By Clayton Browne
India has been the dominant player in offshore outsourcing since its infancy in the 1980s and today represents around half of the total international IT outsourcing and BPO industry. Indian outsourcing companies employ more than 2.2 million people and expect to earn more than $50 billion in total revenue in 2012.
However, many market research firms are forecasting 2012 global IT spending will grow slowly in 2012 due to the European debt crisis, and this is expected to have some impact on the growth of the major outsourcers.
The market research concern Gartner has recently revised their global IT spending estimates, and now project spending to increase by 3.7 percent in 2012, a reduction of almost one full point from their earlier estimate of 4.6 percent.
The “Big Four” – Tata (TCS), Wipro, Infosys, and Cognizant – are the major players in outsourcing in India. These companies by no means dominate the industry; however, as a large tier of mid-cap firms including HCL Technologies and Satyam has developed to keep competition stiff.
The breakdown below provides a brief historical overview of each of the Big 4, followed by a discussion of revenues, number of employees by location and business division and current and future business strategies.
Tata Consultancy Services
Tata Consultancy Services (TCS) began its existence as Tata Computer Center. The business division was created in 1968 to provide computer services to other companies in the Tata Group, especially Tata Steel. But by 1974, TCS had developed enough expertise that they began accepting external work, and within a couple of years had a number of international clients including Burroughs and IGIC.
It took a few years, but the IT outsourcing industry began to come into its own in the early 1980s, and TCS rapidly became the big fish in the pond with major operations and development contracts with a number of government entities and companies like Compaq and the Johannesburg Stock Exchange.
Y2K was a huge boon to the IT industry in general and TCS definitely rode the wave to grow to new heights, as they became a leader in providing models and software tools to automate the Y2K conversion process for factories and other businesses. TCS also leveraged the EU converting to the Euro currency in the late 1990s into a lucrative business opportunity as they provided consulting services to many European governments and major financial institutions.
TCS was also a major player in e-commerce from the early days (2000-2004), and still derives significant revenues from eCommerce operations. In the last few years, TCS has joined the industry focus on bioinformatics and cloud computing, with new operations focused on small-to medium-sized businesses.
TCS has also been nimble at leveraging international operations, and have operations in over 25 counties today, including a number of recent development operations in other Asian and Latin American countries (three call/design centers in Mexico). TCS derives about 80% of their net sales from providing IT services, about 12% from BPO and the remainder from consulting and engineering and industrial services.
TCS has 226,751 total employees, with 187,500 based in India and around 8000 based in Latin America as of Q3 2011. Banking and financial services is the largest business division in the company involving around 32,500 employees, and BPO is the second largest division with 17,500 employees, and enterprise solutions, insurance, and telecom divisions all have over 11,000 employees each. Other significant divisions include healthcare & life sciences with 5,700 employees; manufacturing with 3,300, and government with 2,200. TCS added 11,981 new employees in the fourth quarter of 2011.
On February 9, 2012, TCS reported a 23% increase in profits from the previous quarter and forecast continued double-digit growth as they anticipate continued spending on outsourcing given the uncertain economic outlook.
Wipro’s root actually stretch back to 1945 when it founded as a vegetable oil and soap manufacturer. The company expanded into various businesses in India in the post-war years, and moved into the IT and computer industries in the late 1970s and 80s.
Wipro grew rapidly along with the other major Indian outsourcing companies in the 1990s, and has carved out a lucrative niche in high-end IT outsourcing. Wipro has partnerships and strategic developments with over a dozen well-known international companies including GE and IBM.
Wipro Technologies grew into the largest public software exporting company in India in 2000 and continues to expand rapidly today. Wipro has grown from $3.4 billion in revenues in 2006 to almost exactly $7 billion in total revenues in 2011, while still maintaining healthy margins as the company booked close to $1.2 billion gross profits last year.
Wipro has also grown from 72,000 employees in 2006 to 119,491 employees as of December 2011, and looks to continue hiring as they leverage their growth in emerging markets (especially the Middle East) and in Canada, Mexico, and Brazil. Analysts say they expect Wipro to have revenues of $1.52-$1.55 billion for Q1 2012.
Infosys was founded in 1981 by a group of computer scientists and businessmen who foresaw the coming digital revolution and created an employee-centered company that was focused on creative technical solutions for customer problems. The collegial company culture has proved tremendously successful, as Infosys has enjoyed spectacular growth and developed a well-earned reputation for delivering cutting-edge solutions to thorny customer problems.
Infosys has also been frequently mentioned as one of the most well-managed companies in the sector, and has received a number of awards for management innovation. Infosys has also been among the most popular companies to work for in India since the late 1990s.
Like all of the major outsourcing and BPO players in India, Infosys has also greatly expanded its international reach in the last decade or two, including a number of operations in Latin America. Infosys founded its first subsidiary in Mexico in late 2008 with 87 employees, and had already more than doubled that number by the end of 2011.
Infosys topped 145,000 total employees as of December 2011, and reported almost 14% year over year revenue growth from 2010 to 2011. Infosys racked up an impressive 33% growth in the fourth quarter of 2011, but warned that full year revenue growth would be less due to the impact of the ongoing European debt crisis.
Cognizant Technology Solutions
Cognizant is actually a U.S.-based company, but it has deep roots in India as it was initially formed in 1994 as a joint venture between Dun & Bradstreet and Satyam Computers called Dun & Bradstreet Satyam Systems (DBSS). Cognizant has a long corporate history of mergers and acquisitions almost from its inception, and has emerged as one of the major players in Indian outsourcing today.
Cognizant offers a broad range of IT, consulting and business process outsourcing (BPO) services to businesses of all types and sizes in over 60 countries. Cognizant is heavily involved in both the testing as well as the data warehousing and business intelligence sectors.
Cognizant had almost $4.6 billion in total revenues in 2011, and earned $883 million in net profits. Cognizant has 137,700 employees worldwide in operations in 18 countries as of the end of 2011. Cognizant is projecting revenues of $1.70 billion for the first quarter of 2012.
Cognizant opened a global delivery center in Buenos Aires, Argentina in March of 2008, representing its first Latin American operation. This 250-person operation is dedicated to providing services to their partner in developing the center, Kimberly-Clark.