Emerging markets (or more generally growth markets) are not easy to
penetrate for IT Services players. A cookie cutter or one-size fits all approach
hardly works. IT Services players have to understand the nuances of each
market and yet find common elements across markets to craft specific solutions.
TCS sets the benchmark here and sets the industry template of establishing
credibility across emerging markets. At 20% of its revenues from emerging
markets (over US$2 billion per year), TCS stands alone in setting and executing
on its agenda in emerging markets - a bedrock of differentiation.
Emerging markets are very much unlike developed markets for IT
Services. They are characterized by much greater component of discretionary/
transformation spending spurred by capex (not opex). The annuity component
of revenues is relatively low. Fixed price is the dominant pricing mechanism in
such contracts, not managed services which works better in recurring-type
projects. To succeed in emerging markets the business model has to be
distinctive, geared towards turnkey/transformation projects. There is a fair
element of packaged-based (ERP-based) transformation solutioning.
The challenge in emerging markets is to develop scale given the dominance
of project-oriented assignments. To establish scale, IT Services firms have to
be able to work on extracting common elements across markets and creating
solutions around those markets. The government is a fairly large client in
developed markets & e-governance initiatives are common to several emerging
markets. TCS does well at developing common, standardized cores, which can
be applied across markets with a customized system integration layer.
Presence in the emerging markets is important because they may be leading
the adoption of SMAC (Social, Mobility, Analytics, Cloud). Except for the
cloud in SMAC, TCS finds emerging markets shaping up very well for other
stacks of SMAC namely analytics, mobility and social. Unless firms have their
tentacles entrenched in emerging markets, they could be amiss at adequately
understanding and addressing the SMAC opportunities in emerging markets,
which will likely become mainstream in developed markets with a lag.
Making margins in emerging markets requires differentiated and
transplantable solution-based models (not the cost arbitrage-based onsiteoffshore model of the developed markets). Commonalities exist (in various
emerging markets) in industries such as power/utilities pertaining to leakages in
distribution & generation of power/energy. TCS makes the model transplantable
by leveraging its modular solutions developed for India and other emerging
markets. We discuss TCS’s emerging market template in detail in this report.
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penetrate for IT Services players. A cookie cutter or one-size fits all approach
hardly works. IT Services players have to understand the nuances of each
market and yet find common elements across markets to craft specific solutions.
TCS sets the benchmark here and sets the industry template of establishing
credibility across emerging markets. At 20% of its revenues from emerging
markets (over US$2 billion per year), TCS stands alone in setting and executing
on its agenda in emerging markets - a bedrock of differentiation.
Emerging markets are very much unlike developed markets for IT
Services. They are characterized by much greater component of discretionary/
transformation spending spurred by capex (not opex). The annuity component
of revenues is relatively low. Fixed price is the dominant pricing mechanism in
such contracts, not managed services which works better in recurring-type
projects. To succeed in emerging markets the business model has to be
distinctive, geared towards turnkey/transformation projects. There is a fair
element of packaged-based (ERP-based) transformation solutioning.
The challenge in emerging markets is to develop scale given the dominance
of project-oriented assignments. To establish scale, IT Services firms have to
be able to work on extracting common elements across markets and creating
solutions around those markets. The government is a fairly large client in
developed markets & e-governance initiatives are common to several emerging
markets. TCS does well at developing common, standardized cores, which can
be applied across markets with a customized system integration layer.
Presence in the emerging markets is important because they may be leading
the adoption of SMAC (Social, Mobility, Analytics, Cloud). Except for the
cloud in SMAC, TCS finds emerging markets shaping up very well for other
stacks of SMAC namely analytics, mobility and social. Unless firms have their
tentacles entrenched in emerging markets, they could be amiss at adequately
understanding and addressing the SMAC opportunities in emerging markets,
which will likely become mainstream in developed markets with a lag.
Making margins in emerging markets requires differentiated and
transplantable solution-based models (not the cost arbitrage-based onsiteoffshore model of the developed markets). Commonalities exist (in various
emerging markets) in industries such as power/utilities pertaining to leakages in
distribution & generation of power/energy. TCS makes the model transplantable
by leveraging its modular solutions developed for India and other emerging
markets. We discuss TCS’s emerging market template in detail in this report.
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