Rank1: TATA GROUP - Revisiting Synergies

Synergy is a much maligned management terminology that is often prescribed by
consultants and management gurus. Effectively referring to working together of
different entities to produce an effect greater than the sum of their individual
effects. At an enterprise level, synergy implies cohesive functioning of various
group companies and subsidiaries thereby resulting in both top-line and
bottom-line growth. And there is no better corporate candidate for synergy than
the largest private corporate group in India: the Tata Group.

Spread across more than eighty-five countries and six continents,Tata
companies export products and services to eighty nations. At last count, the
Tata Group comprised 114 companies and subsidiaries in seven business sectors
with a combined annual turnover of over $70 bn. Six out of these companies are
into IT servicesin terms of mutual synergy, IT stands quite high on the Tata
pecking order. As a group, they also continue to be the largest amongst the five
that DQ considers. Led by the largest software firm in India, TCS, the group
consists of a select bouquet of companies like Tata Technologies, Nelito, CMC,
Tata Interactive Systems (TIS) and Tata Elxsi . And they often do mutually
benefit from each othertrue, for the Goliath TCS, those opportunities are rare;
but for other entities like TIS working on training projects for Tata Sky or
Tata Technologies working with Tata Motors on Nano, are vivid examples of how
benefits accrue of mutualism.

RANK 1- TATA group
(Revenue in Rs crore) CyberMedia Research                                                                                            DQ Estimates
	All the Tata group entities have to necessarily adhere to the Tata Code of Conduct that has around twenty five clauses. Clause 11 specifies cooperation among Tata companies, stating that In the procurement of products and services, a Tata company shall give preference to other Tata companies, as long as they can provide these on competitive terms relative to third parties. All the group companies listed herein need to make Clause 11 as their guiding mantra in the coming fiscal
Ratan Tata, chairman

The push for this unity, especially in the IT domain, is taken by the biggest
software company in the country, TCS. In fact over a period of time, TCS has
taken on a very mentoring sort of role within the group. Being the largest
company, with deep spread in various verticals and clients in various
geographies, TCS is more often the preferred and natural partner for a host of
joint go-to-market bids. Tata Technologies, which earlier branded itself as
INCAT, decided to rebrand as Tata, now that the latter is a far more powerful
engineering brand globally. That has created some confusion in the customers
minds. But in many cases, that has been resolved by having joint go-to-market.
ArvinMeritor was one such project that they won together. In case of another
large automaker, they actually proposed swapping of the deal between themselves
and the client saw the rational. In case of JLR, now a Tata company, TCS, Tata
Technologies as well as Tata Elxsi, all have worked on different projects. TCS
has gone a little ahead on this path. In what it calls concept to manufacturing,
it even roped in TAL Manufacturing, Tatas manufacturing services arm to design
a tool for an Italian aeropsace maker and project-managed the manufacturing in
TAL Manufacturing to deliver the client the end-product at a competitive rate.

Similarly, Tata Interactive has worked on a host of such projects with TCS,
wherein it supplied merely a component of the overall project. While the group
revenues did go up, the growth was relatively slow. The reason is fairly simple,
excessive dependence on overseas market. With TCS accounting for over 80% of the
group revenue and since 92% of its revenue still comes from working for
international clients, the impact has been substantially higher. Even on the
domestic front, TCS has little presence beyond the government space and that too
thanks to CMC. The domestic corporate sector has largely been untapped by the
Tata group companies as they have been more focussed on earning revenues in
dollars and pounds, and euros, or even pesos and yens.

And this is where the lack of internal syneries is also most evident. With a
group spanning different verticals and sectors, the Tata companies have truly
not been able to source revenues by working for the group entities. While the
group companies may have come up with a joint go-to-market strategy, more needs
to be done on the back-end.

There needs to be a cross functional team that analyses all the duplication
and overlap between all the group companies and then comes out with a mandate to
sort the situation by giving it to someone like TCS. In fact like other group
entities, Tata should also be having a group CIO/CTO who looks more at ironing
out the issues inside. Probably, as S Ramadorai retires in October of 2009 as
the CEO of TCS and takes on a mentoring mantle, this could be one area that will
indeed draw his attention especially since hes on the board of quite a few
other Tata group entities.

Meanwhile, the rest of the companies in the group, namely Tata Technology and
Tata Elxsi, had a fairly subdued year with a growth in revenues of 13% and 5%
respectively. The case of Tata Technologies is especially strange as it was
involved with quite a few high-profile projects like the Tata Nano and the JV
with HAL for Indian Air Force. Nonetheless, there needs to be renewed focus and
zeal shown by these entities to wade out of the economic cesspool.

One of the most significant moves this year by the Tata group was to make a
big splash on the BPO front by acquiring the assets of Citigroup e-serve. With
the integration of the same, TCS BPO has emerged to be a significant player in
the domain. This move will give much better leeway in terms of service spread
for TCS.

The Tata group is not only one of largest and the oldest corporate entities
in India but is also one of the most respected. In fact, many other business
houses try to emulate the functioning of the Tatas. Hence, there is all the more
pressure on the group even under trying circumstances. Considering this the
leadership team at Bombay House now needs to put their heads together and come
up with a robust strategy for the coming year, and more. What worked in the past
will not necessary do so in the future. In the end, the much maligned synergy is
indeed a crucial factor between high and tepid growth. And Tatas must now focus
on synergy, big time.

Shashwat DC

shashwatc@cybermedia.co.in