The Hindu Business Line : TCS working to clinch five domestic deals

Mumbai, Jan. 18 Keeping in line with its strategy to penetrate the underserved domestic market, Tata Consultancy Services is working on getting five IT outsourcing deals from Indian firms. All these engagements are upwards of $50 million (around Rs 200 crore) in value, Mr N. Chandrasekaran, Chief Operating Officer, told Business Line.

Only one of these five domestic deals is part of the 25 deals pipeline that TCS said it was chasing, during the company’s results conference on Wednesday. All 25 deals are said to be above $50 million.

For the quarter ended December 31 last year, TCS’ domestic business saw a sequential growth of around 20 per cent.

Margin cause

The significantly different margin structure in international deals vis-À-vis domestic engagements was the major reason why the Indian domestic space was largely untapped till a couple of years ago. “The margin gap between international and domestic engagements is still wide,” said Mr S. Mahalingam, Chief Financial Officer.

While margins for the international IT business are in the 25-30 per cent range, domestic margins could be between 8 and 10 per cent, analysts feel.

So why is TCS attaching so much importance to the domestic market? Says Mr Mahalingam: “The Indian market may not be lucrative from a margins point of view, but it is very important from a strategic perspective. It gives opportunities to develop expertise in complex engagements such as (system integration) at tight budgets.” TCS can then market these capabilities to overseas clients at a higher price.

Though Indian firms have been laggards in the domestic space, overseas IT companies such as IBM and Accenture have been picking large deals in India. “Overseas firms have traditionally played in a field where the margin levels are low and hence any engagement in India gives them comparatively better margins,” said Mr Mahalingam.

More Stories on : Software | Tata Consultancy Services Ltd

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page