Re-organisation signifies TCS's coming of age
22/02/2008
TCS announced a company-wide re-organisation of its business into 'client-facing' units. The move comes as the business approaches a year end in which it should generate more than $5bn in annual revenue.

OVUM Samad Masood

Confirmed details are as yet sparse; however, it seems that the company is splitting its business into five groups, which separate out delivery, new sales, new product initiatives and horizontal internal shared services. The five groups are:

* Industry Solutions Group - which will look after sales and delivery for existing clients. These will run as units (ISUs) focused on specific clusters of clients and managing their own P&L.

* Major Markets Group - focusing on new business growth in the US, UK & Europe. This group is simply new sales focused and has no delivery responsibility.

* New Growth Markets Group - focusing on new business growth in India, Asia-Pacific and other emerging markets. Similar to Major Markets this is a sales only division.

* Strategic Initiatives group, focusing on products, SME business and BPO platforms.

* Organisational Infrastructure Units - brings together the Process Excellence Group, Shared Services, Technology Excellence Group, and Resource Management, all of which feed into the ISG above.

Comment:

It's fair to say that TCS has tried to find the middle ground between the 'Vertical vs. Horizontal' organisational structure debate. With clients clustered vertically within the business so that they can benefit from shared expertise in each ISU, supported by horizontal groups focusing on strategic and tactical company-wide initiatives.

It's not new for an IT services vendor to take this sort of route - but it is a big step for an Indian vendor such as TCS. Especially when you consider that three years ago the company was three times smaller (!) and would not have required any such structure to manage its business.

The risk of the new model is that the company becomes 'stove-piped', resulting in reduced economies of scale, flexibility and 'agility' - one of the aims of the re-organisation. However, by making process/technology excellence, resource management, and strategic initiatives as horizontal units, TCS is clearly trying to counter that risk.

The formation of the Major Market and New Growth Markets groups are definitely a good thing. They help to formalise and retain knowledge and expertise in the new and large bid sales process - an area on which TCS is increasingly reliant as it looks to retain growth momentum while it grows into an ever larger business itself. Our only concern is that if these sales divisions lose their ties with the delivery divisions, risking a sales/delivery mismatch when building solutions, and resulting in unhappy clients.

We're not clear yet as to how exactly TCS has clustered clients around its ISUs. We expect that major verticals such as financial services, telecoms and manufacturing would have their own ISUs. But clients could just as well be clustered, not by industry vertical, but by the problem they are trying to solve, or the technology utilised, or geographic region. All these options are valid and carry their own risks and benefits. We look forward to hearing how exactly TCS has decided to align ISU's when we get a formal briefing with it in March. Of course we'll follow up with our views then as well.