By Steve Banker, ARC Advisory Group
Tata Consultancy Services (TCS) had its annual event for analysts in Boston this week, and they reported the usual astounding growth you hear from the leading offshore IT service providers. In their case, their year over year revenues grew by 33 percent and net headcount by over 20 percent. They also reported on changes to their strategy, a re-organization, and allowed analysts to discuss the parts of their business - Application Development and Maintenance, Infrastructure Services, Business Process Outsourcing, Enterprise Implementations, Consulting and so forth - with the appropriate executives. However, by far the most interesting portion of their event was a discussion by various CIOs on how they used TCS.
The CIOs asked not to be named, nor did they want their companies to be identified. Two of the CIOs came from manufacturing companies, one from Financial Services. TCS obviously picked good customers, the ones who used a variety of their services. Nevertheless, these clients spoke in glowing terms about what TCS did for them. What follows is the gist of what the two CIOs from manufacturing companies said.
One of the manufacturers, we will call them Company A, had revenues of over $5 billion. A second, call them company B, was much larger. Both companies had discrete production processes, and both had multiple divisions.
TCS was engaged with these companies in a variety of ways: ERP, EAI, Enterprise Content Management, and PLM implementations; application support and maintenance including upgrades; custom software development; and for Business Process Outsourcing.
So what was so positive about this?
Both companies use multiple offshore IT suppliers, because single sourcing is too dangerous. However, both, based on their experience, have come to view TCS as their primary partner in this area.
TCS was praised for its flexibility. Both companies primarily work with TCS using fixed price contracts with bonuses built in. Both said that one of the key difficulties in outsourcing work is project scope creep. In one case, one manufacturer blamed that on poor internal discipline. The other CIO felt scope creep was inevitable, nobody knows everything at the beginning of a new project. With other suppliers, scope creep can lead ongoing price negotiations, and a customer can end up feeling they were gouged. One praised TCS for being flexible and "doing what it takes to get the job done". The other said, "When you are in a fire fight you don't want to have to go through a renegotiation with your ammo vendor". He added that with some of the bigger consultants, they have had to take the contract out and point out that the consultant was contractually obligated to do something they were dragging their feet on, but that had not happened with TCS.
For one company, TCS was credited with providing important thought leadership - particularly in the area of Business Intelligence (BI) - that changed the way they looked at architecture, deepened their understanding of the various vendors' capabilities, and led to changes in their own BI strategy. In fact, they liked the thinking of TCS so much in this area, they hired one of TCS' key BI people away from them.
TCS was praised for living up to its promises, even in areas where they could not be expected to have had previous experience. One of the companies mentioned that their operations people drive them to implement best-of-breed applications, some of which might be better described as "bleeding edge" solutions. Obviously, TCS could not be expected to have talent in niche solution areas. However, when they asked if TCS could help, TCS said they would acquire the talent they needed, and then lived up to its word. TCS was described as a good partner in these areas, because they brought new ideas to the table, introduced them to suppliers they did not know about, and most importantly served as a voice of experience that "reigned them in" at important junctures in these projects.
Both companies said that learning how to work with an offshore provider is not easy. Both organizations admitted that their internal discipline was not as good as TCS', and that some of their IT people were threatened by it. One says some of his people will say "it was better before", and because they lacked baseline metrics until they hired TCS, he cannot disprove it. However, it is obvious to him that it was not better before.
Capability Maturity Model Integration (CMMI) is a measure of IT process maturity, and TCS operates at Level 5, the highest level. The other CIO made the point that learning how to get work done with people you don't directly manage is tough. Your key people have to learn how to do this. But actually TCS has better processes, and you have to learn how to put your ego aside and not try to micromanage.
Obviously, TCS wanted to pick customers that would say good things about them. However, I have been to many user conferences and analyst events and seen many user panels. I have rarely seen such positive sentiments expressed about IT partners.