IBEF: October 14, 2019
India’s largest IT service company, Tata Consultancy Services Ltd. (TCS), is planning to become the country’s largest software product company by following a new way for itself, as the revenues of the company have already passed the billion-dollar-mark.
Digitate, a TCS unit which was created three years back, is a pure-play software products company, having its own HR rules, start-up culture, and different pay scales. Digitate will be soon reaching the targeted US$ 100 million revenue mark. The other software products of the company already generate over a billion dollars in revenues, as per TCS’ Chief Operating Officer, Mr. NG Subramaniam.
Mr. Subramaniam added that overall products business of the company is way above billion dollars already, and in coming future the company could, even list some of these product units on the stock exchange as independent firms.
“We have multiple products companies and our intent is to keep them within TCS. If an opportunity comes to list them separately, we will. But right now, we are building products and services to be a strong services company that also has products,” said Subramaniam.
The chunk of revenues apart from Digitate comes from TCS BaNCS, according to Subramaniam. Digitate is one of the fastest growing pure-play software products in the world.
Mr. Subramaniam added, “Our BFSI platforms is big business right now... TCS BanCs today has close to 500 clients that run their day-to-day core operations on our platform”. In the last few years, the company has focused its investment in three Ps — products, platforms and patents. These Ps help in future proofing the services business along with allowing TCS to create new capabilities that can be sold at much higher margins.
By September 30, 2019, the company has been granted 1,121 patents out of the 4,874 patents that were applied. 192 patents were applied during the first quarter of FY20. The granted patents are mostly for software products. The benchmark set for the products businesses is much higher when it comes to margins, according to Mr. Subramaniam. The investments that comes into the company are aimed at bringing in higher margins along with the ability to offer unique capabilities.
Mr. Subramaniam futher added, “Digitate is a strategic unit; TCS Financial Services that runs TCS BanCS is a separate business unit, and TCS BFSI platform is a separate business unit. We call them strategic growth businesses. We have kept them separate because fundamentally they work differently from services. Pure-play services business remains separate.”
Digitate has only one commercial product, named Ignio, which is a cognitive automation tool that competes with the likes of IBM Watson. TCS other software products include digital learning tool TCS iON, TCS Algo Retail, focused product for retailers; and TCS BaNCS, which is the largest product so far, having a core banking software product suite. TCS is also making use of other channel partners to increase the growth of the products business, starting with selling Ignio.
“So far we had been selling Digitate through our own internal sales team and integrated Ignio into our solutions.
“Now we have taken a conscious decision to appoint channel partners to accelerate sales. We have started onboarding partners in the last two quarters. In this quarter, we onboarded three more partners,” said Subramaniam.
“Opportunity for us is to make, for example, TCS Financial Services a pure products company and outsource implementation to the services team (within TCS) as a systems integrator,” said Subramaniam. In order to avoid any conflict of interest with clients, TCS is keeping the software products divisions completely away from the services unit.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.