1. COMPANY CASE STUDY
Tata Consultancy Services: Selling Certainty
Strategic Management
KukHwa Kim

2. Kim 1
1 PROBLEM STATEMENT
Tata Consultancy Services (TCS) is the India’s largest Information Technology (IT) services
company that provides nine different offerings to its customers (See Exhibit 1). TCS operates 175
offices in 50 countries, and it has become the first Indian IT services company to penetrate other than
the U.S. by entering into the U.K.,Europe, and Latin America. Main competitors of TCS are coming
from both India’s domestic IT Services industry and global IT Services industry. Infosys Technology,
Wipro Technologies,and Cognizant Technology Solutions are based in Indian IT Services market.
IBM Global Services and Accenture are global leaders in IT Services.
TCS decides to adopt “Experience Certainty” strategy based upon its extensive study on the
company’s operational performance. The study has indicated that TCS stands out for its predictably
delivered high-quality IT Services and cost-effectiveness. These competencies align with what
customers are looking for from IT Services vendors: the truly predictable delivery of IT Services.
“Experience Certainty” attempts to gain a competitive advantage by assuring its customers that they
will achieve excellent results that are within budget and time as planned. “Experience Certainty” is a
business level strategy that fits in Differentiation Strategy type as it aims to provide unique
competitive advantages and broad competitive scope.
While the strategy is built on TCS’s strengths, TCS’ management still concerns that it will face a
number of challenges adopting the “Experience Certainty” strategy. The main issues is, “Can TCS
communicate and translate the concept of certainty into foreign operations outside India and sustain
its profitable growth in intensely competitive IT Services market? Through the strategy, TCS intends
to more aggressively compete against widely known global IT leaders while differentiating its
position from IT companies operating in India, and reach $10 billion in revenue by 2010.
2 EXTERNAL ANALYSIS
FACTORS GENERAL ENVIRONMENT 2007
DEMOGRAPHIC  In 2006, the largest Software export market was the Americas (67%) followed
by Europe (25%). Financial Services is the largest client industry (38%)
followed by High-tech/Telecom (19%) for India’s Offshore Services.
 India’s IT services sector is more concentrated than the global industry- The
top 3-4 players (revenue over $1 billion) earned 45% of revenues,the next 7-10
players (revenue $100 million to $1 billion) earned 25%, offshore operations of
IT majors earned 10-15%.
 Indian IT industry has a number of technical institutes and universities over the
country offer IT education and huge working age population.
POLITICAL/
LEGAL
 India was the dominant location worldwide for offshore services (estimated
market share 65% for offshore IT Services and 46% for offshore BPO) in 2005.
In 2007, total Indian IT-ITES (including hardware) is $39.6 billion and 5.2% of
India’s GDP. This indicates that Indian Government’s stable political
environment and/or concentrated political support on IT industry would have a
huge impact on both domestic and global IT Services industry.
 Foreign investment policies and Tax policies in the sector provide
favorable/competitive environment to Indian IT Services industry.
ECONOMIC  The large difference in skilled labor cost between the U.S. and India stimulates
Indian IT Services industry, specifically Offshore Software Development.
Software Development is very labor intensive with personnel-related costs

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accounting for 70-80% of total costs.
 The exchange rate between USD and Indian Rupees plays an important role for
Indian IT Services industry as Indian IT Services’ revenues are largely earned
in USD.
 Other emerging markets such as China grow rapidly.
SOCIAL-
CULTURAL
 Anticipation on a shortage of IT professionals in the U.S. would support Indian
IT Services’ continuous growth – the number of IT College graduates declined
(50%) in the U.S. between 2004 and 2006. Computer science enrollments were
highly volatile and had suffered a similar decline between 1983 and 1987.
However,the availability of number of IT professionals in India remains
sufficient. Also, a variety of initiatives are adopted to address potential talent
shortage.
 The U.S Department of Labor projected 25-50% increase in employment in
most IT related occupations between 2004 and 2014, and India’s large pool of
talents can take advantage of the current internal demand for IT Services.
TECHNOLOGY  Indian IT Services companies have acquired quality certifications- 48% of the
world’s CMM Level 5 software centers are located in India. While Offshoring
was initially motivated by cost and capacity considerations, quality has become
a major selling point as IT Services industry matured.
 The development of new IT technologies and business segments-Indian IT
Services companies do not limit their expertise on Custom Application
Development and Maintenance (CADM). They aggressively expand the range
of IT Services offerings including IT consulting, systems integration, and IT
resource management.
 Technology innovation including SOA, Web Services, E-business and E-
commerce.
GLOBAL
SEGMENTS
 Global IT services was a $628 billion industry in 2005, expected to grow to
$825-875 billion by 2010.
 Smaller companies (revenue below $100 million) outperformed with 34.4%
average gross margins.
 Integration of IT into clients’ business processes made outsourcing enormously
complex and raised significant execution risks.
 Analysts predicted nearshore and offshore IT Services would grow six fold
from 2004-2010. Nasscom estimated the total addressable market for offshore
IT services was $200-250 billion, implying only 10-14% penetration. Similarly,
Nasscome estimated a $120-150 billion addressable market for ITES-BPO,
implying 9-10% penetration.
EXTERNAL ANALYSIS OUTCOMES
OPPORTUNITI
ES
 Maintained robust growth for offshoring IT Services due to cost advantage
 Highest IT Services spending on Development and Integration, IT Management,
and Process Management (part of BPO)
 Technical expertise becoming more important
THREATS  Increasing competition from emerging IT Offshoring markets such as China
 Competition among Indian domestic companies that drives rapid wage growth in
India
 Increasing attrition rate

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PORTER FIVE FORCES INDUSTRY ANALYSIS- INDIAN IT SERVICES INDUSTRY
Affecting Factors
Rivalry Among
Existing
Competitors
(HIGH)
 There are significant cost differences among IT Services firms as cost-saving is
the main motivator for offshore IT Services.
 Differentiated value delivery to customers is important as the industry matures.
 Brand loyalty and brand marketing play an important role.
 Companies cannot adjust prices quickly as they are based on the combination of
various factors such as individual company’s capacity, project type, geographic
range, and etc.
Threat of
Potential
Entrants
(LOW-
MODERATE)
 Reputation of leadership and established brand are important in IT Services
industry.
 Access to resources is relatively easy for entrants.
 The largest firms are the fastest growing and hold a substantial profitability
advantage over smaller firms- competition is high.
Product
Substitutes
(LOW)
 There is no IT Solutions substitute outside the IT Services Industry.
 Integration of IT into clients’ business processes makes outsourcing complex and
raises execution risks-Price of substitutes is high.
Bargaining
Power of
Suppliers
(MODERATE-
HIGH)
 India has the largest pool of talent appropriate for offshore IT-ITES.
 For large IT Services project, specialized IT Consulting is required, hence there
is few substitutes for supplier’s input.
 Suppliers can use price discriminate among potential customers according to
ability and willingness to pay for the services.
Bargaining
Power ofBuyers
(LOW-
MODERATE)
 Indian IT Services industry is much more concentrated than the global industry.
 Usually, IT Services projects are large and generate high margins.
 Buyers have limited options for high quality and cost advantage IT Services
providers.
 The prices of IT Services are negotiable between buyers and sellers.
OUTCOME OF INDUSTRY ANALYSIS
ATTRACTIVENESS  Indian IT Services industry is very attractive in terms of profit potential.
Although the competition is high among existing competitors, the threat of
substitutes is low and bargaining power of suppliers is fairly high. Also,
large companies like TCS have potential profitability advantage over small
companies.
INDUSTRY
CHANGES
 Differentiated proposition is becoming a critical issue for Indian IT
companies as other offshoring markets such as China emerge. There are
increased risks that Indian IT Services industry lacks sufficient cost
advantage or customer value.
SUMMARY OF COMPETITOR ENVIRONMENT
Infosys IBM
Position India’s 2nd
largest IT firm World’s largest IT firm
Strategies Focus on offshoring services Comprehensive innovation-driven portfolio
Core competencies Branding & Marketing 3rd
most valuable brand acting as competitive
advantage
Weakness Small presence in India market Expensive, inflexible, IBM exclusive
technologies
Financial position comparison (See Exhibit 3)

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3 INTERNAL ANALYSIS
RESOURCES
Tangible Financial  TCS strong financial position- TCS is part of the Tata group, its
2005-2006 revenues were $21.9 billion, equivalent to 2.8% of
India’s GDP.
 TCS went public in India in 2004. At $1.2 billion USD for a 13%
stake in the company, the IPO was India’s largest to date and first
IPO of over $1 billion USD.
Organization  TCS has well designed and thorough planning, measurement,and
report process that ensure that every individual from the top
management to bottom perform the same fuction for their direct
reports.Where the processes depend heavily on relationships with
other companies, TCS is able to use flexibility to translate the
processes into more relevant external objects.
 TCS’s top management is stable and strong, and demonstrates
diligent leadership, innovation and productivity.
Physical  TCS operates 175 offices in 50 countries.
 TCS has invested in Infrastructure- new delivery centeres are built
in Chennai, Pune, and Noida, among other locations, but existing
infrastructure are fragmented. Consequently, it hurts efficiency,
internal communication and customer perceptions.
Technological  TCS has developed Global Network Delivery Model(GNDM) in
order to effectively address regulatory, language, and time zone
requirement.
 TCS makes continuous efforts to innovate their technology. (i.e.,
Software Reuse,Defect Prediction Model, Centre of Excellence,
Process Maturity, and KnowMAx)
Intangible HR  In FY 2007, TCS’ total workforce is 89,419 employees. New hires
includes 5,967 staff working outside of India. As of Q2 FY 2007,
the average age of TCS staff is 28.2 years old.
 TCS’s In-house training program enables it to hire people from a
broader variety of backgrounds.
 TCS’s compensation policies are conservative. Senior employees on
average are paid comparatively less. Despite these policies, TCS’s
11.3% attrition rate was the lowest among large Indian IT services
firms.
Innovation  TCS’s total R&D spending of Rs. 320 million in 2005-6 (~$7
million, 0.28%)
 “TCS-Innovation Network” linkes bewteen start-ups,alliance
partners, and academic institutions.
Reputation  Although marketing is not a competitive strength for TCS, it has
known for superior services and expertise on large projects in
financial services industry. In addition, the Tata group has known
for its dedication to promoting India’s economic growth and
upholding high ethical standards.
 Clients consider TCS as a trusted business advisor, and TCS was
rated India’s best employer in IT services by Dataquest-IDC for the
third consecutive year.

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Capabilities & Core Competencies:
Valuable Rare
Costly
to
Imitate
Non-
substitutable
Competitive
Consequences
Performance
Implications
Distribution Yes Yes Yes Yes Sustainable Above-average
HR Yes Yes Yes Yes Sustainable Above-average
MIS Yes No No Yes Temporary
Average-
Above-average
Marketing Yes No Yes No Competitive parity Average
Management Yes Yes Yes Yes Sustainable Above-average
Manufacturing Yes No Yes Yes Temporary
Average-
Above-average
R&D Yes No Yes Yes Temporary
Average-
Above average
Top 3 Core competencies & Least strong capability:
 Distribution: The combination of physical operation centers, GNDM, abundant talent pool, TCS-
Innovation Network, and fianacial power enables the company to effectively provide quality IT
Services to individualized customers,whose requirements vary. This capability is able to neutralize
the external threats (i.e, economic downfall, emerging new technology, or emerging offshore hubs)
via reorganizing resources accordingly. Hense,this capability yields a sustainable competitive
advantage for the company.
 Human Resrouces:TCS has a sufficient talent pool inside and outside of India and continues to
broaden its hiring scope, supported by in-house training program. The larger the scope of human
resources,the greater the benefit to the company as they create additional knowledge, exchange
knowledge, and contribute to effective decision-making. TCS makes efforts to integrate HR policies
across business sectors and geographies. Also, it updates compensation plan as part of attrition rate
control. Combining organization and stable top management resources,it is expected to yield a
sustainable competitive advantage.
 Marketing: TCS has mainly relied on “words-of-mouth” rather than publicly promotes the company
brand. However,TCS has built the credible reputation through feedback from satisfied clinets,
analysts and globl network. A well-known and highly valued brand name is an application of
reputation as a source of competitive advantage. TCS will require a continuing commitment to
advertising in order to take advantage of its reputation associated with its brand.
 Management: TCS has stong management leadership that integrates day-to-day operations and the
company’s commitment to customer satisfaction. Also, TCS’s top management is stable and
diligently demonstrates its commitment to productivity and innovation. This capability creates a
sustainable competitive advantage.
TCS is currently competing in Indian IT Services industry as a corporate level strategy. TCS has
developed high levels diversification, related constrained, strategy (See Exhibit 1) by building resources
and capabilities to create quality IT Services. With the new business level strategy, “Experience
Certainty”, TCS decides to simplify its offerings in three categories: IT Services, Business Solutions, and
Outsourcing. The new business strategy reflects TCS’s core competencies (quality IT Services and cost-
effectiveness) that are matching with current external opportunities (See Exhibit 2).

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4 ALTERNATIVES
1. Employing the current strategy with modification: “Experience Certainty” is developed based on
its core competencies to differentiate its position from domestic IT Services firms and more
aggressively compete with global IT Services leaders. It also simplifies its service offerings into
IT Services, Business Solutions, and Outsourcing.
2. Shifting focus on providing high-end technology services: TCS has been focusing a lot of its
efforts in sustaining a cost effectiveness. As new cost-saving markets are emerging, however,
Indian IT industry’s cost competitiveness decreases.TCS should differentiate its position by
offering high-technology concentrated services and move away from being cheap resources.
3. Focusing on high margin services: TCS was a pioneer in offshoring services,but it has not
focusing on offshoring projects. Considering Infosys’ aggressive growth that concentrates
offshoring and BPO,TCS might consider to invest its efforts on offshoring and increase profit
margin.
5 RECOMMENDATION AND IMPLEMENTATION PLAN
Recommendation: Employing the current strategy with minor modifications
“Experience Certainty” strategy implicitly promises to provide a level of certainty and excellence to
its customers,that no other competitors can match. Developing the strategy based on the company’s core
competencies: cost effectiveness and technical expertise is a reasonable decision. However, TCS requires
a clear and integrated brand identity as it attempts to compete with widely known global IT Services
leaders such as IBM and a domestic firm, Infosys, recognized for its strong marketing & branding. Direct
communication about TCS’s value propositions with specifically targeted customers will allow the
company to deliver consistent services on a global basis. Also, it will support TCS to convert its highly
valued reputation into a source of competitive advantage; in this way,TCS will be able to set a foundation
to move up to the industry’s global top tier. In order to clarify the company’s proposition and improve
communication, TCS should nurture its least strong capability (marketing) while simultaneously trying to
exploit capabilities that can yield a sustainable competitive advantage. Such attempt will help the firm to
rebranding its company as well as ensure clear internal and external communication in regard to its
commitment to certainty. In terms of potential profit, TCS’ improved brand will have positive impact on
sales and signing large project deals as noted that brand did matter for an IT Services vendor selection.
Implementation plan:
Who: TCS marketing unit and every workforce of TCS
What: Direct communication about TCS’ customer value proposition and commitment
When: Every time when TCS engages in customer relation and publicly promote the company’s
proposition
Where: Across TCS’ business and geographic range
How: By setting specific target segments and communicating a consistent message about their
commitment on providing predictably delivered IT Services that are within set budget and time.
Assumptions:
My recommendation is based on the presumption that TCS’ IT Services provided to customers
are state-of-the-art solutions that can successfully compete with global IT Services leaders. Also, it is
assumed that TCS will continuously pursue technological innovation and service improvement while
employing the recommended strategy because strong marketing itself cannot sustain the competitive
advantage of the firm.

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Exhibit 1: TCS 9 offerings & major market in 2007

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Exhibit 2: TCS’ achieving competitive Advantage
Exhibit 3: Financial Positions & Employees Comparison
Internal capability
•Distribution
•HR
•Management
External opportunities
•Growth for Offshoringwork due to
cost saving
•Technical expertise becoming
important as industry matured