Exclusive: Why Peru Fits into the Global Strategy of TCS

Newest in the line of “India Inc.” conquests in Latin America, Tata Consultancy Services (TCS) announced recently the opening of a new delivery center in Lima, Peru. With centers already in Mexico, Uruguay, Argentina, Chile, Brazil, Ecuador and Colombia, TCS has the largest LatAm presence of any of its Indian counterparts, and has expanded aggressively there ever since Gabriel Rozman initiated the company’s expansion six years ago.

We sat down with Henry Manzano, CEO of TCS Latin America, to find out more about his growth strategy and what TCS sees in the region that its competitors do not.

Peru: Part of a Global Strategy

With an 8% estimated growth rate for 2010, and one of the fastest emerging economies in Latin America, Peru is being noticed for its stability and business potential. The services industry accounts for 53% of GDP, which means the country is eager to support the needs of sourcing companies setting up there.

Latin America as a regional economy is expected to grow up to 5% this year according to figures from the IMF, and TCS is looking to capitalize on that. But why aren’t the other Indian players following suit?

According to Manzano however, it’s not about the specific advantages of Peru but rather that it was always part of the TCS global delivery model. “We divide the market into global, regional and local sectors, and we’re able to service clients from each of those accounts from Peru”, says Manzano, who ranks #18 on the 2010 Nearshore Americas Power 50 List. “On the local level especially, we’re seeing a lot of growth from different industries in Peru, as well as many firms from Chile and Argentina also coming here”. The new office will offer IT, BPO and consulting services to that growing Peruvian market.

Weak IP Protections

Manzano points out that integrating the local workforce into the TCS global force is a critical factor. But the new office will benefit from TCS’ seven-year history of integration into Latin America, by bringing in key managers from India who hold specific positions and train up their LatAm counterparts.

Other challenges of running an operation in Peru include weak intellectual property laws. The International IP Alliance in its 2010 report estimates business software piracy in Peru to be 71%, citing lack of resources, enforcement and legislation as major causes. Things could improve due to the new US-Peru Trade Promotion agreement signed last year which includes high standards for IP protection and enforcement. In any case, Manzano says he doesn’t anticipate much IP risk for the Peruvian operation.

Revenues to Hit $1 Billion

The opening of the new Peru center ties into TCS’ broader strategy for the region, which is visibly more aggressive than its competitors. The company’s current LatAm revenue is US $300 million, and it expects to reach $1 billion in the next three to five years. Latin America as a regional economy is expected to grow up to 5% this year according to figures from the IMF, and TCS is looking to capitalize on that. But why aren’t the other Indian players following suit? Firms like Infosys and Wipro are noticeably more cautious about LatAm expansion – something that Manzano says is an issue of experience in the region.

“Their plan is also to grow, and you can see that they’re trying to do that”, he says. “But we came here first seven years ago, and we’re maintaining that position as leader. We have much more information about Latin America than our competitors do, with around 7000 employees most of whom are local, and relationships with different local companies and governments. All this gives us more confidence”.

There are also certain countries that have almost been blacklisted by other Indian firms, but in which TCS is cheerfully advancing operations. Take Colombia for example. Infosys recently told Nearshore Americas that they would never locate to Colombia, claiming that negative perceptions among customers in the US is a major roadblock. “But Colombia can show the world that it’s much more stable”, says Manzano. “Security has progressed, and the US is helping out. President Uribe is making an effort to reduce the guerrillas and drug trade. We are there because we believe in that market, and in the maturity of that market”.

Does this kind of attitude mean TCS is less risk-averse than the competition? Maybe. According to Manzano at least, TCS sees Latin America as just one country. Different locations simply provide different advantages.