TCS became the third most-valued IT services brand globally, a report said.
Harish Puppala | Rakesh Sharma
TCS, the bellwether of the Indian IT industry, has been in the news for some great results of late. We’d discussed in earlier podcast about TCS breaching the $100 billion barrier to join an exclusive club of worldwide organizations. It was the second Indian company after RIL to do so. Four Indian IT services companies - TCS, Infosys, HCL and Wipro - made it to the global rankings.
Now comes news that TCS is the third most-valued IT services brand globally. That’s right, globally. Brand Finance, a London-based branded business valuation consultancy, releases an annual list of Brand League tables, segmented by region or sectors. And this year, Tata Consultancy Services has been ranked the third most-valued IT services brand globally in 2018-19, after Accenture and IBM.
Accenture, which is valued at $26.3 billion, was declared the world's most-valued IT services brand. Last year, that top spot was held by IBM, which now occupies second place with a brand value of $ 20.4 billion. The statement by Brand Finance said, “Holding steady in third place is India's largest IT services conglomerate, TCS, up 23% to $ 12.8 billion, with a value bolstered by the brand's disciplined focus on the market's increased demand for digital services.”
TCS’ Chief Marketing Officer Ravi Viswanathan said, “2018 was a year of celebrations at TCS, marking the completion of five decades of industry-leading customer satisfaction, business performance, and community impact.” He said the last year was characterised by momentum and milestones for the company, including reaching $100 billion in market capitalisation, and securing record-level new customer partnerships in digital services.TCS also emerged a leader in the Japanese market, thanks to “all-round customer experience” and use of artificial intelligence and robotic automatics in its transformation programmes.
TCS & Tata: Keeping it splendid
In addition to the IT services list, The ‘Tata’ brand has entered the list of Top 100 most valuable global brands, according to the Brand Finance Global 500, 2019 report released at the World Economic Forum in Davos. Tata is the lone Indian brand in the Top 100. It was rated 104 last year and has climbed to 86 this year. The total value of the Tata brand shot up 37% to $19.5 billion in 2019 from $14.2 billion a year ago. Brand Finance explained that the increase in the valuation of the Tata brand came about after improved performances by key Tata companies like TCS, Tata Motors and Tata Steel.
David Haigh, the CEO of Brand Finance, said “The Tata Group has seen an impressive increase in Brand Value in 2019, and have been rewarded by being the only Indian brand within the top 100 most valuable brands in the world. This solid increase in Tata Group’s brand value has largely been driven by an outstanding year for TCS, which improved on their Brand Strength and are for the first time rated a AAA brand.” Tata Sons chairman N Chandrasekaran said, “This recognition of the strength of our brand will encourage us to drive our businesses in a socially responsible manner globally while continuing to strive for excellence through innovation and entrepreneurship.”
Crucially, Haigh also added that another reason for the conglomerate's increase in value was its “cash-cow Tata Consultancy Services.”
TCS, in a lot of ways, was one of the companies that put India on the map as an IT hub. It was after all TCS along with similar firms like Infosys which pioneered modern IT outsourcing, by taking over many of the back-office support functions for the Who's Who of global corporations like GM, Citigroup, among others. The models that were built by TCS and its peers have in fact been adopted by much of the rest the world, and have in the process made Silicon Valley teem with Indians. The IT Services industry which today generates about $167 billion annually is now at a crossroads. There is the rise of automation, artificial intelligence, there is cloud computing... all of these trends in the industry are pushing away the rather labour-intensive back office programming operations that TCS specialises in. But analysts also believe that Tata may be in the best position to make that leap from the old ways into the New World, so to speak.
TCS has shown that it has the spunk to do what it takes. IBM and Accenture, of course, remain the top players in the IT services market cap pecking order, but IBM’s market cap is only about 33% higher than that of TCS, though its revenue is more than 300% higher. However, TCS is in a unique position - it has built a position as the low-cost value player at scale backed by the execution ability to maintain low costs while still delivering quality work. But that ability to maintain low costs might be threatened in the wake of the new technology sweep that is being seen across the sector. According to veteran industry watchers, the positioning by TCS supports good revenue growth and this low cost execution supports distinctive margins. "Good growth plus distinctive margins over many years produces a huge market cap," said Rod Bourgeois, Head of Research in the US-based Deepdive Equity Research.
Phil Fersht, CEO of IT research firm HfS praised TCS, saying, “TCS has stayed very focused on relentless execution and less obsessed with marketing messages and trying to sound like everyone else the phone has created its own individual identity which many of the other service providers are still struggling to do. I sometimes call TCS the 'Indian IBM' because of the longevity of its staff and its unique culture”. Rajesh Gopinathan, the company's CEO had said last year, "TCS is uniquely positioned to offer a combination of services - from core-tech transformation all the way to front-end digital technologies. The full spectrum of services is what is positioning us beautifully in this space".
TCS - a behemoth
TCS is the ubiquitous IT company in India. It is everywhere. Literally. TCS is the largest private sector employer in India, with nearly 4 lakh employees representing 131 nationalities. It is present in 46 countries. More importantly, it's woke! 35.3% of TCS' employees are women! And that is a sort of gender ratio that is enviable in the IT space. Now, the Tata Group is a huge conglomerate of many successful companies. But even in that group of achievers, TCS is the most profitable firm, accounting for about 85% of the group's profit! Clearly, TCS also played a crucial role in helping the Tata Group enter the elite league of 10 trillion rupee market capitalisation.
Another thing that also contributed significantly to the success of TCS is the fact that the waters in TCS seem to not be choppy. Founded in 1969, the company is on the cusp of celebrating is golden jubilee year, but take a guess as to how many CEOs it has had. Well, I didn't know this either, but, just four! Since its founding in 1969, all the way up to 1996, the company was under the stewardship of FC Kohli. Then there was S Ramadorai, after whom N Chandrasekaran took over. Chandrasekaran of course went on to be promoted as the Chairman of Tata Sons in 2017. Currently, TCS is helmed by Rajesh Gopinathan.
Brand Finance also had a word of praise for the business ecosystem in India. David Haigh said, “There is a reason why Bangalore is known as the Silicon Valley of India. As more IT services brands ramp up their outsourcing outposts across the country, it is the skilled workforce, world class facilities and infrastructure that makes India such an attractive location and ultimately a global powerhouse”. Clearly, Mr Haigh has never been stuck in the mess that is Whitefield. But seeing as praise for Bengaluru is in short supply these days, I suppose we would do well to accept his kind words graciously.
Bangalore based company, Wipro, also made the top-10 list this time around. Brand Finance’s report stated, “Up 25 percent to $ 4 billion, Wipro's significant investments in digital transformation capabilities, niche acquisitions, and a recent brand refresh, have propelled it to be the third fastest-growing brand in the segment”. Wipro’s President of Marketing, Innovation and Technology, Milan Rao, told PTI that such a recognition is a “testament to the company's rich technology heritage, sustained investments in building digital transformation capabilities, and deep domain and consulting expertise”.A Moneycontrol report also noted that American brand Cognizant, whose brand value is up 12% to $ 8.7 billion, and India's Infosys, which saw its brand value rise 8% to $6.5 billion, held onto their previous rankings of four and five. It is also worth noting that though Cognizant is headquartered in New Jersey, USA, it holds a major employee base in Chennai and has offices in Kolkata, Bengaluru, Hyderabad, Mumbai, Pune, and Cochin.