Tata Consulting Eyes Emerging Markets

This month, Tata Consultancy Services (VARBusiness 500 No. 52) created a strategic unit to expand its presence in emerging markets worldwide. TCS is employing this new strategy to diversify revenue and risks, expand its business in emerging markets and explore new sources of talent, all while not leaving its home base of India. The unit will focus on emerging markets across Eastern Europe, Middle East, Africa and Latin America, and will be headed by Gabriel Rozman, TCS executive vice president. Rozman took time to speak with ChannelWeb about the prospects for emerging markets and how they could impact the U.S. economy.

Why the need for the new emerging markets unit?

Our customers are going into new markets: China, Brazil, Russia, South Africa, Kenya, Turkey; each of those are different. They represent a group of important markets. We just announced we're going into Russia, for example. Since that announcement, we've seen a lot of traction, not just with our customers but with our competitors as well. They all want to get into that market. We're leveraging our very good experience in Latin America. We [also] went to Portugal, Israel, and Columbia, each very different, and, after 18 months we are profitable there. We have discovered a skill at going into these markets and making a profit.

We've learned that there are important targets in each country: a bank, an airline, a utility company, etc. For example, we obtained $140 million plus contract with the Pichincha Bank in Equator. We got $200 million job at the Social Security agency in Mexico. You have to be in the country, doing consulting. Today, we have over 600 people in Equador.

We looking to stay in India, it's our major destination, but we need a just-in-case. Part of what makes our experience in Latin America very good is that it is in the same time zone. But, what makes Turkey attractive is that it's trying to get into the EU. Companies in Turkey will have to compete with other EU countries and make adjustments, mostly done through technology. So the strategy is to get into a country like Turkey before it gets into EU. Same with South Africa, within the next 10 to 15 years it's going to be one of most important countries to be in, so we want to invest now , as well as the BRIC club [made up of Brazil, Russia, India and China].

The rupee is becoming stronger and Indian wages are rising. How is that impacting your decision to expand into Eastern Europe, Middle East, Africa and Latin America?

The talent pool in India is not infinite. You can get to the point where resources are scare. Filling that popular 10 p.m. to 6 a.m. slot in India is getting harder, because there are a lot of opportunities, a lot of competition for workers.

Emerging markets today are growing at a faster annual growth rate of 8 percent versus the developed markets rate of 6 percent, according to analyst estimates. What are some reasons for that?

Somehow, the emerging markets are decoupling from large countries' economies. Chile, Brazil, Mexico, went up yesterday, while the U.S.' went down. Commodities are very high, and that's bringing money into those countries. They're investing that money back into their economies. For example, Brazil has invested in aircraft industry.

But Brazil's economy is like an electrocardiogram: It goes up and down. Despite that, still, we make money. You adapt. However, a company can't just be in one or two of these markets, it has to be spread out. For instance, it's a mistake to move large chunks to Mexico, or to Latin America. You have to split it up.

Different industries are growing because of globalization; take banking. Banks are opening branches in every country. So local banks need to do something, with technology, to compete. The same goes for manufacturing, which needs tracking and shipping capabilities, CSR [corporate social responsibility], all things that Tata can help them with.

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