TCS entered the BPO game much after others like HCL, Wipro and Infosys did. That was not the issue for a company like TCS, as it is the most comfortable among Indian IT services firms to take big inorganic decisions. While the first phase had marked the typical strings of pearl routewhen it took control of AFS, its own JV with SwissAir, and Phoenix Global Solutionseveryone was expecting something big. There was a time when each BPO services firm up for sale, was rumored to be going to TCS, and that included GEs captive unit, now Genpact and United Utilities subsidiary, Vertex.

But TCS also had the late-mover advantage. By the time it made its moves, the voice space was already getting overcrowded, putting pressure on margins. It was natural for TCS to avoid those and decided to focus only on areas where its IT strength could make a defining difference. The Pearl Insurance deal it closed in FY 06 was the right opportunity. An $847 mn deal spread over twelve years, it provided TCS the right opportunity to help the insurance firm find the exact difference between cost and revenue per policy, and minimize the cost. TCS is doing that a mix of platform consolidation (moving disparate platform to its proprietary platform, IIMs) and offshoring, the latter starting only from year two.

Platforms are key to TCS BPO strategy. Apart from IIMs, it is using TCS banking payment processing platform, QUARTZ and is developing a SAP-based platform in payroll processing. BPO services based on platforms today provide close to 25% of TCS revenue. While TCS plans to push platform BPO, it will have a profitable proposition in it, only when it can move significant part of the contract to transaction-based pricing. TCS admits that even today, large part of the contracts are FTE-based.

TCS plans to continue its twin strategyplatform-based approach and inorganic (ideally customer asset transfer kind) growth. BPO is one of the few areas where TCS is not #1. If and when it becomes #1 is something that will determine the answer to another big question: who dominates, pure-plays or multi-services firms. DQ

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