globally in 2008, moving from a geographical and serviceline go-to-market to a strong vertical industry focus. In the U.K., one of the most mature geographies for TCS, the company goes to market primarily by industry, and the industry-focused leaders make most of the important U.K. investment and commercial decisions. IDC believes that this global and U.K. reorganization into vertical teams was a good move for TCS, because service providers that organize themselves around customer clusters can 10 #IDCVS03U 2012 IDC

11 more easily develop strong domain expertise, build stronger offerings and intellectual assets, and can build deeper and more business-focused relationships with customers. LEARN MORE Related Research TCS Grows Strongly in Europe in 2011 (IDC #lcuk , February 2012) Friends Life Signs Landmark Deal With TCS (IDC #lcuk , November 2011) TCS in Europe: Localization and Innovation (IDC #QL71T, October 2011) Thoughts From the TCS 2011 EMEA Analyst Conference (IDC #Q57T, May 2011) Copyright Notice External Publication of IDC Information and Data Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason. Copyright 2012 IDC. Reproduction is forbidden unless authorized. All rights reserved IDC #IDCVS03U 11