Giants: TATA - Differential Calculus

A self that is only differentiated, and not
integrated-may attain great individual accomplishments, but risks being mired
in self centered egotism. Yet a person whose self is based exclusively on
integration will be well connected and secure, but will lack autonomous
individuality.


                                               
- Mihaly Csikszentmihalyi, Thinker and psychologist

It's Catch 22 version 2: differentiate, or integrate, you
can lose either way. Well, not always, but the right balance is tough.Â
TCS and the Tata Sons have had to think long and hard about this. For
long, many have asked why the various Tata IT entities don't merge into TCS
and come under a common umbrella. Now, in FY 2005-06, when the process finally
got under way with TCS acquiring Tata Infotech, there is the apprehension that
niche players like Tata Technologies, Tata Elxsi or Tata Interactive Systems
might get thoroughly assimilated, and lose their unique identities completely,
if all get consumed by TCS.

TCS CFO, S Mahalingam is quick to respond: the Tata
Infotech acquisition was a fait accompli; if not today, it was bound to happen
tomorrow, as the two had a great deal in common. But the other companies are
fish in different pans. Cooking them in the TCS broth would give no visible
advantage to big brother, instead spoil the individual tastes. The Tata board
verdict: the Group would have the TCS-CMC-Tata Infotech-C-Edge combine operating
as one integrated entity, but at least in the near future the three others would
continue their separate existence.

The Tata Infotech acquisition (legally consummated in
February 2006) resolved one long-standing anomaly where both TCS and Tata
Infotech had entered into the same bids with the same clients, with the
possibility of cannibalizing each other's prospects. Of the 15 Fortune 500
clients Tata Infotech serviced prior to being acquired, five were common with
TCS. Besides, Tata Infotech had a significant presence in the SI area,
particularly in telecom and defense, which supplemented capabilities of TCS as
well as those of its subsidiary CMC, both in domestic and overseas markets. The
best example was the wide area network project for the Army.

What TCS now wants to do is approach overseas customers
flaunting the SI skills of CMC and Tata Infotech: expertise gained in the home
base over the years would now be leveraged globally. TCS believes it can now bid
for and win the mega deals on its own, without needing to form a consortium with
the likes of Infosys and Wipro (as in the ABN-Amro case).

The spate of JVs signed during FY 2005-06 had also given
birth to new IT entities within the group. Subsequent to the FNS acquisition,
C-Edge Technologies, a JV with SBI (authorized capital: Rs 40 crore), is
expected to play a key role in deploying FNS products in the role of a preferred
SI. Similarly, under the arrangement with the UK-based Pearl group (for the life
insurance and pensions industry), a new company, Diligenta, came up with 76%
stake by TCS. It would remain a Pearl captive for three years. 

The other infotech companies of the group, however, do not
settle so well into the jigsaw. There's Tata Technologies operating
exclusively in the automotive engineering design space, so different from TCS;
acquiring it would cut off its umbilical cord to Tata Motors and likely deprive
it of the expertise and skill sets necessary for its existence.

So is the case with Tata Elxsi, which primarily functions
in the CAD/CAM space. Tata Interactive is a global leader in e-learning. All
these entities are small, and wouldn't make much of a mark on TCS' topline
or bottomline.

However, even in the absence of a common policy or defined
IT mandate for the group (issued from Bombay House, the Tata Sons headquarters),
it is often taken for granted that TCS would help settle the IT infrastructure
for group companies. It does a great deal of work for both VSNL and Tata
Teleservices (Maharashtra) as well as Tata Chemicals. And, even though TCS does
not meddle in the routine operations of the other entities, Ramadorai is the
Chairman of Tata Technologies and Tata Elxsi and Vice Chairman of Tata
Interactive.

Though not officially substantiated, N Chandrasekaran might
take over the TCS reins. As head of Global Sales & Operations, he reportedly
spearheaded the global JVs and acquisitions TCS undertook this year. Except
Nelito, where P Bhaskar Rao took over from JM Varma, no other Tata entity saw
any change of guard in FY 2005-06. In case of Tata Technologies, the collective
experience of auto industry veterans, CEO Patrick McGoldrick and COO Jeff Sage,
was leveraged to the maximum in acquiring UK-based INCAT, an engineering design
and PLM services firm.

Rajneesh De

rajneeshd@cybermedia.co.in