Tata Consultancy Services (TCS) has announced fiscal Q1 2009 revenues, for the period ending 30 June 2008, of $1,525m, up 20.8% year-on-year in U.S.$ terms under U.S. GAAP.
Operating income was $336.5m, representing an operating margin of 22.1%, compared with a margin of 22.4% in fiscal Q1 2008.
Fiscal Q1 2009 revenue share (with comparative share for fiscal Q1 2008) by region was:
- Americas 55.2% (55%)
- - North America 51.1% (51.1%)
- - Ibero America 4.1% (3.9%)
- U.K. 19.5% (20.7%)
- Other Europe 10.1 % (8.6%)
- India 8.7% (9.0%)
- APAC 4.9% (5.1%)
- Middle East/Africa 1.6% (1.6%).
Fiscal Q1 2009 revenue share by vertical (with comparative share for fiscal Q1 2008) was:
- Financial services 42.5 (43.1%)
- Manufacturing 10.7% (10.0%)
- High-Tech (a new reportable segment) 7.0% (5.6%)
- Telecoms 15.5% (16.6%)
- Life sciences & healthcare 5.3% (6.1%)
- Retail & distribution 8.6% (8.0%)
- Transportation 4.3% (4.0%)
- Energy & Utilities 2.9% (2.4%)
- Media & entertainment (a new reportable segment) 1.7% (1.5%)
- Others 1.5% (2.7%).
Revenue growth has slowed down in the BFSI sectors because of client specific issues with 2 clients in the U.S. and also with ABN AMRO,
Fiscal Q1 2009 non-India revenue share by service type (with comparative share for fiscal Q1 2008) was:
- Application development/maintenance 46.9% (51.5%)
- Business intelligence 9.0% (9.6%)
- Enterprise solutions 13.0% (12.4%)
- Assurance services 4.5 (3.3% )
- Engineering and industrial services 5.6% (5.3%)
- Infrastructure services 7.7% (5.7%)
- Global consulting 3.7% (3.0%)
- Asset leveraged solutions 3.5% (3.3%)
- BPO 6.1% (5.9%).
The contract type mix (with comparative share for fiscal Q1 2008) was:
- 57.2% (57.3%) time & materials
- 42.8% (42.7%) fixed price/fixed time.
TCS had 885 active clients at end fiscal Q1 2009, down from 908 at end fiscal Q4 2008, though the reduction in numbers only came from clients generating under $1m in business. In terms of client concentration, TCS now has
- 105 clients contributing >$10m per annum, up from 100 at the end of fiscal Q4 2008
- 21 clients generating >$50m revenues per annum, up from 18 at the end of fiscal Q4 2008.
TCS' top client contributed 6.2% of global revenues (6.5% in fiscal Q1 2008)
Its top 10 clients contributed 28.3% of global revenues (29.1% in fiscal Q1 2008)
The revenue mix according to delivery location (with comparative mix for fiscal Q1 2008) was:
- Onsite 54.9% (54.8%)
- GDC/RDC 4.2% (4.%)
- Offshore 40.9% (41.1%).
Total headcount at end fiscal Q1 2009 was 116,308 including Indian subsidiaries comprising:
- TCS 112,593 (up from 107,698 a end fiscal Q4 2008)
- Indian subsidiareis 3,715 (up from 3,709 at end fiscal Q4 2008).
The net increase in headcount was thus 4,895. There was a gross addition of 8,982 employees.
Attrition rate in the 12 month period ended June 2008 was 12.8%, an increase from 11.5% in the prior year period, with:
- IT services 12.1%
- BPO 20.5%
Utilization rate was 78.3% excluding trainees, 74.6% including trainees (79.1% and 76.0% respectively in the prior year quarter). Although there has been a slight decline, TCS is targeting a 100 bp improvement in attrition rate by the end of FY 2009.
In what is one of the largest application management awards in Europe in 2008 to date, Michelin has outsourced its applications development and maintenance activities to four groups of vendors. The combined contracts have a total potential lifetime value of c. €300m for the three base years.
The French headquartered tire manufacturer has been considering its sourcing options (whether or not to outsource, and if so, how) since 2005. Michelin eventually decided on tendering ten lots of work consisting of:
Many vendors were initially interested. The final four groups in contention were Logica, Atos Origin partnering with Accenture, IBM partnering with Sopra, and Wipro.
The discussions with potential services providers have taken as long as the duration of the base contracts, which are short for deals of this size and nature (Michelin had been considering 5-year deals). In what was initially a cautious approach to outsourcing, not unusual behavior for French organizations, Michelin has spread the agreements between global, European, and offshore IT services vendors, with Logica as the major winner.
The fact that Accenture and IBM both chose to partner with French service providers implies their lack of confidence in their local knowledge. The elimination late in 2007 of one strong French headquartered contender, Capgemini, from in Europe but not North America possibly reflects a geographically siloed approach to the opportunity.
Logica's relationship with Michelin was based on consulting engagements delivered by Unilog on change management in working practices, with some applications development engagements. This deal illustrates Logica optimizing a local in-country relationship to win a major outsourcing deal requiring global service delivery.
The contract will give Logica experience in providing major transformational application management services and should also demonstrate its capability to support multi-national outsourcing deals.