VENDOR SPOTLIGHT

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Tata Consultancy Services (TCS) Germany Profile IDC OPINION  IDC sees TCS Germany as a strong service provider with solid 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 growing onshore presence in Germany, having acquired 23 new customers since 2011.  The service provider is investing in adjacent market segments beyond its traditional strong position in application services, including infrastructure management, engineering services, consulting and business process outsourcing (BPO). It has a strong business model that should enable it to keep gaining market share in Germany for the foreseeable future.  TCS has traditionally had strong brand recognition in Germany in application services and is extending this to other areas, such as business process outsourcing and infrastructure management. The company is investing in new and emerging service areas such as cloud, mobility, social computing, and Big Data. Additionally, it has a credible infrastructure management strategy which aims at transforming the client's IT infrastructure.  Through its localization investments and the launch of a broad services portfolio including what TCS calls next-generation offerings for various industries, the company is moving on a new trajectory. TCS' local focus includes taking over German staff in staff transfer deals and integrating them into its global workforce.  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 Germany to support this.

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SITUATION OVERVIEW Overview TCS Germany (Tata Consultancy Services Deutschland GmbH)  Established in Germany: 1991.  Ownership: Part of Tata Consultancy Services Ltd. (worldwide revenues $10.17 billion in the year to March 31, 2012). TCS is part of the Tata Group with worldwide revenues of $83 billion in the year to March 31, 2012.  Head: Saptha Chapalapalli, Director TCS Central Europe.  Headquarters: MesseTurm 60308, Frankfurt am Main.  Regional offices: Düsseldorf (Delivery Center), Frankfurt (Central European Head Office), Hamburg, Munich, Stuttgart, Walldorf, and Wolfsburg.  Employees: TCS employs about 750 people in Germany. The company states that around 3,300 consultants are working on projects for German clients.  Revenues: According to IDC estimates, TCS Germany generated calendar year 2012 revenue of 130 to 150 million Euros. TCS states that revenue grew by 30% in Germany in the last financial year.  Customer development: TCS reports more than 23 new customers, across its industry segmentation, that have been added since 2011. TCS counts 16 of the DAX Top 30 companies as its customers.

Main Offerings in Germany Globally, TCS reports revenues across nine service lines:  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, and the transformation of clients' associated technology and business processes where appropriate. Key technologies implemented include SAP, Oracle, Microsoft, Salesforce.com, Right Now, Oracle Siebel, EMC, OpenText, Autonomy-Interwoven, and niche products for the likes of Infor, Lawson, QAD, and Progress. Globally, Enterprise Solutions comprise around 11% of TCS' revenues.  IT Infrastructure Services (IT IS). There are two main parts to TCS’ infrastructure services portfolio: a set of discrete managed infrastructure services, complemented by a range of more transformational and bespoke services for strategic outsourcing engagements. The services delivered under the “transformational” banner include data center transformation, cloud services (essentially private cloud and workload migration), hosted messaging, BYOD, virtual desktop infrastructure (VDI), and consulting and professional services

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based on TCS’s IT transformation methodologies (eTransform and the 3PT(Prepare, Process, Plan and Transform) methodology). Globally, IT Infrastructure Services accounts for around 10% of TCS' revenues.  Assurance Services (testing services). Assurance Services is a suite of services across the whole software test life cycle. This includes end-to-end services including consulting, static, functional, non-functional, niche, and test support services. TCS uses domain knowledge, frameworks such as the test factory concept, 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. 

For instance, TCS is incorporating the test factory framework in a transformative project with the client DHL Global Forwarding. The focus of the applied test factory concept is on governance, delivery, quality, and applications.

 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.  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 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.  Consulting. TCS offers IT consulting services in Germany and uses its consulting capabilities to deliver end-to-end implementations of its offerings. The focus of its consulting offerings in Germany is the provision of transformational services, in particular technology transformation services. 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.  Asset Leveraged Solutions (aka Products). These are essentially offerings based on the supply of TCS' proprietary software products, typically industry focused. Globally, Asset Leveraged Solutions account for around 4% of TCS' revenues.

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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.

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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.

N e w a n d Em er gin g S er v ices 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 BaNCS software suite for financial services. It also offers its crossindustry BPO software "platforms" for human resources (HR), finance and accounting (F&A), procurement, and analytics as cloud/SaaS services. Additionally, 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.

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Cloud professional services. TCS offers cloud-related services including advisory, migration, development and assurance, deploy and manage services.

 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. 

The so-called TCS App Factory offers an end-to-end approach for mobile application development that includes services along the entire development process (design, build, run, maintain).

 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. 

TCS uses the social software KNOME within the company, a social platform that connects employees and contributes to a vivacious corporate culture. The implementation of KNOME also aims to improve project work through easy information exchange and replace internal email communication in the long term.

 Big Data. The term "Big Data" refers to the management of the rapidly increasing volume, variety, and velocity of enterprise data. To help clients with Big Data implementations, TCS is creating niche analytical business solutions for problems not solved easily using traditional architectures — for instance with the

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adoption of SAP HANA. 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.

Industry Specialization in Germany TCS generated a large share of its revenue from enterprises in the high-tech industry, among banks and financial services providers as well as manufacturing companies. In addition, TCS' industry focus is on travel, transport, and hospitality; insurance; retail; telecommunications; and healthcare and life sciences. TCS' offerings include solutions such as the BaNCS software suite for financial services firms that are adapted to German companies. TCS Germany's reference customers include Airbus, Daimler, Deutsche Bank, Deutsche Börse, Commerzbank, Infineon, Nokia Siemens Networks, SAP and Siemens Enterprise Communications. TCS reports that 16 of the DAX 30 enterprises are part of the services provider's customer base. Examples of deals are:  In the hi-tech industry segment TCS won an application maintenance and development deal with SAP and engineering services deal with Carl Zeiss.  In the banking and financial services space, TCS won an integrated application and infrastructure transformation deal with a leading European bank headquartered in Germany.  In the manufacturing segment, TCS won a contract with a large German auto supplier involving domain solutions and assets on platforms.  Within the domain travel, transport and hospitality TCS closed a domain business process services and analytics deal with a German airline group. Another example is a contract with a leading German airline alliance about transforming its Infrastructure.  In healthcare & life sciences TCS won a deal from a top German healthcare company involving pharmacovigilance and provides domain business process services. In terms of potential customers, TCS targets large German companies as well as the upper "Mittelstand," and at the same time global corporations with a presence in Germany.

Company Strategy for Germany R ece n t G r ow t h a n d B u sin ess M o del Ev olu t i on The growth of TCS Germany, which is well above that of the German IT services industry as a whole, is almost entirely organic. In terms of size, capability, and brand TCS is an important IT services player in Germany with a broad services portfolio. Just five years ago, the main competitors in the local German market were offshorebased vendors like Wipro or Infosys. Through its localization investments and the launch of a broad services portfolio including next-generation offerings for various

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industries, TCS is moving on a new trajectory. TCS has now increasingly started to compete against the likes of IBM, Capgemini and Accenture in Germany. TCS Germany grew more than the global TCS organization in the last two years – TCS reports 23 new customers acquired since the year 2011, and these have contributed significantly to positive growth rates among all industry categories. TCS' services focus in Germany is on applications, infrastructure services, assurance and engineering services. All service lines have references, dedicated teams, and local delivery capabilities, including a portfolio of offerings relevant to German companies across multiple industries. Over the years, 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 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 relationships with customers. There are 12 global vertical P&L owners in TCS, who are responsible for their individual customers irrespective of the client locations. This organizational approach aims at providing a single point of contact irrespective of a client's position or type of service and enables a long term view of the partnership.

" Loc ali za t i o n " of S er vices TCS has demonstrated that it is serious about tailoring its delivery and offerings to the needs of local customers in Germany. This is also reflected by the fact that TCS has built a local delivery center in Düsseldorf, where 90% of employees speak German. TCS also uses the nearshore delivery center in Budapest, Hungary. TCS has continuously increased the workforce in Germany over the last three years and has hired German-speaking employees for the delivery team in particular. TCS pursues a strategy of aligning teams as well as processes with local requirements. TCS aims to constantly build up and strengthen local teams to facilitate localized project growth. TCS' local focus includes taking over German staff in staff transfer deals and integrating them into its global workforce. 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 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. For German customers, while work is done globally, there is a local focus with over 50% of project managers working for German clients being native Germans and more than 30% of staff locally based in Germany. This local focus helps TCS build better client relations and understand its clients' needs better while taking advantage of the headcount and skill base in its global delivery network.

I n ves t i n g in D r i vi n g Cu s t o m er S at isfac t i on 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 has 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 change to some traditional services suppliers. Reference customers have also reported spending less than they have historically done on services from their

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traditional suppliers while experiencing equal or higher delivery quality, and they add that TCS Germany is, relative to their traditional onshore-based outsourcers, more flexible during the bidding and contract negotiation processes and in the subsequent delivery phase. Some customers IDC has spoken to have also highlighted the commitment to clients by senior TCS executives as well as TCS’ industry experience as positives.

I n ves t m e n t in D if fer en t iat in g I n t e llec t u a l P r oper t y TCS pioneered the "land and expand" model of selling small application services contracts and then up-selling/cross-selling larger deals in Germany, 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. The company is also moving toward an increased accountability model with transaction-based pricing, which illustrates how business models are changing across the industry with a greater focus on flexibility.

FUTURE OUTLOOK The current TCS model in Germany is clearly working, given the supplier's growth and its market share gains. Nevertheless, vendors cannot stand still; their business and operating models need to evolve, and TCS has a number of areas in which it should focus if it is to continue its success in Germany. Future drivers of growth in Germany include:  IT infrastructure management. TCS offers IT infrastructure transformation and management services, and it takes over ownership of existing client infrastructure assets on a case by case basis. The focus is on transformation of clients' IT infrastructure. According to TCS the company generated a very strong growth rate of 48% in the domain IT infrastructure management in FY 2012 compared to the prior fiscal year in Europe. Businesses within its customer base, as well as inorganic growth through acquisitions, contributed to this.  Targeted outsourcing deals bringing new service capabilities. TCS is relatively bold in its willingness to take bets on transformational outsourcing deals in the international arena that bring new capabilities to the company. For instance, globally it bought the back-office processing operations of Citibank in 2008.  SAP enterprise solutions. As a SAP Global Partner TCS has built a strong partnership to develop, implement, and maintain SAP solutions. It is the company's objective to accompany and support the value chain of SAP solutions from development and testing to product decisions with services. In addition,

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TCS established a Center of Excellence in the U.S. two years ago, where employees develop applications based on SAP HANA. TCS reports that it was able to significantly increase revenue with SAP solutions in Germany, with growth of 38% in the last year.  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. 

This change in focus toward transformational services was a necessary part of TCS' evolution into an established provider that can supply end-to-end outsourcing and project services, particularly for large enterprises.

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In the case of both infrastructure management services and BPO services, TCS uses asset-based technology and process transformation to differentiate itself against traditional market players.

 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). 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. 

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 Germany on client-side 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 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.

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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

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cloud services (such as supplying software-as-a-service and businessprocess-as-a-service offerings) based on its process and industry domain expertise. 

For more details, see the "New and Emerging Services" section above.

ESSENTIAL GUIDANCE Advice for TCS in Germany IDC offers the following advice and guidance for TCS if it is to continue its solid growth in Germany:  Focus on building senior business relationships. Traditionally, TCS has strong relationships with CIOs and the technology function in German enterprises, but does not have the same strong relationships 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, a key priority for TCS should be to build strong relationships with senior business leaders beyond the technology function in German organizations. 

A way to build stronger CxO relationships will be through expanding TCS' competencies in business consulting. TCS has a good capability in IT consulting and has for a long time used IT consultants to help implement complex projects successfully — also in regard to business process optimization. This can be a good foundation. We believe that building up competencies in business consulting is the right step to create brand permission to drive enterprisewide 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 do not want to deal with arrogant service 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 weakening the strong customer service ethic for which TCS is known among many of the customers that IDC has spoken with.

 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 Germany" section, above). Over this period it has also, in parallel, developed an extensive 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

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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 should invest in (see our advice on building senior business relationships, above).

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TCS' strong industry focus in Germany will be beneficial for the company here. TCS reorganized itself globally in 2008, moving from a geographical and service-line go-to-market to a strong vertical industry focus. This segmentation will also help the company when it comes to selling its industry-specific offerings. IDC believes that this global and local reorganization into vertical teams was a good move for TCS because service providers that organize themselves around customer clusters can more easily develop strong domain expertise, build stronger offerings and intellectual assets, and build deeper and more business-focused relationships with customers.

LE ARN MORE Related Research  Key Takeaways from Tata Consultancy Services Germany Analyst Day, 2013 (IDC # GE58V, Feb, 2013)  TCS Cloud Strategy in Europe (IDC #QL51V, Feb, 2013)  TCS Hits the £1 Billion Mark in the U.K.- Now for Growth on the Continent (IDC #lcUK23963113, Feb 2013)  TCS Grows Strongly in Europe in 2011 (IDC #lcUK23295712, February 2012)  Friends Life Signs Landmark Deal With TCS (IDC #lcUK23170111, November 2011)  TCS in Europe: Localization and Innovation (IDC #QL71T, October 2011)  Thoughts From the TCS 2011 EMEA Analyst Conference (IDC #Q57T, May 2011)

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