TCS JV with Mitsubishi: Corporate Strategy

Tata Consultancy Services, a leading global IT services and consulting firm, and Mitsubishi Corporation, a global integrated business enterprise announced the establishment of an IT services joint venture, Nippon TCS Solution Center Limited, strategically targeted at providing world class information technology services to Japanese customers. The new company will be capitalized at 350 million yen (approx. USD 4.5 million), of which TCS’ Japanese entity Tata Consultancy Services Japan, will provide 60 percent and Mitsubishi Corporation 40 percent. The newly established company will be based in Tokyo. The joint venture sees the establishment of TCS’ first near shore delivery centre in Japan. Joint establishment of the near shore delivery centre is aimed at capitalizing on the synergies born of Mitsubishi’s domestic brand strength and local market expertise paired with the global expertise of TCS’ global best practice and its Global Network Delivery Model, to meet the various needs of Japanese companies through enhanced service offerings. The collaboration comes against the backdrop of a strong yen, the globalization of supply chains and a growing trend toward overseas mergers and acquisitions, all of which act as a catalyst for the increasing globalization of Japanese companies,. This has brought heightened interest in the role of “global IT services” to link domestic and overseas operations. Establishment of the joint venture will ensure customers experience certainty by providing the flexibility to effectively respond to global IT needs through TCS’ GNDM®, while catering to interface needs through the near shore delivery centre. The new company will provide a full suite of IT services, including IT infrastructure management, system integration, application development, maintenance & operation services, engineering services and business process outsourcing (BPO) services. The new company’s sales functions will be provided by TCS Japan.

N. Chandrasekaran, CEO TCS and Hideyuki Nabeshima, Senior Executive Vice President Mitsubishi Corporation have been appointed non-executive directors of the new company in a move that will see close coordination and participation by senior management from both sides in establishing strategic direction. Mitsubishi Corporation and TCS have already started collaborating in a wide range of areas. The two companies have entered into discussions for the establishment of an IT support system, that utilizes TCS’s know-how and network, for Mitsubishi Corporation’s overseas bases, and are implementing new employee training programs for Mitsubishi Corporation’s Business Services Division and for IT Frontier Co., Ltd., a Mitsubishi Corporation group company, at TCS’s training centre (Trivandrum, India). Through the ongoing pursuit of joint projects and exchange of human resources at every level, Mitsubishi Corporation and TCS aim to achieve further growth of their businesses and to strengthen service functions. This is only the second time that TCS has opted for a JV route to enter a new market. TCS had presence in China since 2002 and chose the JV route with the government there in in

2007, as it started to expand into the domestic Chinese market. TCS has had presence in the Japan market for close to 20 years.

Several other companies have been trying to enter the Japanese IT services market but none have met great success. For Infosys, Wipro and others, revenue from Japan as a proportion of the total is still in single digits.

About Tata Consultancy Services Ltd (TCS)Tata Consultancy Services is an IT services, consulting and business solutions organization that delivers real results to global business, ensuring a level of certainty no other firm can match. TCS offers a consulting-led, integrated portfolio of IT, BPO, infrastructure, engineering and assurance services. This is delivered through its unique Global Network Delivery Model™, recognized as the benchmark of excellence in software development. A part of the Tata Group, India’s largest industrial conglomerate, TCS has over 226,000 of the world's best trained consultants in 42 countries. The Company generated consolidated revenues of US $ 8.2 billion for year ended 31 March, 2011 and is listed on the National Stock Exchange and Bombay Stock Exchange in India.

About Mitsubishi Corporation (MC)Mitsubishi Corporation (MC) is a global integrated business enterprise that develops and operates businesses across virtually every industry including industrial finance, energy, metals, machinery, chemicals, foods, and environmental business. MC's current activities are expanding far beyond its traditional trading operations as its diverse business ranges from natural resources development to investment in retail business, infrastructure, financial products and manufacturing of industrial goods. With over 200 bases of operations in approximately 80 countries worldwide and a network of over 500 group companies, MC employs a multinational workforce of nearly 60,000 people.

Company Outline:Name:                     Nippon TCS Solution Centre LimitedRepresentative:      Representative Director Masahiko KajiRegistered office:   Minato-ku, TokyoCapital:                   350 million yenInvestment ratios:   Tata Consultancy Services: 60% / Mitsubishi Corporation: 40%Date of establishment:   January 24, 2012

Scope of business:  Design, develop, license and implement products relating to computer software and

hardware, information systems, data processing and data communication systems Management of data processing, information systems and data communication

systems Provide advice and consultancy services relating to computer software and

hardware, information systems, data processing and data communication systems

Conduct scientific and technical research, developments, experiments and surveys relating to computer software and hardware, information systems, data processing and data communication systems

Carry on the business of import, export, sale, purchase, lease, maintenance and services relating to computer software, hardware systems and equipments

 

TCS’s strategyThe JV will see an initial investment of $5 million (Rs 24.5 crore) from TCS giving it 60 per cent holding in the JV. The same will be called Nippon TCS Solution Centre; they will also set up a nearshore delivery centre in Japan which will have close to 1,500 employees, reports state. TCS is keen on increasing its market presence in Japan and expects revenue to reach $500 million in the next four to five years (TCS’s revenue at present stands at less than $100 million). “This is part of TCS strategy, to focus on markets like Germany and Japan. We think the partnership with Mitsubishi will significantly accelerate our presence in Japan. The new joint venture will provide strong local market know how and deep domain knowledge, as well as bring in best practices to help Japanese corporations effectively respond to their global IT needs. Mitsubishi is also a large industrial house and will give TCS opportunity to look at a business opportunity,” said N Chandrasekaran, managing director and chief executive officer of TCS.

The key services provided by the venture would be: The joint venture will provide information technology services to help Japanese

companies to expand their overseas operations. It will be capitalized at 350 million yen

The joint venture will develop & operate enterprise resource planning (ERP) systems and offer cloud computing services

The joint venture company will offer a full service suite of IT, BPO and infrastructure services to Japanese corporations

The new joint venture will also establish a nearshore delivery center in Japan The establishment of the joint venture will ensure customers experience certainty by

providing the flexibility to effectively respond to global IT needs through TCS' GNDM®, while catering to interface needs through the nearshore delivery center

"Japan is a very important market for TCS and we are delighted to partner with strong partner like Mitsubishi Corporation in this market. The new joint venture will provide strong local market knowhow, deep domain knowledge as well as bring in global technology best practices to help Japanese corporations effectively respond to their global IT needs," Chandrasekaran said while explaining the strategy of TCS.“Joint establishment of the nearshore delivery center is aimed at capitalizing on the synergies born of Mitsubishi's domestic brand strength and local market expertise paired with the global expertise of TCS' global best practice and it's Global Network Delivery Model (GNDM), to meet the various needs of Japanese companies through enhanced service offerings," added the statement.

Meanwhile, the collaboration comes against the backdrop of the positive factors such as a strong yen, the globalization of supply chains and a growing trend toward overseas mergers

and acquisitions. All these factors have chalked out as the catalyst for the increasing globalization of Japanese companies.