TATA SONS: Wanting To Break Free

The

bigger and older you are, the harder it is to make a clean break or transition.

You have much in the form of legacy. A younger company can make a transition, or

start afresh much better. It’s one of the disadvantages of having an old

established business," said Ratan Tata, Chairman, Tata Sons.

These words from the scion of India’s giant business group

speak volumes.

The group created monoliths at a time when companies and

people feared to trudge the path laid forth at the onset of the new economy. The

new economy then was yet to clearly define a business model of its own, and so

the structures at Tata continued to use traditional business models. This posed

serious challenges when, later, the business needed to be ported to the

ecommerce model, which turned out to be much more dynamic than one could have

ever anticipated. The IT chieftains at Tata are now willing to listen and

accept, a mellowed down attitude visible across the board.

The dilemma that Ratan Tata faces in the era of convergence

and the IT boom is not whether to corporatize Tata’s business, but how to go

about tapping the emerging markets. It is also about realigning and reinventing

the group to face upcoming challenges. On one hand, it has the monolithic Tata

Consultancy Services (TCS)–an institute by itself and the bedrock of earning

for the Tatas. On the other hand, there are companies like Tata Infotech, Tata

Technologies and Tata Elxsi pitching in with their fair shares of revenues.

The Tatas have a finger in almost every pie. In the IT

industry, TCS is there to make its presence felt with its domain expertise and

areas of operations. Over the years, from the ‘license raj’ to the free

economy era, TCS has grown by leaps and bounds. Every second year it has been

able to double its revenue, which speaks volumes of the vision and strategy

envisioned by the grand old man of IT industry, Fakir Chand Kohli–the brain

behind TCS. Galloping over governmental hurdles and tangles, TCS has transformed

itself from a humanware exports organization to a full-project implementation

company, catering to some of the most respected global names. It has put into

place quality and processes, and is even moving from the traditional to the

ecommerce base, albeit slowly. It is not just exports that TCS has targeted.

Though the margins have been low, TCS has got into the domestic market as well.

The transition from the traditional economy to the new

economy is visible at TCS. Ecommerce is rubbing shoulders with the traditional

base of banking, finance and telecom services in garnering revenues for the

company. But this has made a slight dent in its topline, with growth in

1999-2000 being restricted to just 23% as compared to the 1998-99 growth of 55%.

Tata Infotech (TIL) on the other hand had a bad year.

Two-thirds of the company’s revenues, which came



from Unisys Corp in the 1998-99 fiscal, diminished as Unisys itself got into the
services game. This was a bolt from the blue for TIL and the year that went by

saw its net profits dip by 74%. TIL’s honcho, Nirmal Jain, has the herculean

task of realigning his team and his 4,000-strong workforce to match industry

standards, and put the company back into reckoning. TIL will continue focusing

on education, and pushing distance education through e-learning will be its new

cry.

The company has its core strength in systems integration. By

tapping IT-enabled services, it plans to make the best use of the domestic

market scenario. TIL needs get going fast with its action plan of positioning

itself as an independent entity. It has to build new relationships and widen its

customer base for its plans to break even in the current fiscal to fructify. So,

for the present, any separate divisions in the company have been ruled out.

Tata Elxsi on the other hand has focussed on value-added

services and high-end developments. And this has paid dividends, adding to the

company’s bottomline as well as to its shareholders’ kitty. Its domestic

business under its traditional CAD/CAM/CAE division has also added to the

profits. The transition from being a hardware and applications software company

to becoming a solutions provider, offering design, development, training and

support services across its business areas in the domestic market, has taken

some time for Tata Elxsi. But this has slowly started paying off. The margins

are low, but the value-added services that it has been offering in the overseas

markets have helped it keep a steady bottomline. The focus continues to be in

these areas and in the high-end design and development work, which should let

the company achieve better results.

Ratan Tata’s candid words keep echoing. He was thinking

aloud the hurdles that Tata Sons would face as the new economy manifested itself

in different forms. The building blocks have been put in place, and spearheading

the change in the mindset is none other than Ratan Tata himself. TCS, the group’s

cash cow, is in the midst of this change, coping with the challenges of the new

economy.

Surely, the Tatas have realized that traditional barriers have to be broken

down and legacy has to be compromised if they have be in tune with the pulse of

the new economy. The group is likely to undergo skill honing exercises in new

business domains, before emborking upon the course of e-action. DQ