The two companies had partnered for some years, with TKS providing industry-specific and local market expertise in France and Switzerland, as well as being the front-end for its customers to gain the benefit of lower-cost software development from Tata Consultancy Services (TCS), which conducted any necessary customization. TCS’ inexorable ascent up the services value chain has, however, outlived this position in the relationship.
The acquisition adds Alpha (a private banking system ), and a wealth management system called e-Portfolio, to the core banking solution that TCS gained via its acquisition of Australian banking software firm Financial Network Solutions (FNS) just over a year ago. Together, TCS can offer these as the basis of a software and business process outsourcing (BPO) platform to a banking and financial services sector that still promises strong growth (especially in emerging markets), while remaining highly competitive (and therefore ripe with opportunity for outsourcing providers).
Standardization has long been a route to attaining value from outsourcing, as providers can establish skills to be brought into play on a repeatable basis, and therefore attain economies of scale that benefit customers. Cost reduction benefits can be gained throughout the services lifecycle, from initial migration to post-implementation support, and when this is applied to BPO, these benefits can be driven into everyday operations, and amount to considerable savings that make a real difference to the bottom line.
It is anything but a new idea for an outsourcing provider to own the software platform as a vehicle for standardization, but TCS is aiming to take this to a new level by providing both the software services and BPO atop the platform. In undertaking this approach, TCS could be said to be competing with a broad range of vendors, from Oracle and SAP in terms of owning a vertically-focused software offering, to Hewitt, Liberata, and the other global pure-play BPO providers.
However, given the scale of ambition to attain growth in platform-based BPO services that TCS recently expounded, the company is hardly expected to be daunted – it aims to establish very substantial BPO businesses in insurance, retail, telecommunications, travel and hospitality, and healthcare within the next few years. Although TCS has been less acquisitive than some Indian competitors, that is expected to change in order to meet this challenge.
For potential customers, there are a number of implications to consider. Undertaking BPO on a proprietary platform would certainly incur a loss of flexibility to change outsourcing provider. However, the potential cost reduction would be considerably greater in using one provider for end-to-end services. Customers would have to ensure they still had flexibility to accommodate their individual requirements, and also that a highly standardized approach would not lead to loss of opportunities for competitive advantage. For this reason, a platform-based approach is most appropriate for industry areas where cost reduction is the strongest driver, and process-level innovation is not a requirement.
This year’s ground-breaking deal with Pearl in the UK insurance industry showed TCS displaying strong commitment and maturity in approaching a highly competitive vertical market, to the extent that the newly-established TCS subsidiary, Diligenta, had to attain Financial Service Authority regulatory approval. TCS has such an impressive scale of ambition that one might doubt it could be achieved in total. However, the company has so far demonstrated an extremely strong capability to execute on its plans, and it is expected to make further forays into discrete vertical markets to gain software platforms on which to base BPO and end-to-end services.
Source: OpinionWire by Butler Group (www.butlergroup.com)
