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Business model of TATA Consultancy Services

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Business model of TATA Consultancy Services

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Business model of TATA Consultancy Services

  1. 1. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 1 Reinventing the Business Model TATA Consultancy Services Atul Katiyar B Siva Sankaran K Aravind Reddy P Mathan Anto Marshine S Srikanth Group 04 IIM Indore Correspondence: Guided by Professor Prasanth Salwan Tel: þ +91 22 41021513 E-mail: pm13atulk@iimidr.ac.in pm13bsiva@iimidr.ac.in pm13karavind@iimidr.ac.in pm13pmathan@iimidr.ac.in pm13srikanths@iimidr.ac.in "Experience Certainty" "We will definitely maintain a certain amount of war chest for acquisitions." - TCS CEO Mr. N.Chandrasekaran…ET :18-Sep-2014 "One secret to maintaining a thriving business is recognizing when it needs a fundamental change." - "Reinventing your business model" by Clayton M. Christensen BOD, TCS, Mark W. Johnson and Henning Kagermann Acknowledgement The students thank Prof. Prasanth Salwan for his valuable insights on business models. Abstract In a competitive business environment, it is imperative for any organization to develop and sustain an advantage. Over time, several successful organizations have innovated on certain key phases of their business and were able to effectively turn it into a mechanism which positively isolated the way they reduced their business costs or consistently made customers pay more for their offerings. In a dynamic service business driven by quality and innovation, the solution to retaining and expanding customer base is not a straightforward task. As an example of a domain witnessing dramatic shifts in rather short spans of time, the industry of Information Technology Enabled Services (ITES) has undergone vast transformations in the last decade itself. Even as the industry is flattening out with weakening entry barriers, players are identifying newer means to innovate in the salient features of their business: be it their underlying technology base, the quality of solution, the delivery, the resource management technique or even the talent acquisition policies. However, in the Indian context - and to a fair extent on a global setting - Tata Consultancy
  2. 2. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 2 Journal of International Business Studies Services (TCS), an Indian Business Consultancy firm, has thrived in the global competition, producing consistently outperforming results year on year with respect to market share and quality of services. Unlike most of its competitors, TCS has not only been able to impregnate their entire business model with multiple advantages complementing each other, but have also managed to retain the benefits of this constructive interference. Through this paper, we try to investigate the most significant features of TCS’ unique business model, its complex network of interrelationships and intra-relationships, and how this mechanism has resulted in creating unique advantages for the company. The investigation begins with a brief overview of the relevant economic policies of India, and the dynamics that have helped shaped the industry. We also deemed it a relevant and necessary exercise to compare the environment that TCS found itself in at the head of the global economic meltdown (2007-8) and compare it with the present day scenario (2013-14), since it was during this critical period that the company made a number of business choices, exposing itself to a variety of risks, which eventually helped shape the distinct advantage it today enjoys. Finally, we also theorize our observations on TCS’s sources of competitive advantage and how the business choices they made translated into consequences which were instrumental in mitigating the dangers posed by competition and creating holds-up within its own ecosystem partners. Journal of International Business Studies (Sep 2014) Keywords: customer value proposition; key success factors, EFE matrix, PESTEL, Tetra-Threat; sustainable strategy; GNDM; COIN Introduction TCS, as an IT consulting company, stands out for its pioneering work in setting an industry standard through its innovative model of solution delivery, which was its biggest advantage in the latter half of the 2000s. However, as a corporate, it has been focusing a lot of its efforts in sustaining a much less-obvious advantage: cost efficiency. A key proxy to identifying TCS’ sustained advantages is the feedback of its worldwide network of customers, who generally have two things to say about them: state-of-the-art solutions, and cost- effectiveness. Quite understandably, these have come from the kind of assets and the kind of people that this 46-year old company has been accumulating strategically, brick by brick. Its remarkably high score in industrial metrics like employee-attrition and asset utilization are testimonies to the above statement.
  3. 3. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 3 Journal of International Business Studies By bravely infusing certain key business choices in its corporate model over time, TCS has now nurtured a complex network of interrelated positive business consequences, creating inimitable and path- dependent advantages over other players. A framework is attached with this write-up, which attempts to map the relationships of the company’s broadest and most significant choices and consequences. Looking at the evolution of this framework, there is evidence that TCS has been attempting to mitigate competition by actually creating an inimitable business model. All the activities and advances that it has built up over the last decade has been simply to reinforce the two pillars in its model: cost-efficiency and service-efficiency. Literature Review In their review of "Reinventing your Business Model" by Mark W. Johnson, Clayton M. Christensen and Henning Kagermann clustered the three steps for reinventing the business model.1) Find out opportunity, key success factors and external environment to add customer value proposition by aligning profit formula key resources & processes.2) Blue print to construct profit formula through revenue model, cost structure ,margin model and resource velocity. 3) Compare model thus obtained with existing model, that provides clarity on how align my business model with changing environment and key success factors. We find this article very interesting and relevant considering one of the authors i.e. Clayton M. Christensen role as board of director in TATA Consultancy services.
  4. 4. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 4 Journal of International Business Studies Strategic Dynamics PESTEL Analysis: 2007 -2008 & 2013 - 2014 Factors 2007-08 2013-14 Political India spent 3.7% of GDP on IT (World Bank World Development Indicators on CDROM, 2005).This points out to the concerted policies and vision by the government and industry to promote software exports and transfer of technology and telecommunication. Country getting the most stable government in recent days emanating positive signals for the for the business community for in and around the country. The Indian federal and state governments are committed to developing and broadening e-governance. Fourteen state governments have IT-specific priority policies and many have implementing IT related projects. Government is planning to set-up 15 new laboratories which will facilitate registration and testing of IT products before they are launched in the market. Postgraduate education and research in IT is pursued for promoting R&D in the emerging areas of Bluetooth technology e-commerce, and nano-technology and bioinformatics solutions. Foreign investment in the sector is encouraged by simplifying policies and strengthening and upgrading telecommunication and IT infrastructure. In the 12th Five Year Plan (2012-17), the Department of Information Technology proposes to strengthen and extend the existing core infrastructure projects to provide more horizontal connectivity, build redundancy connectivity, undertake energy audits of State Data Centres (SDCs) etc. Stable and collaborative political structure along with federal form of government, provide conducive environment to the IT business to flourish and grow. The Government of India has fast tracked the process of setting up of centers of National Institute of Electronics and Information Technology (NIELIT) in Northeast India The Government of Brazil has liberalized the
  5. 5. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 5 Journal of International Business Studies issue of short term work visas, a move which will make it easier for Indian IT professionals to take up assignments in Brazil. Economic In 2006, real GDP growth was 9.4%, the fourth consecutive year of growth above 8%, giving positive signal and confidence to Indian IT companies, at the same time receiving criticisms of overheating of the economy. FDI up to 100 per cent under the automatic route is allowed in Data processing, software development and computer consultancy services; software supply services; business and management consultancy services, market research services, technical testing & analysis services. For Indian IT Services companies, with revenues largely earned in U.S. dollars and costs primarily in Indian Rupees, the INR/USD exchange rate was of special importance. From October 1, 2006 to October 1, 2007, the Rupee had appreciated from Rs. 45.9 to Rs. 39.8 per dollar. Companies making special arrangements to hedge this fluctuation. Between April 2000 and June 2013, the computer software and hardware sector attracted cumulative foreign direct investment (FDI) of Rs 53,757.60 crore (US$ 7.97 billion), according to data released by the Department of Industrial Policy and Promotion (DIPP). IT spending in emerging markets was growing very rapidly with 20% and 19% growth rates in India and China respectively in 2006 World economy is coming out of the global recession posing well for the business especially export oriented businesses as IT. Potential of technology to transform sectors such as healthcare, public services, utilities and education is well recognized, hence a spurt in IT investments expected as the year progresses. Social Enrolment in Indian technology schools is expecting to reach 600,000 by 2008, thus providing a huge and culturally diverse talent base for the IT companies. Education system in India is producing labor force for the industry which is cheap and talented. Also they are able to communicate easily with people of other countries as the mode of education is English.
  6. 6. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 6 Journal of International Business Studies India is having 10% of world total software developers which is growing at the rate of 32%, which means in the next three years India will have the highest no. of software developers in the world. Availability of large no. of people in the working age group does not pose minimizes the risk of labor shortage. The Indian education system places strong emphasis on mathematics and science, resulting in a large number of science and engineering graduates. Mastery over quantitative concepts coupled with English proficiency has resulted in a skill set that has enabled the country to taake advantage of the current international demand for IT. Cultural diversity is equipping people here to become adaptive to other cultures and countries, helping them work effectively with foreign cultures. Availability of large no. of people in the working age group does not pose minimizes the risk of labor shortage. In India there has been a rising trend of couples working and staying in cities that facilitate employment for both. The husband and wife both find it easier to work and stay together given the new corporate culture in cities like Bangalore, Gurgaon, Pune, Bombay etc. Diverse cultural environment of the country, give the perfect adaptability to the people of country to work in different cultural atmosphere. Companies are adopting the policy of giving back to the society through, thus benefitting society not directly connected to the business. Technology Increase in the cost optimization measures by implementing packaged software solutions like ERP,CRM and Core banking products. Disruptive technologies present an entire new gamut of opportunities for IT firms in India. Over 400 Indian IT companies had acquired quality certifications with 82 companies certified at SEI CMM Level 5 – higher than any other country in the India has got low price mobile tariffs which add to the advantage of industry. Advent of Smartphone, tablets, iPads, has added to the advantage and has increased the opportunity.
  7. 7. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 7 Journal of International Business Studies world, giving India an image of credible outsourcing destination to the world. The no. of PC sold per year increasing as well as the no. of internet users rising in domestic market, promising good for the IT&ES industry in the country. Cloud represents the largest opportunity under Social, Mobility, Analytics and Cloud (SMAC), increasing at a CAGR of approximately 30 per cent to around US$ 650–700 billion by 2020. Social media is the second most lucrative segment for IT firms, offering a US$ 250 billion market opportunity by 2020. Environment Companies are focusing on reducing carbon footprints, energy utilization, water consumption etc. Companies are focusing on reducing carbon footprints, energy utilization, water consumption etc. Environmental conservation and protection is an issue which has gained prominence because of deteriorating environmental balance which is threatening the sustainability of life and nature They run and grow their business on an environmentally sustainable basis, cultivating eco-efficient practices like helping and partnering in effective disposal of e-waste etc. Legal Indian labor laws are flexible and mostly non-union workers are found in the IT sector due to the better working conditions, salaries and other job-related opportunities compared to employees in other sectors. Govt. of India implemented amended form of Information Technology Act 2000 on 27th Oct. 2009. It provides additional focus to informational security. It has added several new sections on offences including Cyber Terrorism and Data Protection. Copyright protection and cyber laws were included in it. The tax benefits firms enjoyed under the Software Technology Parks of India (STPI) were set to expire in 2009. These benefits included a 10-year exemption period from income taxes on export profits as well as exemptions from many indirect taxes, such as on procurement of Indian labor laws are flexible and mostly non- union workers are found in the IT sector due to the better working conditions, salaries and other job-related opportunities compared to employees in other sectors.
  8. 8. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 8 Journal of International Business Studies capital goods. In broad terms, the IT sector had been promised continued benefits under the government’s new Special Economic Zones (SEZ) program. Companies Act, 2013, has made CSR compulsory for companies Question remained as to the treatment of firms located in STPIs under the new program as Nasscom advocated for maximum benefits for IT Services companies under the SEZ program. External Factor Evaluation(EFE) Matrix : 2007 -2008 KEY EXTERNAL FACTORS(1-4, 4 being superior) WEIGHT RATING WEIGHTED SCORE Opportunities Worldwide growth in technology spend rising by 7.3%, was 1.3 trillion more than the 2006. 0.07 3 0.21 With BPO and Packaged Software showing the highest of 9.7% and 8.3% respectively. 0.06 4 0.24 IT Service industry growing at the 6.3%. 0.07 3 0.21 USA, Western Europe and Japan being the biggest market, looking for outsourcing majority of their work. 0.07 3 0.21 The increasing demand for higher value-added services and innovation as part of the outsourcing contracts. 0.05 3 0.15 Customers off shoring the services in order to save on cost, hence giving opportunity to cheap hub as India. 0.07 4 0.28 Rising demand for services among businesses in order to improve on cost. 0.06 3 0.18 Rising demand due to increasing zest for innovation and time to market. 0.05 3 0.15 Threats Strengthening of INR causing reduction in margins from 0.07 3 0.21
  9. 9. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 9 Journal of International Business Studies export dependent industry Tough competition causing commoditization of low end products 0.07 3 0.21 Competition among domestic companies driving employee cost high 0.07 3 0.21 Tough competition from new emerging IT hub such as China, Malaysia, Singapore, Mexico etc. 0.07 4 0.28 Rising issues of visa availability for countries like UK & USA. 0.06 3 0.18 HR issues such as high attrition rate and penury of talented and skilled employees being faced by the industry. 0.07 3 0.21 Risk in treasury with the institutions being used as financial partners for hedging business due financial volatility. 0.05 3 0.15 Client and customer non-compliance to financial obligations. 0.04 2 0.08 Total 1 3.16 External Factor Evaluation(EFE) Graphical: 2007 -2008 Weighted scores were plotted graphically separately for both opportunities and threats for better representation. Global Technology Spending 15% Rising BPO and Packaged softwares 17% Increase in outsourcing 15% Demand for Innovation 10% Cheap Resource 20% Rise in services business 13% Increase zest for Innovation 10% Opportunities (2007-08)
  10. 10. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 10 Journal of International Business Studies External Factor Evaluation(EFE) Matrix: 2013 -2014 KEY EXTERNAL FACTORS(1-4, 4 being superior) WEIGHT RATING WEIGHTED SCORE Opportunities World economies improving, showing better future prospect to IT business as a whole 0.09 3 0.27 Global Technology spending grew by 5.4% in 2014, better than the year 2013. 0.07 3 0.21 Domestic IT-BPM revenue is expected to grow at 9.7 per cent to gross ` 1,910 billion in FY2014 0.07 4 0.28 India offers continue cost advantage, being 7-8X cheaper than source countries and 30% cheaper than next low cost service provider country. 0.07 3 0.21 Largest pool of trained human resource available in India, with 5.3 MN graduates. 0.07 4 0.28 Health Care Sector emerging as one of the most promising sector domestically as well as globally. 0.06 2 0.12 Strengthening of INR 13% Commodisation of Low end services 14% Rising Salaries 14% Competition from emerging IT hubs 18% Rising Visa related issues 12% Rising Attrition rate 14% Financial and Currency Volatility 10% Compliance related issues 5% Threats (2007-08)
  11. 11. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 11 Journal of International Business Studies Global delivery model of companies giving an access to the coveted sectors of Health, Defense etc. 0.07 3 0.21 Threats Some economies still showing the sign of slow or very slow growth, which may impact IT industry as it is closely linked with world economy. 0.07 4 0.28 Non-tariff trade barriers may lead to some challenges of compressed margins and increased cost. 0.08 4 0.32 New disruptive technology posing challenges to traditional customers. 0.1 4 0.4 Post-merger threat to industries as no. of M&A increasing. 0.05 3 0.15 Maintaining the right pool of talent becoming important as it could impact delivery and quality of service. 0.06 3 0.18 Currency volatility 0.06 3 0.18 Increasing pressure on margins due to rising pay and rising expanse. 0.05 3 0.15 Anti-Bribery law getting more stringent. 0.03 4 0.09 Total 1 3.33 External Factor Evaluation(EFE) Graphical: 2013 -2014 Weighted scores were plotted graphically separately for both opportunities and threats for better representation. Improving Global Economy 17% Global Technology Spending 13% Domestic IT Spending 18% Cheap Resource 13% Rise in trained human resource 18% Emerging Sectors 8% Efficient Delivery model 13% Opportunities(2013-14)
  12. 12. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 12 Journal of International Business Studies Porter five force analysis: 2007-08 & 2013 -2014 Factors Affecting Rivalry Among Existing Competitors To what extent does pricing rivalry or non-price competition (e.g., advertising) erode the profitability of a typical firm in this industry? 2013-14 2007-08 1. Degree of seller concentration? High High 2. Rate of industry growth? Growth rate 7.4% over 2012-13 5.4 % 3. Significant cost differences among firms? Yes Yes 4. Excess capacity? No Yes 5. Cost structure of firms: sensitivity of costs to capacity utilization? No No 6. Degree of product differentiation among sellers? Brand loyalty to existing sellers? Cross-price elasticities of demand among competitors in industry? 1) High 2) Less 3) Less 1) High 2) Yes 3) Less Slow growth of economies 16% Trade barriers 18% Disruptive Technologies 23% Post merger integration 9% Attrition rate 10% Currency Volatility 10% Rising Salaries 9% Anti-bribery laws 5% Threats (2013-14)
  13. 13. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 13 Journal of International Business Studies 7. Buyers’ costs of switching from one competitor to another? Yes Yes 8. Are prices and terms of sales transactions observable? Yes Yes 9. Can firms adjust prices quickly? No No 10. Large and/or infrequent sales orders? No, as IT spending is always huge and strategic oriented. Yes 11. Use of “facilitating practices” (price leadership, advance announcement of price changes)? Yes, Industry has first mover advantage. Yes 12. History of “cooperative” pricing? No, it is less as market forces are highly competitive. No. 13. Strength of exit barriers? No, entry and exit is easy. No. Factors Affecting the Threat of Entry To what extend does the threat or incidence of entry work to erode the profitability of a typical firm in this industry? 2013-14 2007-08 14. Significant economies of scale? Yes Yes 15. Importance of reputation or established brand loyalties in purchase decision? Yes Yes 16. Entrants’ access to distribution channels? Yes, there are strong players in each segment Tier-I,II and III companies and focused startups. Yes 17. Entrants’ access to raw materials? Yes, resources are easily available. Yes
  14. 14. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 14 Journal of International Business Studies 18. Entrants’ access to technology/know-how? Yes Yes 19. Entrants’ access to favorable locations? Yes, IT penetrated into tier II & III cities. Yes 20. Experience-based advantages of incumbents? Yes, Large corporate don't risk outsourcing to firms of relative smaller size. Yes 21. “Network externalities”: demand-side advantages to incumbents from large installed base? Yes Yes 22. Government protection of incumbents? No No 23. Perceptions of entrants about expected retaliation of incumbents/reputations of incumbents for “toughness”? Minimum, industry is diversified in terms of verticals and geography and people dependent. Minimum, industry is diversified in terms of verticals and geography and people dependent. Factors Affecting or Reflecting Pressure from Substitute Products and Support from Complements To what extend does competition from substitute products outside the industry erode the profitability of a typical firm in the industry? 2013-14 2007-08 24. Availability of close substitutes? Not for all IT solution. Not for all IT solution. 25. Price-value characteristics of substitutes? Price of substitutes is generally high. Price of substitutes will be high.
  15. 15. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 15 Journal of International Business Studies 26. Price elasticity of industry demand? High High 27. Availability of close complements Yes, hardware Yes 28. Price-value characteristics of complements? Price of hardware is comparatively higher and most cases it is bundled with software. Price of hardware is comparatively higher Factors Affecting or Reflecting Power of Input Suppliers To what extend do individual suppliers have the ability to negotiate high input prices with typical firms in this industry? To what extend do input prices deviate from those that would prevail in a perfectly competitive input market in which input suppliers act as price takers? 2013-14 2007-08 29. Is supplier industry more concentrated than industry it sells to? Human Resources: High Hardware: Less Office space: High Human Resources: High Hardware: Less Office space: High 30. Do firms in industry purchase relatively small volumes relative to other customers of supplier? Is typical firm’s purchase volume small relative to sales of typical supplier? Human Resources: No, Yes Hardware: Yes, Yes Office space: No, No Human Resources: No, Yes Hardware: Yes, Yes Office space: No, No 31. Few substitutes for suppliers’ input? Human Resources: High Hardware: Less Office space: High Human Resources: High Hardware: Less Office space: High 32. Do firms in industry make relationship-specific investments to support transactions with specific suppliers? Human Resources: Yes Hardware: Yes Office space: Relatively no, being SEZ mostly with government. Human Resources: Yes Hardware: Yes Office space: No, boom of SEZ.
  16. 16. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 16 Journal of International Business Studies 33. Do suppliers pose credible threat of forward integration into the product market? Yes, increasing cases of supplier/sub contractors establishing relationship directly with customers. Yes 34. Are suppliers able to price discriminate among prospective customers according to ability/willingness to pay for input? Yes Yes Factors Affecting or Reflecting Power of Buyers To what extend do individual buyers have the ability to negotiate low purchase prices with typical firms in this industry? To what extent to purchase prices differ from those that would prevail in a market with a large number of fragmented buyers in which buyers act as price takers? 2013-14 2007-08 35. Is buyers’ industry more concentrated than industry it purchases from? No, as large number of verticals and geographies. No 36. Do buyers purchase in large volumes? Does a buyer’s purchase volume represent large fraction of typical seller’s sales revenue? 1) Yes, IT deals are large 2) Yes. 1) Yes, usually IT deals are large 2) Yes. 37. Can buyers find substitutes for industry’s product? Very less, as substitutes are usually inefficient and difficult to sustain. Very less. 38. Do firms in industry make relationship-specific investments to support transactions with specific buyers? Yes, Customer relationship management is core strength in this industry. Yes, Customer relationship management is core strength in this industry. 39. Is price elasticity of demand of buyer’s product high or low? Price elasticity is high Price elasticity is high
  17. 17. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 17 Journal of International Business Studies 40. Do buyers pose credible threat of backward integration? No, as outsourcing is cheaper option. No 41. Does product represent significant fraction of cost in buyer’s business? Yes Yes 42. Are prices in the market negotiated between buyers and sellers on each individual transaction or do sellers “post” a “take-it-or-leave it price” that applies to all transactions? No, usually services are negotiated. No Key and Critical Success factors: 2007-08 & 2013-14 Critical Success Factors of 2007-08 Critical Success Factors of 2013-14  Diligent senior leadership  Ability to preempt market trends  Price competitiveness  Customer intimacy  Financial position  Abundant and agile talent pool  Abundant and agile talent pool  Diligent senior leadership  Risk management capabilities  Innovation capabilities  Financial position There has been a change in the major critical success factors of TCS between 2007-08 and 2013-14.  In 2007-08 critical success factors like financial position, abundant and agile talent pool and diligent senior leadership have been the core success factors for TCS. Considering the effect that the 2008 recession had on the global IT spending, TCS’s most vital critical success factors were price competitiveness and customer intimacy.  The ability of the senior leadership to preempt the global economic scenario was the key for TCS to implement strategies that focused on these critical success factors.
  18. 18. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 18 Journal of International Business Studies  In the interval between 2007-08 and 2013-14, the focus of the IT industry worldwide had shifted from enterprise software systems to individual centric emerging technologies like mobility and cloud technology.  This transition occurred owing to the advancement in computing hardware technology giving way for cheaper access for individuals to access and own devices with high and very high computational power.  TCS is focused on developing its risk management capabilities and innovation capabilities which are very important factors when it comes to individual centric emerging technologies.  Considering the demographics of emerging economies the emerging technologies are to grow faster in these countries than in other major countries.  TCS has ventured into emerging economies and has already made its global presence felt in important emerging economies where the adoption of emerging technologies is expected to grow at a higher rate. Competitive Profile Matrix (CPM) TCS Infosys CTS IBM HP Critical Success Factors Weight Rating Score Rating Score Rating Score Rating Score Rating Score Technology/ Innovation 0.1 2 0.2 3 0.3 2 0.2 4 0.4 4 0.4 Price Competitiveness 0.25 4 1 2 0.5 4 1 2 0.5 2 0.5 Process Quality 0.2 2 0.4 4 0.8 3 0.6 4 0.8 4 0.8 End - to - end solutions 0.05 3 0.15 3 0.15 1 0.05 3 0.15 4 0.2 Employee competitiveness 0.15 3 0.45 4 0.6 3 0.45 4 0.6 4 0.6 Financial position 0.1 4 0.4 4 0.4 4 0.4 4 0.4 4 0.4 Management 0.15 4 0.6 2 0.3 3 0.45 4 0.6 3 0.45 3.2 3.05 3.15 3.45 3.35
  19. 19. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 19 Journal of International Business Studies Perceptual Map based on CPM Perceptual drawn by grouping critical success factors into external and internal based on nature of the factor. Example: Price, Process quality and End-to-End solutions are grouped as external Technology, Employee competitiveness and financial position management are grouped as internal Developing the logic of firm Customer value proposition
  20. 20. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 20 Journal of International Business Studies Key Resources  Agile Talent Pool  Diligent Senior Management  Partnerships with academic institutions Key Processes  International Accounting standards introduced  Compliance stds introduced Profit Formula  Fixed cost revenue model  Cont Margin: 23.58%  Exp/Rev: 59.72%  Net Margin: 21.78%  Wages/Rev: 26.59% 2007 - 2008 2013 - 2014 Profit Formula  Transaction based revenue model  Cont Margin: 29.09%  Exp/Rev: 52.73%  Net Margin: 22.96%  Wages/Rev: 26.24% Key Processes  COSO based ERM policies brought in.  Robust revision of compliances and Risk policies  New BR policies Key Resources  Agile Talent Pool  Diligent Senior Management  Partnerships with academic and scientific institutions Customer Value Proposition  Operational Effectiveness  Product Leadership  “Our products are uniquely better!” Customer Value Proposition  Customer Intimacy  “We make things easier for you!”
  21. 21. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 21 Journal of International Business Studies Reasons for the differences in customer value proposition, profit formula, key resources and processes: 2007-08 & 2013-14 2007-2008 Strategy The strategies followed by TCS in the year 2007-2008 can be classified as Operational strategies and Geographical focused strategies. The operational strategies encompass the Global Network Delivery Model (GNDM), Inorganic Growth Strategies and Integrated Full Services Play.  The GNDM model The GNDM was brought with an intent to bring in homogeneous standards across all centers of TCS i.e. one global service standard. It would also help TCS implement a follow the sun model where the dependency on geographically distributed centers would decrease bringing in an opportunity to function seamlessly.  Inorganic growth TCS aimed at attaining inorganic growth by focusing on different geographies, diverse competencies and also aimed at acquiring new capabilities that would lead to synergistic growth. Inorganic growth was a cheaper option to consider because of the availability of cheaper targets during an economically stressed period.  Integrated Full Services Play Offering Integrated Full Services Play would enable TCS to capture the entire IT value chain – products, services, consulting, implementation and support.  Focus on Corporate Governance TCS focused on implementing best practices in corporate governance across all levels in the organization.  Evolution of this Company’s brand identity TCS considered that they had an implicit promise to provide a level of certainty and excellence to its customers, that no other IT company can match. TCS’s geographically focused strategies considered opportunities in multiyear relationships with multiple services in major markets and end to end services in emerging markets.
  22. 22. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 22 Journal of International Business Studies  Market Expansion TCS started a new phase of market expansion by entering new growth markets like Latin America, China, Middle East and Africa as the Company perceived a significant gap in the market place for high quality services. The Company started engaging with regional and national champions in these markets, many of whom have since emerged as our key customers in these newer geographies as well as globally as they have expanded into other major markets.  Leadership in all forms of people development TCS started its own program of creating an eco-system for technology talent by working closely with academic institutions and scientific bodies, initially in India and subsequently globally. TCS had created a scalable and replicable training model that allowed them to use their training programs at other centers in India as well as in US, China, Hungary and Uruguay. Customer Value Proposition The 2007-08 period was an economically, financially and operationally stressed period for all companies that rely on IT services to run their businesses. TCS chose to offer a “We make things easier for you” (Customer Intimacy) proposition, while its competitors were offering an “Our product is uniquely better” (Product Leadership) proposition, which was possible because of three primary reasons:  Diligent leadership  An abundant and agile talent pool  Sparkling financial health By offering Customer Intimacy as its primary value proposition during difficult times helped TCS create a holdup during the brighter days of the economy. Critical Success Factors  Diligent senior leadership -5 0 5 10 15 20 25 0 50 100 150 200 250 300 350 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Global IT Spending
  23. 23. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 23 Journal of International Business Studies  Ability to preempt market needs  Price competitiveness  Customer Intimacy  Financial position  An abundant and agile talent pool 2013-2014 Strategy The Key elements of the company’s growth strategy during this period were: Customer centricity, full services portfolio, global network deliver model, non linear business models, and experience certainty.  Focus on “Digital Five Forces” - Mobility, Big Data, Social Media, Cloud Computing and Robotics TCS identified that the impact of the Digital Five Forces on the society would be of a higher magnitude than the technology cycles, enterprise systems that have driven business in previous decades. They also were able identify that what the digital five forces were doing, was to complete the entire transaction loop, by bringing in the most important element of business, the individual consumer. 0 2 4 6 8 10 12 0 100 200 300 400 2009 2010 2011 2012 2013 2014 2015 Global Enterprise Software Spending
  24. 24. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 24 Journal of International Business Studies  Innovation The company continues to invest in research and innovation that will meet customer requirements today, in the near term and in the long term. The three segments of innovation that TCS is focusing on are: Derivative, Platform, Disruptive innovations. The Company actively pursues collaboration with academic research and innovative start-up companies to help customers solve problems.  Human resources strategy The drive to create a homogeneous work culture across the organization helped TCS integrate its diverse global talent base into a high performing cohesive unit. The company has started to re-imagine its HR processes, use digital technologies namely, mobile, social, cloud and analytics in an integrated manner.  Talent management, leadership development and talent retention The ‘Inspire’ program continues to identify and develop high-potential employees for leadership roles. Potential leaders are nurtured through training and coaching and given challenging roles to build leadership capability.  Risk Management The increasing global trends in digitization driven by the forces of social, mobility, analytics and cloud coupled with the large size of the addressable global market and the relatively low current levels of penetration of the target markets suggest significant headroom for future growth. The Company has positioned itself well for the growth in business with an aligned strategy, structure and capabilities.  Strategic focus on geographical diversity 0 500 1000 1500 2000 2009 2010 2011 2012 2013 2014 2015* 2016* 2017* 2018* Global Smartphone Shipments
  25. 25. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 25 Journal of International Business Studies TCS continues its strategy to focus on APAC, Latin America and Middle East & Africa in order to de- risk geographical concentration and create a significant presence. Contribution of these new growth markets to the total revenue almost doubled in the last decade. Customer Value Proposition Unlike in 2007-2008, in 2013-2014 TCS offered a Product leadership and operational excellence oriented customer value proposition. That is TCS focused more on offering an “Our products are uniquely better” proposition than on a “We make things easier for you” proposition. Critical Success Factors  Abundant and agile talent pool  Diligent senior leadership  Risk management capabilities  Innovation capabilities 0.00% 10.00% 20.00% 30.00% 40.00% 2011 2012 2013 2014 2015* 2016* 2017* Global Smartphone Penetration
  26. 26. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 26 Journal of International Business Studies Creating and Sustaining Competitive advantage and Business Model Analysis of Competitive advantages of TCS VRIO Framework Analysis Summary of VRIO, Competitive Implications, and Economic Implications Parameter Valuable? Rare? Costly to Imitate? Organized Properly? Competitive Implications Economic Implications Geographic expansion/penetration and Strategic alliances Yes Yes Yes Yes Sustained Advantage Above Normal Non linear business models Yes No No No Competitive Parity Low Normal Full services portfolio Yes Yes Yes Yes Sustained Advantage Above Normal Global network delivery model Yes No Yes Yes Competitive Parity Normal TCS Co-Innovation Network Yes Yes Yes Yes Sustained Advantage Above Normal Digital 5 forces Yes Yes Yes Yes Sustained Advantage Above Normal Robust HR systems Yes No Yes Yes Temporary Advantage Above Normal Near shore model Yes No No Yes Competitive Parity Normal Customer centricity Yes Yes Yes Yes Sustained Advantage Above Normal
  27. 27. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 27 Journal of International Business Studies Detailed Analysis Competitive Advantages Sustainable Advantage? Geographic expansion/penetration and Strategic alliances Yes. TCS penetrated strongly in global geographies both organically and inorganically through strategic acquisitions like SITAR Sweden, Alti SA France, Comicrom Chile, TKS Teknosoft Switzerland, Pearl group UK, FNS Australia etc. In each of the acquisitions geographic penetration was not the only objective. TCS ensured that its scope of offering increases. Example: After completion of TKS and FNS, TCS was able to offer full fledged software products for banking industry. TCS ensured it integrates/consolidates/transforms it acquired entity within a span of 2-3 years to TCS subsidiary in that corresponding region. Apart from mergers and Acquisitions(M&A), TCS also formed strategic alliances(JV) through its subsidiaries in countries like China and Japan. TCS formed tripartite Joint Venture between National Software Export Base, TCS, and Microsoft. TCS formed (60-40)% JV with Mitsubishi corporation, Japan, First of its kind by any Indian IT services company. Non linear business models No. We performed a comprehensive analysis of TCS using operational figures and data sheet of TCS annual report. We found key performance analysis parameter of IT industry i.e. Revenue per employee is increasing for the past 5 years. (Please refer to ratio analysis part of appendix), also number of employees increased over the same period. however non-linear business of IT services like product licenses, product implementation fees, product AMC etc were not increasing over the same period with
  28. 28. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 28 Journal of International Business Studies the increase in number of resources. (Please refer to TCS Data sheet, tab "IFRS-PnL,BS-USD" section column: Sale of Equipment and Software Licenses part of appendix section: Consolidated Historical Financials) Hence we could conclude that TCS could not sustain the competitive advantage by having a portfolio of software products. Full services portfolio Yes.TCS ensured it provided extensive portfolio of services in IT Industry. TCS used to execute some Government projects even though they don’t make much margin out of it. TCS as a policy used to execute some niche services projects at loss/less profit margin initially to acquire skills in that scope of services. Example: TCS was just a technology partner for Motorola Solutions from 2005, however from 2010 onwards TCS started working on services related to business consulting aspects of ERP implementation services. As discussed in section "Geographic expansion/penetration and Strategic alliances" through each of its acquisition TCS added additional scope of services/products in its portfolio apart from geographic penetration. Project/Services portfolio of TCS would be unique and different from its competitors. TCS completed projects to clients with 1 mn to 100 mn revenue and even beyond like fortune 500 companies. (Please refer to TCS Data sheet, tab " Operating Metrics" section column: TCS CLIENT METRICS part of appendix: Consolidated Historical Financials) TCS conducts CAT, India's renowned B-School aptitude test. TCS in collaboration with MP Govt. in MPONLINE. TCS has India's largest BPO services. TCS has renowned banking product suite BANCS. TCS has its own ERP solution i-ON for SMB business. Global network delivery model No. TCS pioneered the Global Network Delivery Model(GNDM) in outsourcing industry. In fact TCS obtained the trademark for GNDM. However over a period almost every outsourced projects
  29. 29. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 29 Journal of International Business Studies were executed through a modified version of global delivery model. Hence there is no significant competitive advantage exist with this resource. TCS Co-Innovation Network Yes. TCS Co-Innovation Network(COIN) is a rich and diverse network ecosystem that comprises emergent technology companies, research labs of academic institutions, leading technology vendors, venture funds to offer collaborative IT and IT services innovation for customers. TCS inbuilt innovation labs coordinates and collaborates with COIN. TCS ensures it offer value proposition to each partner in this ecosystem. COIN helps TCS to sense the technology landscape, VC funding pattern in different emerging technologies and also customer needs through innovations. Thus COIN helps TCS to find out the market maturity graph for their service capabilities and thereby predict future trend of the industry. COIN being a diverse geographical network, it helps to find out emergence of innovation and VC funding in a particular geography. Example: COIN identifies major investment in China is happening in internet space & Integrated electronics, In Israel funding is raised for life sciences and clean technology. (Derived from the White paper on TCS COIN - Emerging Technology trends) No doubt, COIN helps TCS stay relevant in changing patterns in Industry also adds to TCS learning curve. Digital 5 forces Yes. TCS full services portfolio offering and diversified geographical presence has placed itself ahead in experience curve. TCS's timely strategic investment in digital 5 forces(cloud, social media, big data analytics, mobile computing and artificial intelligence) has helped to develop platform based innovations for various industries specific problems comprising SMAC technologies. Ex: Telecom vertical - TCS Hosted OSS/BSS(HOBS)
  30. 30. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 30 Journal of International Business Studies Digital forces were disrupting the way in which traditional business has been operated and managed. Example: Health checkup has become a ongoing activity. Wearable devices collect data and feed into cloud(from android devices) which maintains the history of many individuals. Big data analytics helps to track and find out any deviation in health factors. If something went wrong, easily doctor will be intimated using mobile apps. Robust HR systems Neutral. TCS HR system is robust considering the below facts  TCS is progressive, young and second largest organization behind IBM in terms of employee strength, At the same time ensuring having average age of employee as 29 years and women workforce consisting of 32.7% of total work force.  High employee retention rate in industry at 88.7%.  Employees represented from 118 nationalities (i.e. all continents) and deployed in 55 countries.  TCS follows Indian way of campus recruitment(Now online campus commune channel) even in countries like USA, Canada, Uruguay, China and Hungary. After recruitment they were inducted for training in India/Abroad. Thereby they follow "oneTCS" culture for easy and effective integration both in paper and practice.  TCS went on to one level ahead in conducting TCS IT Wiz - India's largest Inter-school competition to serve dual purpose both social intent and attract them young.  Through Academic Interface program, continually engages with leading institutions like IIT & IIM's for MDP programs, Guest Lectures, Internships and PPO's through case study competitions. TCS HR strategically recruits fresher's in large number compared to experienced individuals. Reasons are 1) Good pool of fresh candidates available in India at low cost 2) Having fresher in
  31. 31. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 31 Journal of International Business Studies large proportion among its 3,00,000 + workforce helps to even out the cost incurred in employee salary and perks. HR system is highly depend on the external environment which is supportive now in providing talented pool of graduates at low cost. We are not sure if low cost resources will be available in next 5 years considering the economic growth and inflationary trends in India. Near shore model No.TCS enjoyed advantage initially by having its near shore to North America in Uruguay.TCS expanded the subsequent centers organically and inorganically in UK, Europe, Japan etc. However competitors realized the potential of this model and imitated by opening the centers in same regions. Customer centricity Yes. We analyzed using real time facts from one of our group member, who worked with TCS during Global slowdown. His SBU faced a situation on Nov,2009 where in a leading financial institution could not release the payment for past two milestones. Client openly acknowledged their financial situation and requested TCS management to provide a moratorium period of 5 months for each of the milestone citing the last 10 year relationship. TCS management accepted the client request and allowed its consultants to work on onshore and offshore as usual, however other technology and business consulting partners removed their consultants immediately next day and were not ready to negotiate on any terms towards pending payments. After he left TCS to pursue MBA, he happened to meet ex- colleagues in Jan 2014. He came to know that once financial situation got improved, bank outsourced 5000 people effort to TCS and TCS was made as the only technology partner. Most of Vendors(including Wipro and Deloitte) who existed prior to 2009 were removed.
  32. 32. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 32 Journal of International Business Studies TCS roots in TATA values of handling relationship with customers achieves significant edge over its competitors in sustaining customer centricity.
  33. 33. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 33 Journal of International Business Studies Tetra-Threat framework analysis DIFFICULT TO IMITATE OVERCOMES SUBSTITUTION NO SLACK HIGH HOLDUP • Hold up of customers • is very high with TCS. From 2005, revenue from repeat business is more than 96% (Please refer to TCS Data sheet, tab " Operating Metrics" section column: Revenue from Repeat Business part of Appendix) •TCS has lowest attrition in the Industry.Also,great leadership from thought leaders Mr. F.C. Kohli and Mr. Ramadorai. •Mr. N Chandra, current CEO, though inherited stable company. He managed the organization well post global slow down. •TCS faces genuine threat of subsituting its IT solutions by products and viceversa. however TCS mitigates this risk by diversifying its services and packaged solution offering. •TCS mitigates the risk of imitation in three horizon of innovations derivative, disruptive and platform based innovation guided by specialist HBS Prof.Christensen. Hence resources and processes are continuosly innovated. •TATA group business values, code of conduct & support to TCS is not imitable. ADDED VALUE VALUE APPROPRIATED
  34. 34. Journal of International Business Studies (2004) 35, 3–18 Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 34 Journal of International Business Studies Business model of TCS (2013-14) Value loop Flexible Consequences leading to competitive advantage TCS’ business acumen is two-pronged: one one hand, the company has been able to successfully preempt competitors’ games and core-competencies, and on the other hand, align its resources efficiently to equip itself with assets and qualities in order to counterbalance competitors’ advantages. The organization clearly knew about the perishability of technological advantages and the commoditization of a human-resource advantage in the IT industry; and began using their first-moves to build into greater levels of customer satisfaction and cost-leadership, instead of focusing on leveraging its opportunities to eat into market share. Given the financial and marketing backing of a huge brand name which spelled trust in India, TCS realized rightly that they were the best-suited company to undertake a cost-leadership strategy, yet they acknowledged that they could not sustain its leadership without earning loyal customers across the world, who were looking for top quality services.
  35. 35. Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 35 Journal of International Business Studies
  36. 36. Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 36 Journal of International Business Studies Model (2013-14) Learning  How TCS experienced "Certainty"?: Transition from one of the top Indian IT Player to India's largest company. Before 2007-2008, TCS was neither India's no.1 in market capitalization nor a big difference existed between TCS and Infosys. TCS sensed the externalities and predicted key success factor to thrive and succeed in the industry very well. TCS anticipated correctly that outcome of the recession will be enforcement of Stringent International compliances, protectionist measures, need of innovative cost efficient technologies and availability of cheap resources. TCS build strategies to convert each of the outcomes of recession to its competitive advantage. TCS focused on geographical penetration in depth and width; today TCS has agile HR system which could place resource from any corner of the world to service its global clients. Also, TCS has very strong local presence in all developed economies hence unaffected by protectionist measures. TCS adopted
  37. 37. Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 37 Journal of International Business Studies international standards and policies on compliance and regulation; thus helped its brand getting unaffected in controversial business clauses unlike its competitors. TCS adopted customer intimacy and cost efficiency as key strategies, both turn to be successful in helping TCS deliver large projects at less cost. Also, TCS purchased/leased key assets in India i.e. 15-20 kms away from all leading tier I and II cities. Suggestion  How TCS could continue "Experience Certainty" for next 5-10 years? TCS achievement in terms of revenue were achieved by global competitors like IBM, Accenture and HP at much less number of resources; less cost due to their concrete strategy in execution of non linear business model. i.e. IBM bundles product and service at higher fees; Accenture offers more high end consulting services. TCS competitors in India, namely Cognizant (CTS) offers high end consulting services and has strong penetration in North America, whereas Infosys focuses on adding innovative products and packaged solution to its portfolio. With the change of industry environment in terms of rising in salaries, trend towards commodity of existing service offering, protectionist measures and success factor of Industry evolved with disruption of existing customer business model by digital 5 forces; there is a greater need to have additional resources with greater scope of skills to increase non- linear revenue model. Resource intensive i.e. linear model to thrive in IT industry might not be successful. Hence there is a greater need for TCS to improve upon its portfolio scope to offer non-linear revenues. As concluded in the article by Ramon Casadeus-Masanell and Jorge Tarzijan article on 'When one business model isn't enough" we draw the similar analogy to stress upon the need for complementary business model to add on to the non-linear revenues in future to thwart the competitive forces. TCS has decades of strong experience on IT services and it has presence in major Forbes 500 companies, Hence there exist a greater scope to extend its current Global consulting practice to offer high end business consulting. Also, TCS could look for strategic acquisition of firms offering high end strategic consulting services.
  38. 38. Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 38 Journal of International Business Studies Appendix 1. RATIO ANALYSIS Ratio Analysis Unit FY FY FY FY FY FY FY FY FY FY 2013-14 2012-13 2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004- 05 Critical Ratios - IT/Knowledge industry Total revenue C 81809.36 62989.48 48893.83 37324.51 30028.92 27812.88 22619.52 18685.21 13263.99 9748.47 Total Headcount as at March 31 Num 300464 276196 238583 198614 160429 143761 111407 89419 66480 45714 Revenue Per Employee C 0.2723 0.2281 0.2049 0.1879 0.1872 0.1935 0.2030 0.2090 0.1995 0.2132 Ratios - Financial performance Employee cost/total revenue % 49.49 50.68 50.48 50.38 50.17 52.07 50.45 48.17 46.08 44.98 Other operating cost/total revenue % 19.77 20.68 19.99 19.67 20.88 22.15 24.3 24.32 26.15 26.16 Total cost/total revenue % 69.25 71.36 70.48 70.05 71.05 74.22 74.75 72.5 72.22 71.14 EBIDTA (before other income)/ % 30.75 28.64 29.52 29.95 28.95 25.78 25.25 27.5 27.78 28.86 total revenue Profit before tax/total revenue % 31.05 28.72 28.48 29.53 27.61 22.11 25.84 26.32 26.44 27.02 Tax/total revenue % 7.42 6.37 6.95 4.91 3.99 3.02 3.48 3.55 3.84 4.07 Effective tax rate - tax/PBT % 23.9 22.19 24.42 16.61 14.44 13.64 13.45 13.5 14.53 15.07 Profit after tax/total revenue % 23.43 22.09 21.3 24.3 23.31 18.9 22.22 22.55 22.37 20.28 Ratios - Growth Revenue % 29.88 28.83 31 24.3 7.97 22.96 21.06 40.87 36.06 . ! EBIDTA (before other income) % 39.43 24.97 29.14 28.57 21.27 25.54 11.14 39.48 30.94 . ! Profit after tax % 37.7 33.65 14.84 29.53 33.18 4.58 19.31 42 50.07 . ! Ratios - Balance Sheet
  39. 39. Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 39 Journal of International Business Studies Debt-equity ratio times 0.01 0.01 0 0 0.01 0.04 0.04 0.06 0.02 0.06 Current ratio times 2.74 2.69 2.22 2.35 1.88 2.26 2.24 2.24 2.25 2.24 Days sales outstanding (DSO) days 81 82 86 80 71 79 87 84 90 77 in ` terms Days sales outstanding (DSO) days 82 82 81 82 74 74 87 88 90 78 in $ terms Invested funds / total assets % 43.01 36.38 34.81 36.81 45.68 26.29 28.97 27.03 17.67 17.92 Capital expenditure / total revenue % 3.8 4.18 4.06 4.85 3.43 3.95 5.58 6.64 4.69 3.72 Operating cash flows / total revenue % 18.03 18.44 14.27 17.72 24.66 19.45 17.22 18.58 18.76 21.46 Free cash flow/operating cash flow % 78.9 77.33 71.52 72.66 86.07 79.7 67.6 64.25 74.97 82.64 Depreciation / average gross block % 10.57 10.25 10.65 10.35 10.78 11.13 15.05 17.1 18.09 13.57 Ratios - per share EPS - adjusted for bonus ` 97.67 70.99 53.07 46.27 35.67 26.81 25.68 21.53 15.16 11.84 Price earning ratio, end of year times 21.79 22.14 22.01 25.56 21.89 10.07 15.79 28.97 31.57 30.23 Dividend per share ` 32 22 25 14 20 14 14 13 13.5 11.5 Dividend per share - adjusted for bonus ` ` 32 22 25 14 20 7 7 5.75 3.38 2.88 Market capitalisation / total revenue times 5.1 4.88 4.67 6.2 5.09 1.9 3.51 6.53 7.06 7.05
  40. 40. Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 40 Journal of International Business Studies 2. Consolidated Historical Financials TCS_Data_Sheet.xls x https://drive.google.com/file/d/0B_ZF3pDhMAHpdVlZbnUyNUhsb2s/edit?usp=sharing 3. Facts about TCS Co-Innovation Network(COIN) 1. Overview of startups in TCS COIN Company Area Aito Technologies Customer Experience Analytics Activeo Real-time Contact Center Performance Monitoring Attensity Sentiment Analysis, Social Media Monitoring Avhan Unified Customer Interaction Process Cicero Desktop Activity Intelligence and Improvement Software, Enterprise Mobility Clarabridge Sentiment Analysis, Social Media Monitoring ESQ Business Transaction Management iKen Solutions AI-based Consumer Analytics Platform Inbenta Semantic Virtual Assistant Jacada Customer Experience Management Kaltura Video Content Management Kana CRM Solutions for Customer Experience Management Knoahsoft Workforce Optimization Neospeech Text to Speech Engine OpenSpan User Process Improvement / User Experience Perpetuuiti Disaster Recovery Management Seclore Information Rights Management SmartConnect Customer Interaction Management
  41. 41. Reinventing the Business Model - TCS Atul,Aravind, Siva, Mathan & Srikanth 41 Journal of International Business Studies Testplant Automation and Software Application Testing VeryDay Service Design, Product Design and Interaction Design 2. TCS Brochure on TCS Co-Innovation Network https://drive.google.com/file/d/0B_ZF3pDhMAHpRUZvNGczejRlMkk/edit?usp=sharing 3. White paper on TCS COIN - Emerging Technology trends https://drive.google.com/file/d/0B_ZF3pDhMAHpNnFYa29Dd0JDUzA/edit?usp=sharing References TCS COIN communications(coin.queries@tcs.com) (2011) white paper on 'The TCS COIN™ Emerging Technology Trends Report 2011' pages: TCS COIN communications(coin.queries@tcs.com) (2014) brochure on 'Co-Innovation Network (COIN) Synergies in the Innovation Space' pages: Mr. Kedar Shirali (Head, Investor Relations - TCS) (2014) data sheet on 'Consolidated historical financials' tab: IFRS- PnL,BS-USD, Operating Metrics Ramon Casadeus-Masanell and Jorge Tarzijan article on 'When one business model isn't enough' Mark W.Johnson,Clayton Christensen and Henning Kagermann article on "Reinventing your business model" Thomas Eiesmann article on "Business model analysis for Entrepreneurs" Mr. Kedar Shirali (Head, Investor Relations - TCS) (2014) 'Annual Reports' year: 2007-08 & 2013-14 Mr. Nandhi Keswaran, Consultant, Delivery manager - TCS

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