Tuesday, February 20, 2007

TCS shows the way

TCS plans a 500 seat delivery center in Mexico.

TCS, I have long maintained, is the real thought leader in Indian IT, right from its inception. The Indian IT services, lets not shy away from saying it, has a strong base in wage arbitrage. So fair enough, it is a model alright. Having said that, it needs to also be said that wage arbitrage in India vis-a-vis foreign countries has long existed in India. Most of the previous labour booms originating out of India were labour/wage arbitrage in some shape or form. But the difference between the IT boom and the others (Gulf jobs for instance) is that nobody really made a model out of it. Prior to the big players, bodyshopping was the way the IT service model really originated. To take that and create an entire service model out of it and then having done that, creating centers of expertise and capabilities takes some doing. Which is what the Indian IT service companies have done.

This was the first (or second) step, depending on how you look at it. Now companies need to think beyond and see how to take this model to the next level. The model as it exists today is unsustainable over a long term. Companies recognize this. Which is why you see some of them invest in products (Finacle by Infy), invest in capability (Wipro and chip design) and so on. TCS, as usual is active on all fronts. They are lowest in cost and perhaps pretty high on the capability scale too. Now, what they are doing is taking this model and porting it to other countries. So, a center in Mexico or other parts of Lat-Am/Europe means an ability to service customers in Europe and America at a lower cost (not as low as India), and with a minimal time zone difference. Time zone difference is often a big problem when one deals with several types of industry. The other thing, being, regulations. Being located in a NAFTA or an ASEAN zone opens up several opportunities which may not necessarily be available out of India.

What this also does is that it opens the door for the creation of a brand. Lets say, if TCS manages to take over a big firm in the US/Europe, it is immediately able to lower the cost of delivery of the firm by using the satellite delivery centers. I am not sure that this is why they are doing it, but it sure makes sense. Expect the others to think along these lines, but TCS is way way ahead on the curve.


Manoj said...

think again... the major reason , tapping into the spanish speaking markets whole of s.america 50% of n.amaerica, parts of europe ... next only to the english speaking markets..

Neelakantan said...

no doubt manoj...but I saw that as an obvious reason; there are other advantages of being there.