T C S ' M a i n O f f e r i n g s

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1 V E N D O R P R O F I L E T a t a C o n s u l t a n c y S e r v i c e s ( T C S ) N o r d i c Jan Horsager I D C O P I N I O N TCS is making highly visible inroads in the Nordics. After 20 years in the market, especially after the last year's winning of flagship deals with TDC, SAS, Nokia, and Norway Post, TCS has shown commitment to developing services for the wave of "second generation outsourcing" or the mix of offshore, onshore, and nearshore that IDC expects to see taking off in the Nordic region over the next three years was a landmark year for TCS Nordics, firmly positioning it as a partner to Nordic companies either looking to transform themselves or become more efficient and agile. Omøgade 8 P.O.Box Copenhagen, Denmark P In the transformation of the Nordic IT services markets towards 2020, IDC believes TCS has a strong position as a key player. It has a solid business model that should allow it to continue gaining market share in Nordic markets for the foreseeable future. The company seems determined to continue making the investments necessary to support this. TCS is investing in its business consulting capabilities and local Nordic expertise, giving it the potential to go to market with a more consulting-led, businessoriented approach to supplement its traditional technology transformation story. It has a credible infrastructure management strategy in which it transforms the client's IT Infrastructure. IDC sees TCS as a healthy services provider in the Nordics with strong human and intellectual assets, commitment to customer satisfaction, and a mature business model that has taken it beyond its origins as an offshore player to become a global services provider with significant onshore presence in the Nordic markets. S I T U A T I O N O V E R V I E W N o r d i c C o m p a n y O v e r v i e w Established in the Nordics: 1991 Ownership: Part of Tata Group (worldwide revenues $83 billion in the year to March 31, 2012). Nordic offices: TCS has regional offices in five Nordic markets: Denmark (Copenhagen), Finland (Helsinki), Iceland (Reykjavik), Norway (Oslo), and Sweden (Stockholm), and delivery centers in Denmark (Aarhus), Finland (Helsinki), and Norway (Oslo). Filing Information: April 2013, IDC #NITS52V, Volume: 1 Nordic IT Services Opportunities: Vendor Profile

2 Employees: 5,000 consultants serving the Nordic markets. Revenues: TCS does not publish Nordic revenues. Sweden contributes 32% of TCS Nordic business, Denmark and Finland both 27% 28% and the Norwegian market 15% 16% of revenue in the Nordic markets. Customer base: TCS reports 75+ customers in the Nordic markets. T C S ' M a i n O f f e r i n g s Globally, TCS reports revenues across nine service lines, which consist of: Application Development and Maintenance (ADM). The original focus of TCS and still accounting for nearly 45% of TCS revenues globally. ADM services consist of customer application development, application management, application modernization, system integration, and performance engineering services. Enterprise Solutions. Implementation of enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM), enterprise content management (ECM), and other critical enterprise software systems. This includes both implementation of the technologies themselves, but also the transformation of clients' associated technology and business processes where appropriate. Key technologies implemented include Oracle, SAP, Microsoft, Salesforce.com, Right Now, Oracle Siebel, EMC, OpenText, Autonomy-Interwoven, and niche products such as Infor, Lawson, QAD, and Progress. Globally, Enterprise Solutions comprise around 11% of TCS' revenues. 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, re-usable assets, frameworks, test packs, and technology-led offerings in SAP, Oracle, and other ERP platforms, as well as clients' in-house tools. Globally, Assurance Services accounts for around 7.5% of TCS' revenues. Consulting. TCS offers standalone IT consulting and business consulting services, and uses its consulting capabilities to deliver end-to-end implementations of its offerings. The focus of its consulting offerings is the provision of transformational services, including technology transformation but also business transformation (for example, business process redesign). Globally, Consulting accounts for around 3% of TCS' revenues. Business Process Outsourcing (BPO). TCS offers a mixture of cross-industry BPO services based on global processing "platforms" (essentially a core software package combined with process/workflow models etc.) and industryspecific BPO services that also draw on software global processing platforms. Globally, BPO accounts for around 11% of TCS' revenues. Engineering and Industrial Services (EIS). These are outsourced research and product life-cycle management services that aim to help customers accelerate product life-cycle times and to develop more innovative and cost-effective offerings. Globally, Engineering and Industrial Services accounts for around 3% of TCS' revenues. 2 #NITS52V 2013 IDC

3 IT Infrastructure Services (IT IS). TCS does not (with very few exceptions) offer traditional datacenter outsourcing services in which it takes over ownership of its clients' datacenters. Instead, it offers what is essentially a "you own, we manage" service in which it manages (but does not own) clients' infrastructure, with an emphasis on transforming the infrastructure to make it more cost-efficient, agile, and easier to manage. Globally, IT Infrastructure Services accounts for around 10% of TCS' revenues. Asset Leveraged Solutions (aka Products). These are essentially offerings based on the supply of TCS' proprietary software products, typically industry focused. Globally, Asset Leveraged Solutions account for around 4% of TCS' revenues. The most notable software offering is the BaNCS package for financial services. Other packages include Business Support System (BSS) in telecoms, TCS Rewardz in retail, and the Legal Management System (LMS) for law firms. These products can either be bought in a standalone manner or implemented in-house or through an independent system integrator, or (more usually) they can be implemented by TCS as part of an overall services contract. Business Intelligence (BI). TCS has a suite of business intelligence (BI) and performance management offerings that aim to manage the challenge of rapidly growing volumes of business data. As part of this, TCS offers its SOLAR framework of integration and information management services designed to optimize and monitor business processes by orchestrating business intelligence, business process management, enterprise data management, integration, and knowledge management/enterprise content management initiatives. Globally, Business Intelligence accounts for around 5% of TCS' revenues. New and Emerging Services Within these service lines, TCS offers a number of next-generation services including: Cloud Computing: Cloud services. TCS offers a cloud/saas (software-as-a-service) version of its well-established BaNCS software suite for financial services. It also offers its cross-industry BPO software "platforms" for human resources (HR), finance and accounting (F&A), procurement, and analytics as cloud/saas services. TCS will provide managed services for clients' private cloud, and if necessary provide hosting through a partner, but this is not a special focus area. Cloud professional services. TCS offers cloud-related services including advisory, migration, development and assurance, deploy and manage services. ION. TCS also has an offering for small and medium-sized organizations, ION, which it currently offers in India. ION offers a complete "stack" of infrastructure and business applications on a cloud/saas basis, including cross-industry applications such as ERP document management and collaboration software, and also industry-specific applications IDC #NITS52V 3

4 Mobility. TCS offers application development services, application testing services, and proprietary intellectual property in both licensed and hosted models, with the aim being to help clients to transform their business processes and their customer service through mobile applications deployed on tablets and smartphones. Social Computing. TCS has social computing offerings including cloud-based platforms, solutions, and services aimed at improving clients' end-customer experience, helping clients generate new revenues and improving its clients' customer contact strategies through reduced cost and greater reach. These offerings include insight, customer intimacy, collaborative, and enterprise integration solutions. Big Data. The term "Big Data" refers to the management of the rapidly increasing volume, variety, and velocity of enterprise data. To assist clients with Big Data implementations, TCS is creating niche analytical business solutions for problems not solved easily using traditional architectures. It is using domain expertise across industries, in analytics and in visualization technologies to build intellectual property that addresses specific business problems using Big Data. Eco-sustainability services. TCS has consulting capability and offerings in compliance management, reporting, sustainability performance management, energy management, green IT and datacenter, renewable energy, water and waste management, green engineering, low-carbon logistics, etc. T C S ' O f f e r i n g s i n N o r d i c M a r k e t s TCS builds its offerings in the Nordic markets based on its global portfolio and according to demand and business opportunities. Some of the company's important recent contract wins include: In February 2012, TCS won the delivery of IT to Danish telecom vendor TDC from CSC, making it the third time TDC has outsourced its IT and infrastructure. The deal established TCS with two delivery centers in the Nordics (Aarhus and Copenhagen, both in Denmark) and set a new standard for business aligned outsourcing contracts in the Nordics that are built on the principles of "transforming while performing." The real value for TCS will become apparent when new solutions and deliveries are implemented and deliver results for TDC. In July 2012, TCS won a deal with Nordic airline SAS. TCS is to take over financial services for the airline. This is the first financial platform as a service in the Nordics and a breakthrough for software as a service (SaaS) business process outsourcing (BPO) in the Nordic markets. In January 2013, Nokia outsourced the last part of IT maintenance and development of internal applications and services to TCS. The deal is another significant deal in the transformational category in the Nordic markets. TCS positioned itself as the reevaluating partner helping large customers to assess and reevaluate the options around IT services and infrastructure. By being a trusted partner in the evaluation process, TCS has won several big deals starting with Ericsson four years ago and comprising Nordic entities such as TDC, Nokia, and Norway Post as critical mass. 4 #NITS52V 2013 IDC

5 TCS Nordic gets a majority of its business from six verticals: telecom, manufacturing, retail and consumer, travel and logistics, financial services and utilities and energy. While the early TCS development in the Nordics came from the first three verticals, the latter have been significant to the last two years of growth in the Nordic markets. From a services perspective, outsourcing is 40% of TCS' Nordic business, 30% is enterprise solutions, engineering services 10%, assurance services 10%, BPO 5%, and BI 5%. Contracts such as TDC, Unibet, and SAS have further strengthened TCS' Nordic positioning in infrastructure and cloud services, which are rapidly growing new services for TCS in the Nordic markets, already contributing more than 10% of revenue. N o r d i c C o m p a n y S t r a t e g y TCS has enjoyed double-digit growth up to 30% in the four main Nordic markets of Denmark, Finland, Sweden, and Norway. In all four markets TCS will climb and shake the IT services market in Industry knowledge is a key to TCS' business approach, as well as local market adaptation. TCS is a part of the Tata Group conglomerate comprising knowledge of more than 100 companies. The local Nordic TCS organizations are coordinating and adapting the market approach to the needs of each country and looking after customer satisfaction whereas the P&L is with the vertical groups. Already having a foothold in manufacturing and telecoms in the Nordic markets, TCS looks at finance and the public sector as potential new growth areas. TCS has demonstrated that it is serious about tailoring its delivery and indeed its offerings to the needs of local customers. Over the past seven years or so, TCS has taken a series of important steps that reflect its growing maturity and its transition from its roots as an application-focused offshore IT services player to being a global services player with a broad portfolio. For example, in 2008 the company reorganized globally around vertical (industry) market teams to drive greater industry understanding among its staff and create closer relationship with customers. TCS pioneered the offshore-based delivery model in the late 1990s, and has since refined the model to balance offshore, onshore, and nearshore delivery by changing the mix of these delivery locations as its customers' needs evolve (a shift to what IDC calls "offshore 2.0"). TCS is an industry leader in global delivery, having developed its GNDM (Global Network Delivery Model) over many years to optimize the remote/local balance of delivery resources. Investing in Driving Customer Satisfaction TCS has a focus on investing in service delivery quality in order to build strong relationships with customers. TCS Nordic's reference customers frequently report to TCS that the company displays a "can-do" attitude and a commitment to solving problems quickly. Reference customers also reported to TCS that they are spending less than they have historically done on services from their traditional suppliers while experiencing equal 2013 IDC #NITS52V 5

6 or higher delivery quality, and add that relative to their traditional onshore-based outsourcers TCS more flexible during the bidding and contract negotiation processes, and in the subsequent delivery phase. Investing in Localization TCS has made significant progress in localizing its organizations in the Nordic markets. Of 5,000 consultants servicing Nordic clients, roughly 1,500 are located in Nordic countries and more than 500 are local Nordic nationals. This is a tenfold increase over three years in the number of local Nordic employees working for TCS. TCS has also created an interesting Nordic ecosystem by partnering with local Nordic IT companies to provide clients with a best of breed proposition leveraging best of both global and local worlds while taking end to end responsibility. One example is the TDC contract in which TCS has partnered with local Danish vendors Atea and KMD as a part of the solution. This has been enabled by TCS' culture of collaboration and taking accountability supported by a strong service management and integration capability. Investment in Differentiating Intellectual Property TCS pioneered the "land and expand" model of selling small application services contracts and then up-selling/cross-selling larger deals, but has long since matured its delivery model, now selling mostly fixed-price services and increasingly services with a high element of intellectual property. IDC believes that TCS understands the need to supplement traditional labor/timebased services with more automated services built around scalable and repeatable intellectual assets such as packaged software (e.g., BaNCS, or the cloud-based Business Support System for telcos), application and process design and management tools, methodologies, and so on. Intellectual property-based services tend to lower project risks, lower service delivery costs, raise service quality predictability, and protect suppliers' margins, thus encouraging them to maintain and reinvest in their offerings. F U T U R E O U T L O O K TCS is making inroads in IT services markets in Denmark, Finland, Norway and Sweden. In the past 5 years large deals have been won an established TCS in the enterprise segment across verticals. Now TCS needs to change its profile in all Nordic markets to be relevant to entities in larger sets of verticals like public and healthcare. Across all Nordic markets, businesses and organizations are preparing for the next generation outsourcing and offerings. TCS' propositions for that demand are: 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 on client-side integration and service management work, rather than on challenging the public cloud vendors. 6 #NITS52V 2013 IDC

7 TCS clearly intends to target the market for private cloud infrastructure consulting, implementation, and management services (IaaS) 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). In such engagements, TCS brings deep understanding of applications to help the transition to a private cloud set up and run it efficiently by deploying automation. Direct cloud provision services. As well as helping clients migrate to the cloud and to manage their cloud services providers by acting as a client-side "cloud services broker," we see TCS playing a role in supplying specialist cloud services (such as supplying software-as-a-service and business-process-as-a-service offerings) based on its process and industry domain expertise. Next-generation offerings. TCS aims to increase the share of next-generation offerings particularly intellectual property rich offerings such as platform-based business process outsourcing (BPO) like the financial services deal with SAS. TCS is delivering financial services to the airline as a financial platform as a service. Although application services will remain its bread-and-butter business, IDC sees TCS 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. IT infrastructure management. TCS offers IT infrastructure transformation and management services, taking over ownership of existing client infrastructure assets. The company's focus is on transformation of clients' IT infrastructure. Targeted outsourcing deals bringing new service capabilities. TCS is relatively bold in its willingness to take bets on transformational outsourcing deals that bring new capabilities to the company. For instance, globally it bought the back-office processing operations of Citibank in 2008 and in Nordics the TDC deal from 2012 is a good example. Public sector. The public sector in the Nordic markets has not traditionally been a strong focus for TCS. However more demand for digitization and cost reduction in the Nordic welfare states makes both the "offshore 2.0" mix of offshore, onshore and nearshore as well as Next-generation offerings interesting to explore for the public sector in the welfare states, even though issues on data storage still need attention. 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 IDC #NITS52V 7

8 E S S E N T I A L G U I D A N C E A d v i c e f o r T C S IDC offers the following advice and guidance for TCS to reach the goal of becoming a top IT services vendor in the Nordic markets: Stay focused on differentiating markets, both in geography and verticals. TCS has achieved remarkable results in terms of both growth and deals over the past three years in the Nordic market. But the Nordics is a difficult region, because the four main markets Denmark, Finland, Norway, and Sweden put together do not even add up to one of the bigger traditional EMEA markets. However, all four markets are very mature when it comes to technology usage and customer expectations. Services vendors need to be prepared to invest in the differentiation in geographical markets as well as industry verticals. Develop transparent processes. In the mature Nordic markets, flat management structures and collaboration are key elements in successful business. Buying IT services is increasingly being influenced by players other than the CIO and IT staff. Transparent processes help IT services vendors sell, but they are also a requirement for line of business influencers in client companies that do not want to deal with a lot of specifications but want efficient and problem solving services. Build partnerships. Partnering with other vendors and consultants in delivery ecosystems is not only a cost-effective delivery model. Partnering is also a foundation for the credibility needed to become a trusted advisor and deliver intelligent industry solutions. TCS has credible success stories demonstrated in its contracts. The company already has a strong alliance network globally and locally in the Nordics, giving it a strong foundation for future partnering. Develop innovative risk-sharing models. Sharing economic risk is the core in a commercial partnership, and next-generation offerings and outsourcing are all about partnership. TCS is moving toward an increased accountability model with transaction-based pricing to cope with the changing business models across the industry. Bet on next-generation offerings. Nordic businesses are ready to work with business process outsourcing in the rich platform-based version promised by the next-generation offerings. That is why TCS' delivery of a financial platform as a service for SAS is a breakthrough for BPO in the Nordic markets. L E A R N M O R E R e l a t e d R e s e a r c h TCS Nordic Strategy (IDC #NITS59T, November 2011) TCS Hits the 1 Billion Mark in the U.K. Now for Growth on the Continent (IDC #lcuk , February 21, 2013) 8 #NITS52V 2013 IDC

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