Innovation in Emerging Markets – The case of
Tata Consultancy Services (TCS)
D. Prasad Raju
Vice President &
Head of US Midwest Operations
Indiana University – Kelley School of Business
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The Tata Group
Pioneering Indian Industries since 1868
US$ 17.8+ Billion; 250,000 employees,
80+ companies, committed to society
Steel
India’s
Largest
Vehicles and
Engineering
India’s
Largest
Energy
India’s
Largest
Pvt Sector
Player
IT Services
and Consulting
Asia’s
Largest
&
Global No. 12
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Telecom
Top 3
in India
Hotels
India’s
Largest
Luxury Chain
Consumer
Goods & Retail
World’s
No 1
Tea Producer
TCS-Asia’s Largest Global Software & Services Company
Established in India in 1968
US Presence since 1976
2005-06 Revenue
USD 2.97 Billion
Over 62000 Consultants
Over 150 Offices
Across 34 + Countries
Business Partners to
Fortune 100 Companies
(6 in top 10)
Flag bearer of
Indian IT Industry
Pioneer of
Onsite /Offshore Model
Strong Domain Focus
Chinese Presence since 2002
Commitment to
Community
Vision: Global
Top
10 by 2010
First Company to get
Strategic Alliances with
Integrated CMMi & PCMM
leading product Vendors
Level 5 Certification
Beyond the obviousTM
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First & Largest:
- S/W R&D Center in India
- S/W Exporter in India
- Indian S/W company to
cross the USD 2 Billion
mark in revenue
Developing Solutions & Delivering Value
“TCS brings deep experience to its offering, since it has been supplying remote operations in India
for many years.”
AMR Research – November 30, 2004
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Tata Information Technology (Shanghai) Co. Ltd
塔塔信息技术（上海）有限公司
（中国第一家通过CMMi和PCMM五级的公司）
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First Indian IT company to set up its
operations – set-up in June 2002
Registered Office at Shanghai
Shanghai – SAP & Oracle CoEs
Shanghai & Hangzhou – Delivery Centres
Beijing – JV
Academic Interaction Programs with leading
Universities in China
• Vision : Establish World Class Solution Delivery
capability – we already have a superb infrastructure
• Current Strength: 415+ Consultants
• 90% Local Recruits
• First & Only Company in China to have 5
certifications: CMMI & PCMM level 5, ISO, BS7799
& BS15000
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Future trends in Global Service Delivery
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The Need for Global Sourcing – point of view
Context
Potential Benefits
 Increasing Instability
 Increasing Competition
 Acceleration of
Globalization
Outsourcing
 Decreasing
Competitive Advantage
 Demanding Customers
 Business Flexibility
 Cost and Process
Efficiency
 Speed
 Focus
 Improved
Competitiveness
 Stakeholder Value
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Current Outsourcing Models
 “Transfer” Deals such as Traditional IT Outsourcing and Business Process
Outsourcing – this, can be of three types
 Selective – typically a single function is outsourced with objectives of reduced cost and additional
capability
 Strategic – major process or functions are outsourced with additional objective of implementing a
different management approach: Focus on core competencies, variable cost structure, etc.
 Value Based – typically large unique Strategic deals that significantly increase the suppliers and
clients market value. Also enables Clients to leverage stranded assets and share in the value
created
 The Emerging Model – “Transformational” Deals
 A relationship that is designed to put the client and service provider “in the same boat” to create
value for the client’s business through
 Outsourcing non-core activities
 Focusing on strategic capabilities
 Collaborating across the enterprise
 These deals are structured to deliver defined business outcomes, as expressed by clients’
business – the service provider takes some risks associated with delivering against these
business outcomes
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Global Sourcing - Collaboration on the rise
 ‘Coopetition’ gaining acceptance in this space
 India based outsourcing companies are building closer ties with
Western outsourcing and consulting companies
 BTO providers, BPO providers, and ITO providers are also
collaborating
 Products and Services companies are collaborating
 Benefits include
 Pooling of resources and Joint Go to Market Strategies
 Enhanced offering portfolio and Brand Equity
 Increased reach in newer markets
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Growth in Services Outsourcing – Takeaways
 The stage is now global
 Ignore the rest of the world at your own risk!
 To grow, outsourcing firms must collaborate
 The best opportunities demand diverse talents and shared risk
 Growth will come from multiple fronts
 Both organic and inorganic opportunities will play an important role
 Managing growth is as difficult as achieving growth
 We should not lose sight of where we came from, who got us there,
and who we are accountable to for our past accomplishments and
future success
 Our Customers shall continue to be our most important stakeholders
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Innovation in TCS
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Background and Motivation – Innovation in TCS
We established…
We will..
1. A Vision for Innovation Initiative
2. An Innovation Architecture
across the organization
elements
3. A distinction between sustaining
and disruptive innovation
4. An Innovation Process
5. An Innovation Network across
key stakeholders
1. Create measurable competitive
advantage and business impact
2. Create a Technology Brand that is
visible to our stakeholders
3. Leverage the Technology
Ecosystem around us
4. Attract, build and Retain great
Technology People
5. Position Technology Innovation
with a ‘vertical’ focus
Key learning
Stretch Goals
We need to Institutionalize and Scale up Innovation in TCS
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Scope of Innovation Extends across the Enterprise
Innovation in
Our Enabling
Processes
People
Processes
Knowledge
Processes
Internal IT
Systems
Supplier /
Partner
Processes
Innovation in Our Business Models
Leadership systems
Strategy Processes
Business
Models
Customer and
Market models
Innovations in our Offerings
Service offerings
Domain Offerings
Technology
Offerings
Product / IP
Offerings
Innovations in our Delivery
Delivery Models
Delivery Processes
Delivery Infrastructure
Delivery Technology
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Sample: Establish the Innovation Network
Members of bodies
Students
Industry Bodies
Academic Institutions
Startup Companies
Venture Capitalists
TCS
Partner’s Partners
Governments
Alliance Partners
Corporate Customers
Research Institutions
Customer’s Customers
TCS is establishing an Innovation Network – and we believe that this ecosystem will be of great
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benefit to TCS and to all the participants
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TCS’ Focus on Software Research and Development
Products, tools and assets
Released commercial products
MasterCraft – Model based software development
Assent – Code inspection and standards checker
Consult – Experiential knowledge management
Infrex – Business rules management
Proven tools and assets
Testify – Test automation
Revine – Reverse engineering
KDD Toolkit – Library of data mining / statistical processing
In Design / Pilot Stages
Terese – Intelligent text search
Inx – Information extractor
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TCS’ Innovative Research on Decision Support
Systems
Decision Support
Systems
Decision Systems Initiative
Knowledge discovery
Knowledge management
Decision tree induction
Case-based reasoning
Statistical classifiers
Rule based reasoning
Support vector machines
Natural language
processing
Sequence mining
Clustering
Information extraction
Information retrieval
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Business analytics
Analysis
Modeling
Prediction / Forecasting
TCS’ – Tool Based Methodology for Legacy Reengineering
Current
Business and
Technology Drivers
Legacy System
Desired Business
and Technology
Requirements
System
Assessment
TCS’ Forward Engineering Tools
(MasterCraft, Infrex,
@Test)*
Architecture
Definition (Business
and Technical)
Forward
Engineering
Reverse
Engineering
Current System
Documentation
TCS’ Data Migration Tool
(DMT)
TCS’ Reverse Engineering Tools
(CasePac & Revine)
Implementation
Reengineered System
Stand-alone Projects for
Legacy Systems Documentation carried out
Some Applications may not be simple conversion, may require reengineering –
new functionalities can be added in the process
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Case: Tool Based Re-engineering of a large system
Fortune 200 Insurance Company. Multi-site (108) implementation. Phased Rollout. 600 PY effort over multiple releases
Business Issue
 6 million lines of legacy code in a 30
year old core system with very little
system documentation and few
subject matter experts with knowledge
of the existing business functionality
 System inflexible to introduce new
insurance products and regulatory
changes
 High operational cost. Several manual
interventions in overall business
processes leading to complicated
implementations
 Non availability of skills to support
legacy systems and several failures to
re-create a new application in-house
TCS Solution
 Reverse engineering using TCS
Tools – CasePac and Revine to
document as is business processes
 TCS business experts helped in the
optimization of the business processes.
Joint workshops to define requirements
for target application
 Web-based 3 Tier Architecture
adopted. Business components
developed using TCS Modelling and
Code Generation Tool – MasterCraft
 Program executed in a phased manner
and solution rolled out in 108 locations.
Technology – Java, DB2, CICS
Customer Benefits
 50% reduction in maintenance
effort – flexible, modular system
with externalization of rules from
application code (INFREX)
 About 10% efficiency gain for
service representatives in
completing business transactions,
leading to reduced operational costs
 Rated as “Better than the best” in
customer satisfaction by J D
Edwards
 Detailed system and operations
documentation delivered to aid
ongoing support
Legacy Application Size 6 Million LOC, Reengineered Application Size - 120 Use
Cases, 17 Business Components, 2.7 MLOC of Master Craft generated Code
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Sample: Organization Models for
Sustaining Vs Disruptive Innovation
 Sustaining Innovations or
‘Incremental’ innovations
 owned and executed by current
organization elements
 Use standard measures – immediate
impact on Balanced Scorecard
Parameters
 Disruptive Innovations –
targeting markets and concepts
which do not exist today. These
are ‘Horizon 3’
 This runs in ‘Horizon 1’
 Today's’ business
 Focus on efficiency, scale, costs
 Zero or Low tolerance of failure
 ‘Horizon 2’
 is the bridge between disruptive or
longer-term innovation and the core
business
 Some failure is expected
 Define the Current or Anticipated Market
Need being addressed
 Identify target customers who will
‘mentor’ the innovation
 Fund innovation engines inside and
outside to fill the gap
 High degree of risk and higher failure
rates
 Execute, measure effectiveness, scale
up, cannibalize for the next cycle
Two distinct Organization Models and Structures are needed – and it is hard to overlay one on the
other. The Planning and Execution ©processes
Tata Consultancy
need
Services
to be
Ltd.different – but running in parallel.
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Sample: Use the Innovation Register as the baseline
Sustaining Innovation - Derivative
1.
2.
3.
Improvements to our current offerings
and processes
Targeted at our current customers
Across all our current businesses (‘six
bubbles’), executed by Practices
Sustaining Innovation - Platform
1.
2.
3.
Next generation offerings and processes
Targeted at our current markets
Across all our current businesses (‘six
bubbles’) – Practices and R&D, with the
new Ecosystem initiative
1.
2.
3.
4.
5.
6.
7.
1.
Disruptive /Breakthrough Innovation
1.
2.
3.
4.
5.
Radical, breakthrough offerings
Targeted at new markets
Competes against non-consumption
Could create new businesses
R&D and the Ecosystem drive this
2.
3.
4.
Next Generation Development,
Maintenance, Product Deployment
processes e.g. Model Driven Development,
Collaboration and Distributed
Development
Service Oriented Architectures
Open Source Computing Models
Wireless, hand-held, mobile technologies
Grid Computing, Utility Computing and
Infrastructure Management
Next Generation Security and Privacy
Next Generation Reuse - Mighty
Next Generation Internet and
Collaboration Technologies including Web
2.0, SaaS models
Next Generation Domain Technologies –
telecom, life sciences, media /
entertainment
Next Generation Embedded Technologies
Next Generation Interfaces including
Voice, Human-Computer Interfaces,
Personalization
The Innovation Register is used for resource allocation for innovation. The current business will
continue to own the ‘Derivative’ innovation
category.
TheLtd.Corporate Technology Office, governs
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Consultancy
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innovation across the ‘platform’ and ‘disruptive’
categories.
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Summary
 We have a a framework for innovation and it can help in creating value for
an organizations' ecosystem including clients, partners, employees and
shareholders.
 The framework has two distinct aspects relating to an organization's
business model, processes and market offerings
 Innovation which results in incremental and evolutionary changes - sometimes called
'sustaining innovation',
 Innovation which results in potentially radical changes - sometimes called 'disruptive'
innovation'
 The framework has a lifecycle - enabling innovation, evaluating the early
results, scaling up and 'productionizing' and finally retiring and replacing.
 Organizational mindsets need to be receptive, and necessary support
structures are needed - although innovation and process seem like
antitheses, one cannot live without the other
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Q&A...
Thank You
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