INDUSTRY ANALYSIS

TCS
(SM Project Report)

Group 3
Section G
Gaurav Singh- ABM15035
Anant Shilarkar- PGP34305
Ankit Yadav- PGP34306
Jetkumar Meshram- PGP34325
V Renuka- PGP34343

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 CONTENTS

Table of Contents
Introduction .............................................................................................................................. 3
Industry analysis...................................................................................................................... 6
PEST analysis....................................................................................................................... 6
Porter’s Five Forces Analysis……………………………………………………………………...7

Internal analysis....................................................................................................................... 8
Value Chain Analysis…………………………………………………………………………….. 8
VRIN Analysis……………………………………………………………………………………... 9
Business strategies ................................................................................................................11
Key strategic challenges & Recommendations ....................................................................13
References ............................................................................................................................166

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 Introduction
TCS stands for Tata Consultancy services which was founded in 1968 by Facquir
Chand Kohli and JRD Tata. It’s parent company is Tata sons. Natarajan
Chandrasekaran is chairman of the company and Rajesh Gopinathan is the MD and
CEO of the company. It has become the largest Indian IT company in terms of market
capitalization crossing the $100 billion mark and second Indian company to achieve this
milestone after Reliance industries. The company has its headquarter located in
Mumbai, Maharashtra. It has 284 offices worldwide across 46 countries and has 147
delivery centres in 21 countries. It has 417,929 employees worldwide making it the
largest IT company in terms of workforce also. It has 67 subsidiaries which provides a
wide range of products related to information technology and services including
consulting, enterprise software, payment processing, hardware sizing, business process
outsourcing, application development, capacity planning, technology education services
and software management.
The company’s provide a wide range of services such as application development and
maintenance, BPO, ERP across various sectors which are Banking Finance Services
and Insurance, Telecom, Retail and distribution, Manufacturing, HiTech, Life sciences
and health care, travel and hospitality etc. Thus it has a wide scope of sectors to

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provide services and a wide growth opportunity. The four major services functions of
TCS are:

IT Infrastructure services
TCS gives an end to end solutions through a framework “assess-build-manage-
transform”. They leverage the eco-system of their partner and apply analytic based
approach to help them move from traditional outsourcing model to new generation
model. They continuously help in improving the process, provide better margins,
increase flexibility and reduce cost of the industries.

Enterprise Solutions
Through enterprise solutions TCS help their clients in improving operational efficiency,
managing complex data and to take advantage of new opportunities while responding
effectively and quickly to market changes. It scales the business, increase profitability
and improve agility. Finally, it applies these enterprise solutions throughout the value
chain of the business process and consolidate the flow of information.

Business Process Outsourcing (BPO)

It helps the clients in growing their business by leveraging their expertise in domains like
accounting, finance, human resource and supply chain management, allowing clients to
only focus on innovation and relationships across the industries. It helps in identifying
new revenue streams and reduce the cost of revenue while focusing on risk mitigation
to ensure smooth transition and achieve 99% SLA compliance.

Global Consulting
TCS provides an IT-enabled services for business transformation that help the client to
align their business operations with the new technologies. They define the objective,
plan a strategy and implement it along with their clients to achieve success. With their
vast industry knowledge and technology expertise they are they make the business
more agile, efficient and responsive to change in market and customer needs.

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TCS Innovation Labs
With the ever changing technology TCS has established various innovation labs which
helps them to keep up with the ever changing technology, and also provide latest
technology solutions to their clients. It has total 19 innovation labs across 3 countries.
Their partners include “Cassatt, Collabnet academic institutions such as IITs, MIT,
Stanford, Carnegie Mellon and venture capitalist like Sequoia and Kleiner Perkins”.

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 Industry analysis

PEST analysis

PEST analysis is done for TCS India.

Political:
● The IT industry is completely FDI permitted and has seen a yearly increase in
FDI inflow of 3% over the last 3 years.
● The Govt. spending on IT has grown over 9 percent to reach US$ 87.1 billion.
● The government has identified IT as one of 12 champion service sectors and set
up a Rs 5,000 crore (US$ 745.82 million) fund for realising the potential of
service sectors.
● Tax Exemption for 3 years for start-ups has really helped the opening of many IT
based start-ups in India.

Economic:
● India is considered one of the topmost offshoring destination for IT -approx. 55
% market share of the US$ 173-178 billion global services sourcing business.
● The expanding economy propels growth in local demand for IT through plans like
one Lakh Digital villages proposed.
● The cost of basic Infrastructure and also the day to day operations is low in India
( 5- 6 times lesser than US)

Socio-cultural:
● Education -Highly qualified talent pool of technical graduates (1.5 mn graduates
every year).
● Working population: Increasing labour force.Demographic – With the average
age of India being 29, the ratio of population who are dependant are very less
and hence it helps to propel the economic growth.
● The only negative aspect is the migration of Indian working population to other
countries, which is offset by the increasing working population.

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Technological:
● Increasing research efforts in AI and in leveraging AI technology provides the
technological growth required to take a leap into the future of IT.
● Rapidly growing urban infrastructure fosters several IT centres in the country.
● Set up of new IT Infrastructure like National Optical Fibre network, National
Knowledge Network etc. is an added advantage.

Porter’s Five Forces Analysis

Threat of New Entrant: There are many startups providing business solutions at very
cheap prices possing as a threat to TCS. Along with that, the businesses are going for
in-house development which again is a threat to TCS.

Threat of Substitute: Businesses are highly dynamic nowadays and their rapidly
changing processes pose a threat to TCS if they do not opt for the innovation and cope
up the dynamics of businesses. Cost of the project is a differentiator in the IT industry
because the products are the same and Chinese companies are providing services at
very low prices.

Bargaining Power of Supplier: Due to slowdown and job cuts the bargaining power of
the workforce is low. Again the gap in demand and supply is adding to the lowering of
bargaining power.

Bargaining Power of Buyer: Large no of IT firms adding to the competition and hence
increasing the bargaining power of customers. Decreasing expenditure is also one of
the reasons to increase the bargaining power of buyers.

Rivalry among Competitors: Huge number of competitors providing the same set of
solutions to the customer making it a crowded place. This leads the high rivalry among
the competitors.

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 Internal analysis
Value Chain Analysis

According to the value chain analysis model there are broadly two activities Primary
activities and Supporting activities. In Order to study the value chain of the TCS, both
the activities are elaborated as follow:

Primary Activities:

Inbound Logistics :- This Primary Activity includes all the Activities associated with
receiving, storing and disseminating the inputs of the products. In the case of the TCS
firm, receiving, storing and disseminating of the Data collected through various sources
is categorized under this activity. Activities related to establishment of the architecture to
support the receiving and storing of the data is also an inbound logistic activity.

Operations :- This category includes all the activities which are necessary to convert
the input into the desired valuable output. Here in this case is Data is the input and
along with the skilled personnels, this input is then converted into the output for example
Application development, Software Management, Enterprise software, Payment
processing etc.

Outbound Logistics :- TCS performs these these activities to distribute the finished
products to channel partners and final buyers. Outbound logistics activities include –
distributing its services through the widely spread delivery centres, order processing,
report preparations etc.

Marketing and sales :- These activities are undertaken by TCS to create means
through which the buyer can buy a firm’s products. These activities include – channel
selection, pricing, marketing, sales force management, advertising and promotion etc.

Services :- TCS needs to provide after sales services and maintenance for successful
usage of the software. Service activities of TCS include – installation services, post
sales maintenance, training, and product forward and backend alignment of software
etc.

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Support Activities:

Firm Infrastructure:- Firm infrastructure support the and facilitate activities such as
Financing, accounting, legal and general services. Here, Finance and planning activities
are performed at corporate level while legal and general management, and accounting
activities are performed at business level.

Human resources Management:- TCS being the service company offering variety of
complex intangible products, highly skilled personnel’s play significant role in the overall
organizational success. Human resource management affects competitive advantage in
any firm, but in some industries it is defining factor. For example, in the consulting
companies HR is the main source of competitive advantage.

Technology Development:- Technology development also plays a critical role in the

consulting businesses. This also has become the source of competitive advantage. This
can include activities such as- technology selection, feature design, process
engineering, component design, and field-testing.

Procurement :- Procurement activities at TCS include activities that are undertaken to

purchase inputs that are used by TCS value chain. It doesn’t include purchase inputs
themselves. Purchased inputs may include - raw materials, supplies, machinery,
laboratory equipment, office equipment, and buildings.

VRIN Analysis:-

Resources of TCS can be categorized into two categories - Tangible resources and
Intangible Resources. Tangible resources include- physical entities, such as land,
buildings, plant, equipment, inventory, and money. Intangible resources of TCS are –
skill and administrative level of managers, brand names and goodwill of the company,
intellectual property rights, copyrights, trademarks, and special relationship with supply
chain partners. Following are the four components of the VRIN:

Valuable:- Here we identify whether the resources are valuable to the TCS or not.
Resources can be Financial, Human, marketing expertise etc. Here, if we take brand
equity as one of the resource, then this resource is highly valuable to the TCS company.

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Rare:- After finding out the resources which are valuable, next step is the see if the
resources are rare or costly to attain. If they are not rare than both present competitors
and new entrants will easily able to get access to them and enter the competitive
landscape. Here, Brand Equity is the rare and can be established over the long period
of time & investment.

Difficult to imitable :- Imitation of the services or the product can take place in two
ways, duplication of the product or substitution of product, both of these are capable of
disrupting the business. In the case of Brand equity, it is difficult to imitate.

Difficult to Substitute:- If the resource is difficult to substitute then it can give a

competitive advantage to the organization in the long run. In the case of Brand equity, it
is difficult to Substitute.
Here, Brand equity of the firm TCS is Rare, valuable, difficult to imitate & substitute.
This gives the Firm sustainable competitive advantage over the long period.
Similarly, Customer network and Loyalty, is also a Valuable as the 23% of the
customers contribute to more than 84% of the sales revenue, rare as it is costly to attain
takes longer period of time to achieve, it is also an Inimitable as this has been tried by
competitors but none of them are as successful and also Non-substitutable resource
giving the firm sustainable competitive advantage.

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 Business strategies
TCS on comparison with its industry rivals like Wipro, Accenture, Infosys, Tech
Mahindra, HCL technologies, Cognizant etc. provides low cost services. It also has
Differentiation strategies as compared to these firms. It exploits both the strategies to be
the market leader in India with a revenue of over 8000 crores and the only company
after Reliance to have crossed the 100-million-dollar market cap in India to become the
most value company. To understand TCSs growth and position both the Business
strategies are analyzed below:

Differentiation

Mini- ceo model:

Infosys which was once the Market leader in the IT industry around 2009 is now
overtaken by TCS which as of 2018 is 2.6 times bigger that its rival. On looking into
what brought about this turnover, we can see that the fundamental execution of its
business is their major differentiation.
TCS that was led by Chandrasekaran was divided into smaller business units that each
had separate leaders “mini-CEO’s” to take faster decisions regarding their strategies,
projects they undertake and the everyday operations of their business unit. This
resulted in a large organization with the energy of several small companies.
Infosys on the other hand had a radical change. Their leaders were encouraged to
prepare the Client’s for a change that was too fast. This resulted in the company lost
sight of the segment that accounted for nearly two-thirds of its revenues.

Brand:

TCS being a part of TATA group holds the TATA brand name that is well known and
trusted which gives TCS an edge over others. In addition, the brand operates in diverse
industries like engineering, energy, telecom etc. giving TCS an easier access to varied
clientele and an internal knowledge database to provide solutions.
It has a strong presence in more than one sector and it is one of the market leaders in
different sectors like healthcare, Retail and Govt. solutions.

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Focus on employees:

TCS is an employee focussed firm. It has a very low cost and highly skilled workforce.
The company spends a lot on its employees which results in a good retention ratio and
growth of employee skill and performance. TCS effectively utilizes the Indian
employment market consisting of highly skilled people for building an intellectual
property for expanding its footprint to the customer organizations.

Cost Leadership

TCS is able to provide the same services at a much lower cost than its rivals can
because of its higher utilization of staff, its project choices and technology model. TCS
takes more than one project from the same client and works on many such combined
project that helps it take advantage of its scale. TCS provides services ranging from low
skilled to very sophisticated projects. Inherits theses skills through various mergers and
acquisitions.
In addition, “The Global Network Delivery Model” developed by TCS is considered a
benchmark in the history of software development. TCS uses this model to provide its
customers throughout the world, the same experience and lower cost while maintaining
high quality services.
TCS is now emphasizing on simplification of business process to IT infrastructure,
which will turn out to be a state of the art transformation by making use of artificial
intelligence and robotics in near future.

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 Key strategic challenges & Recommendations

Growth in Revenue

Looking at the growth of TCS year after year it has started declining due to various
reasons such as Diverse Portfolio issue and updates into the installed softwares.
Diverse Portfolio was initially the strength of the company but as the time passed the
strength became the weakness of the company, reasons are clear that they were not
able to focus on the core competence of TCS.
To see the impact on TCS revenue in the different geographies we divided market into
developed and developing market. In the developed markets like US (generating 52% of
the revenue) are not doing good due to the requirement of advancement or updates in
the IT softwares made by TCS. And, in the developing market like India the real issue is
that the extent of actual hard investment is hard to get in here, TCS in India works on
project-based business unlike the annuity business in developed markets.

Recommendations
As there is no scope of further expanding business in North America because of
banking financial services and insurance (BFSI) vertical continued to lag. They should
go for other developing geographies which are still to be explored. In the recent past,
they have started working on a specific segment rather than going for a diversified
portfolio. As the developed market is looking for the updates they should start thinking
about advancement and installation of updated software as they are TCS initial
customers. TCS also started working on digital solutions business which is doing well
and attracting new potential customer for TCS, it isn’t making large enough impact to
offset the slowdown in the traditional business, but still contributing positively in the
revenue of TCS.
Recently These strategy has given them a positive impact of 1.7% increase in the
revenue of TCS in the 2nd quarter of 2018, which is showing the light in the dark phase
of TCS.

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Dual Challenge: Trump and Tech

TCS majorly contribute to IT and BPM sector. Now according to the IBEF report in IT
services around 81% of revenue comes from exports and 87%of revenue is generated
from exports in business process management sector. Being the market leader in the
IT-BPM industry, TCS get the major chunk of this export revenue. Which also makes it
most prone to the risk that foreign markets have in terms of regulations. Recently when
Mr. Trump slashed the corporate taxes from 31% to 25% which is making the
outsourcing more expensive for the US firms. Following the protectionist policies, Mr.
Trump introduced many regulations such as H1B visa which drastically hampered the
business of Indian IT companies. Not to forget the Brexit drama of the UK in the
discussion of protectionism. So TCS must take this as a challenge for its future
business growth and learn from it to make itself tolerant to such regulatory shocks.
The second challenge for TCS in the dual aspect is “Tech” by which we mean the
automation. According to “Indian IT industry faces twin challenges of Donald Trump,
automation”, an article in livemint, the automation will make one-fourth of the employees
redundant and most of this chunk would be from IT sector. TCS traditionally doing the
business which comprises of support activities will have a maximum impact due to
automation. TCS needs to bring innovation in its business. To add to this problem, the
degrading quality of the Indian workforce is another issue. Well-acted upon these
challenges would make TCS ready for the future ups and down. We have suggested
some of the steps that can be taken towards this solution.

Recommendations:
To start with TCS have to change its outlook from service based firm to innovative firm.
Accordingly, they have to attract a young and innovative workforce. To make a point
TCS had last time changed its starting pay structure in mid-2010. Now with such a little
to work for, employees tend to leave the organization as soon as possible. This also
demotivates them to think and apply innovative ideas. TCS had to design a proper
payout structure properly aligned with Heisenberg's theory of motivation. Along with
that, they can lobby the government to bring quality education in India and improve the

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quality of manpower. TCS should work towards developing the pro-innovation culture at
the office. Along with that, it will have to invest in innovations.

Implementation of Enterprise AI: Organizational and cultural

challenge
Most of the sectors in the market wants to implement the AI technology in their
businesses. But there are various factors which restricts the TCS to implement AI in
their clients businesses. Firstly, there is a high cost involved in implementing AI with low
accuracy and false positives Thus it leads to the threat of losing the existing client and
the upcoming market. It is also difficult to implement AI in new businesses which do not
have past data. There are several organisational issues such as implementing AI
requires workforce in order to make the system learn which again increases the cost.
Due to the rapid change in technologies the traditional approaches are becoming
obsolete and therefore they are putting pressure to implement untested technologies
such as Artificial intelligence.
Key Recommendations:
There is a step by step strategy that should be followed in order to enable clients to
implement AI in their business structure.
Firstly, TCS should segment all the businesses and industries that could benefit from
using the AI technology. After that they should identify the areas where the technology
has already been successful and then scale them across organisation. Once they have
devised the strategy then they should implement it by using a phase by phase approach
in implementing the change rather than a big bang. Once successful in implementing
the Enterprise AI in a firm, then they should target the other firms of the same sector.
There are also some internal changes that will be required in order to overcome this
challenge. TCS should partner with firms which already have specialisation in
implementing AI. They should hire new workforce which have Subject Matter Expertise
in this technology. Apart from these they should also conducts trainings and learning
process for the available workforce to have less dependency on external resources.

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 References
1. https://www.livemint.com/Industry/nS6Bfc39NKYd6jGiFY4D6I/Indian-IT-industry-faces-
twin-challenges-of-Donald-Trump-au.html
2. https://economictimes.indiatimes.com/tech/ites/protectionist-us-a-major-challenge-for-
indian-it-services/articleshow/57135835.cms?from=mdr
3. https://www.ibef.org/download/IT-and-ITeS-July-2017.pdf
4. https://www.scribd.com/doc/221195087/STRATEGIC-MANAGEMENT-PROCESS-OF-
TCS
5. https://managementstudyguide.com/herzbergs-theory-motivation.htm
6. https://www.ibef.org
7. https://www.moneycontrol.com/
8. http://blueoceanuniversity.com/frontpage/portervaluechain/15400-tcs-ramadorai
9. http://blueoceanuniversity.com/frontpage/vriocase/17001-tcs-services
10. Tata Consultancy Services on the Forbes Asia's Fab 50 Companies List". Forbes.
11. Overby, Stephanie (2018-03-15). "The top 10 IT outsourcing service providers of the
year — and the top 10 challengers".
12. "TCS overtakes RIL as country's most valued firm – PTI". Moneycontrol.com. 30 Dec
2011. Retrieved 3 September 2013.

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