Enterprise consultancy TCS expands in downturn, teams with startups

As the global downturn deepens and many companies lay low, business-services giant Tata Consultancy Services of Mumbai, India, plans to keep growing worldwide and strengthening its global network of startups, venture investors and technology partners.

In a recent interview with VentureBeat by conference call, TCS chief technology officer Ananth Krishnan said that many of the outsourcing firm’s clients “are using this period of economic uncertainly to streamline their IT systems and business processes.” Rather than slash IT costs, they’re boosting their spending on technology 4 – 5 percent to streamline their entire business, including their computer networks, their financial and accounting systems and their human resource operations.

“They’re asking, How can I produce more output at the same costs? Is there a simple way in which my company can operate?” Krishnan said. “The world economy has been impacted severely, and we are seeing that impact in our business, and in the business of our customers.”

While many still stereotype India-based outsourcing firms as call-center companies, TCS, Infosys, Wipro –- as well as rivals such as IBM and Accenture — are strong players in the fast-growing industry of business-process outsourcing, or BPO, which provides a host of technology, research and management consulting services for corporate clients.

The BPO industry is more recession-hardy than others, since many companies will hire BPO firms to help them streamline their costs and operations during downturns. According to Global Industry Analysts in San Jose, Calif., the BPO industry is projected to hit $975 billion in revenue by 2012.

Of course, the global slump still has stunted growth in the field. TCS saw its fiscal third-quarter profit rise only 1.6 percent to $276 million from the same time a year ago, and Morgan Stanley estimates a 3 percent drop in the company’s annual compound earnings from 2008 to 2011. Some corporate clients also are delaying or killing projects with consultants, according to recent media reports and statements from TCS and other BPO industry officials.

Despite the ailing economy, TCS, a $6 billion firm with 130,000 employees in 42 nations, aims to keep expanding internationally — especially in the U.S., its largest country by revenue and home to several TCS research labs and offices. To that end, Krishnan is leading a global initiative called the TCS Co-Innovation Network, or COIN, which was launched two years ago and is now gaining momentum.

Through COIN, TCS teams with hundreds of startups, corporate clients, universities and tech stalwarts, including Cisco Systems, Kleiner Perkins Caufield & Byers, Sequoia Capital, Stanford University and MIT. Their goal: to jumpstart innovation and bring breakthrough tech products to the business market more quickly and cheaply than traditional models. Other outsourcing and consulting firms also are forging similar global networks, but few have the scope and scale of COIN’s partners.

While TCS already has 20 tech innovation labs all over the world, Krishnan said it was clear that TCS needed “a systematic way of collaborating with innovators and inventors” on a broader scale. Working with venture capital firms, TCS looks at 700 to 800 startups a year, then picks about 20 or so to join COIN that already have developed their products and are hunting for a large market. The startups work on pilots with TCS labs and corporate clients to make sure the products function on a large enterprise scale for global companies. Within a year or so, the products hit the market.

“Then it’s a success or a failure,” Krishnan said. “If it works well, it scales very quickly.”

The COIN model gives startups access to international markets and customers, Krishnan said. It gives TCS access to new technology that might take many years to develop if TCS did it on its own. It gives venture capital firms a better shot at successful investments. And it eliminates some of the risk for all parties. TCS has partnerships with many dozens of startups, including enterprise software firm MetricStream in Palo Alto, Calif., Cassatt, a data-center software firm in San Jose, Calif. and Collabnet, a collaborative-software company in Brisbane, Calif.

Krishnan said that COIN’s cross-border team approach will work well with complex technologies and business projects that no one player can handle. Take cloud computing, for example. He said that TCS computer scientists are working with at least 10 COIN startups, business partners and corporate customers on “different parts of the puzzle, including security, scalability, availability –- all the nice stuff that enterprise data centers look for” in software and other tech products.

“Everyone’s interested . . . but who’s going to make the big leap and put cloud computing on the roadmap?” Krishnan said. “One enterprise company cannot claim to have done it all. A loose consortium or collaborative network, with TCS orchestrating it, moves faster than any one entity. The concept of collaborative networks is still nascent, but we are trying to execute on it.”

Edward Iwata is a former USA Today staff writer who covered venture capital, business diversity, white-collar crime and other topics. He is writing a book tentatively titled Fusion Leaders (Jossey-Bass/Wiley, 2010) and a blog, Cool Global Biz, on businesses, globalization and diversity. Photo credit: HeadStart

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