Operational management in IT Luxoft vs Tata Consulting services
1. Team A: Alexander Sokhanych; Maxim Pustovoy; Angela Harris; Jason Monahan; Kern Wasan; Georgi Georgiev
2. Industry information
IT services is a fast growing and emerging industry
Revenues of $980 B in 2015 and new 550k IT jobs
worldwide
Companies differentiate risks by creating their own
products and solutions to get higher profits.
Companies sustain growth by high activity in M&A
Growth potential is sensitive to access to Human Capital
and economic activity in home country
75% of all expenses costs for labor including: salaries &
bonuses, training and recruiting
There are low barriers to entry but significant competition
to hire and retain skilled employees.
Company Country
of origin
Operational
margin, %
Headcount,
employees
Utilization,
%
Attriction,
%
Revenue,
Bln $
Accenture Ireland 14 305 000 90 15 30
TCS India 29 330 000 78 16 15
Capgemini France 9 180 000 80 25 12
Atos France 5 90 000 82 18 11
Infosys India 26 160 000 86 19 9
WIPRO India 25 150 000 66 15 7
HCLT India 27 100 000 84 17 6
4. Two very different models: outsourcing and solutions/premium services
Focused on 6 core verticals: Company has strong yearly revenue growth of
30% vs industry’s 18%.
Biggest clients: UBS, Deutsche Bank, Harman, Credit Suisse, Boeing &
Avaya
Client contribution: There are 2 at $100M, Less than 10 clients at $10M
2 biggest clients take 50% and 10 biggest clients take 80% of all revenue.
Most of revenue is from the UK (30%) and the US (40%)
Sources of revenue: financial services (70%) , auto (10%) & travel (5%)
One of the largest software employers in Europe
Employee concentration: Russia 23%, Ukraine 35%, currently moving to
Poland due to economic downturn and military conflict between Russia
and Ukraine.
Founded in 2000
Company type: Public. Trading on NYSE. Market cap
$2.5B
Revenue 2015: $0.5B EBITDA: 19% Employees: $10k
Revenue per developer: $75k Utilization rate: 80%
Location: 27 offices with 18 delivery centers in 17
countries, HQ Switzerland
Labor turnover: less than 10%
LUXOFT PROFILE
5. Largest private corporate group in India: 114 companies and subsidiaries
Largest IT provider in Asia and 7% of world IT services market
9 different services with software development, 45% of all revenue
Company has strong revenue growth +16% yearly
Client contribution: 30 with $100M, 260 clients with $10M or less
revenue
Biggest clients: GE, Citibank, IBM, Home Depot, Walmart & Vodafone
TCS has 1,500 clients, GE produces 20% of all revenue
Most of revenue is from US & Canada (52%) and UK (17%)
Sources of revenue financial services (41%), retail (14%) & telecom (12%)
World`s 4th largest software employer in IT
Primary locations: India (79), EU (41), N&S America (37), EMEA (27)
Founded in 1968
Company type: Public. Trading on BSE, NSE. Market
cap: above $80B
Revenue 2015: $16B EBITDA: 26% Employees: $336k
Revenue per developer: $46k Utilization rate: 86%
Location: 183 offices with 117 delivery centers in 21
countries
Labor turnover: +16%
TCS PROFILE
6. LUXOFT FINANCIALS
80%
82%
84%
86%
88%
2012 2013 2014 2015
Total costs / Total revenue
5000
6000
7000
8000
9000
2012 2013 2014 2015
Amount of employees
30
130
230
330
430
530
2012 2013 2014 2015
Financial values, in mln $
Revenue Cost of developers
10%
20%
30%
40%
50%
60%
2012 2013 2014 2015
Financial values and ratios, in %
Revenue growth Employee cost/revenue EBITDA
9.0
10.0
11.0
12.0
2012 2013 2014 2015
EBITDA per developer in 1 000$
60
64
68
72
76
2012 2013 2014 2015
Revenue per developer, in 1 000 $
7. TCS FINANCIALS
15%
25%
35%
45%
55%
2012 2013 2014 2015
Financial values and ratios, in %
Revenue growth Employee cost/revenue
220,000
240,000
260,000
280,000
300,000
320,000
340,000
2012 2013 2014 2015
Amount of employees
9
10
11
12
13
14
2012 2013 2014 2015
EBITDA per developer in 1 000$
32
34
36
38
40
42
44
46
2012 2013 2014 2015
Revenue per employee, in 1 000 $
68%
70%
72%
74%
76%
2012 2013 2014 2015
Total costs / Total revenue
0
4
8
12
16
2012 2013 2014 2015
Financial values, in Bln $
Revenue Cost of employees EBITDA
8. Existing business sustainability and profitable growth
Sustainable investments in human capital
Ensure sustainability of a low cost global 24/7 service model
Timely delivery of services with quality framework – TQMS
Leverage on its unique Global Network Delivery Model - GNDM™
from a network of delivery centers distributed across
India, China, Europe, North America and Latin America
New business
Differentiation in low end services such as ITO consulting in niche offerings. Differentiation across the value chain regarding BPO.
Leverage on its partnership network to enter new segments and grow in existing segments
New locations
Become more customer focused in emerging regions such as Middle East, Asia Pacific and Australia
Technological capabilities
Focus on the Centers of Excellence and partnership network to strengthen capabilities in R&D and build state-of-the-art solutions
in emerging technologies
TCS CORPORATE OBJECTIVES
9. Existing businesses Sustainable and profitable growth
To keep long term relationships with key clients through engagement models
Continue to develop their human talent
Leverage on upper levels of the ITO supply chain
Become trusted technology advisor and a leader in engineering services
and systems design
Start to sell internal IT knowledge to third parties
Sustain trainings in IT, operations and quality management
Enter new verticals of business
Make key partnerships with BPO organizations in key verticals
Develop technological partnerships to support horizontal functions and solutions per
verticals
New locations
To expand their global network presence
Innovation recognized as main driver to go beyond customer’s expectations
LUXOFT’S CORPORATE OBJECTIVES
10. Mission
Our mission is to go beyond the client expectations by bringing together technology,
talent, innovation, and the highest quality standards.
Values
LUXOFT’S MISSION & VALUES
11. Mission
To help customers achieve their business objectives, by providing innovative, best-in-class
consulting, IT solutions and services. To make it a joy for all stakeholders to work with us.
Values
Leading change. Integrity. Excellence.
Respect to individual. Learning and sharing.
N.Chandrasekaran, CEO & MD, TCS
TCS’ MISSION & VALUES
12. Outsourcing services as growth driver to obtain margins growth.
Premium services as value and new business drivers give premium margins- Example: Bank 3.0 Financial
services for banking industry
Focus on large (+10mln $) and medium (+3mln $) accounts. No activity with accounts less 1mln $.
Concentration on 6 core verticals: finance, auto, travel, telecom, technology & energy.
Product development strategy: Car as Services Platform, autonomous drive, Safety (AutoSar)
LUXOFT MARKETING STRATEGY
13. Market penetration strategy: further aggressive increase of market share in UK, EU, Asia and North America
markets
- Purchase of ALTI in 2013 (1,200 employees), expansion to EU
- Purchase of IT Frontier in 2014 (2,400 employees), expansion to Japanese market
Market development strategy and looking for affordable solutions in India, Australia and EMEA:
- partnership with Indian government programs
- purchase of CRL in 2012 (80 employees) in India, acquire expertise in High Performance Computing and
Cloud
Diversification strategy:
- Purchase of Citi Group BPO in 2008 (12,500 employees), expansion into BPO offerings
- Purchase of CRL in 2012 (80 employees) in India, acquire expertise in High Performance Computing and
Cloud
Product development strategy: more than 40% of Indian banking works on TCS offerings
TCS MARKETING STRATEGY
14. Qualifiers
Quality
• Emerging Responsiveness
• Accessibility (EU)
• Performance
• Consistency
Efficiency
Price
Quality
• Responsiveness
• Accessibility (worldwide)
• Performance
• Consistency
Efficiency
Price
Dependability
Winners
Innovation
Time
Flexibility and Variety
• ITO supply chain integration such as
engineering services and system design,
application development and maintenance,
system integration
• Training and process consulting
Brand
Time
Flexibility and Variety
• Service and vertical product variety (ITO, BPO,
KPO)
Dependability
• Quantity
ORDER WINNERS AND QUALIFIERS
15. TRANSFORMATION PROCESS
LUXOFT TCS
Strategic partnership
with all global OEMs and Tier 1s
Strategic partnership
with global companies and R&D providers
Global delivery Global Delivery
Integrated supply chain targeting EU and NA Integrated supply chain targeting EMA & Asia-Pacific
Capacities and support centers at emerging locations Capacities and support centers at emerging locations
Why?
Market penetration and sustaining growth strategy,
cost efficiency
Why?
Innovations and further sustainable growth in
emerging markets, cost efficiency
16. INFRASTRUCTURE SUPPORT
LUXOFT - INNOVATION
Various programs to support innovation:
• Promotion and acquiring of top talent
• Luxoft labs at Universities and colleges
• Incentives for R&D excellence
Why? - Innovation sustainability
TCS - ENVIRONMENTAL AND SOCIAL
RESPONSIBILITY
Focus on:
• Social responsibility
• Environmental responsibility about
global warming, energy and societies
Why? - Sustainable brand development
17. ALIGNMENT COMPETITIVE CAPABILITIES AND ORDER WINNERS
TCS LUXOFT
Order winners
Innovation
Brand
Time
Flexibility and variety (BPO, ITO,
KPO)
Innovation
Time
Flexibility and variety (ITO supply
chain)
Competitive capabilities
Time
Efficiency
Quality
Flexibility and variety(BPO, ITO,
KPO)
Brand
Time
Efficiency
Quality
Flexibility and variety (ITO supply
chain)
Innovation
Degree of alignment High alignment High alignment
18. Increasing cost of labor
Significant dependency on financial services – 70% of revenue
Intense competition from companies in high-end segment like
Accenture, CAP Gemini, ATOS S.A
Remain strategically relevant to clients
Increase Global brand perception
LUXOFT FUTURE CHALLENGES
SOLUTIONS MUST BE READY BEFORE
MARKET ASKS FOR IT
WHAT`S HOT TODAY, WILL BE COLD
TOMORROW
19. “Their premium has come off a bit and the
market is adjusting to that, but in terms of their
business model strength, their delivery, their
strategy, TCS is still far, far ahead of everyone
else.”
Kawaljeet Saluja, technology analyst
Increasing costs of labor
Significant dependence on financial services – 40% of revenue
Intense competition from companies like Wipro, Infosys, HCL
technologies
Increased competition from low-wage countries like China,
Indonesia
Risk management and strategies to mitigate policy risks such
as the US Congress plans to implement restrictions in Visas
(45% of all employees are onsite)
TCS FUTURE CHALLENGES
20. LUXOFT RECOMENDATIONS
Strategy to open new R&D offices and increase Global
presence (such as Asia-Pacific)
Keep focusing and increase business expertise in selected 6
core verticals to keep strategic advantage
Focus on premium quality delivery
Further develop own portfolio of advanced solutions and
products to get premium income
Keep the focus on highly skilled middle & senior developers
21. TCS RECOMENDATIONS
Keep costs low and open new offices in Asian and African
countries with low salaries
Further penetrate premium segments and Tier 1 clients
Put focus and actively develop new directions – BigData, IoT,
Predictive Analytics instead of scaling with old and current
technologies
Active cooperation with governments in Asia
Further development of own product portfolio