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Tata Consultancy Services Ltd. will depend on the U.S. for half its revenue, while expansion in China, the world's fastest-growing major economy, will take time, the Indian software exporter's chief executive officer said.
"In the immediate future definitely it is 50 percent but even when it comes down it will come down by a percent, two at a time," Natarajan Chandrasekaran, 46, said in an interview in Mumbai on Jan. 16. China "is more like running a marathon; it's not going to be easy to ramp up in China overnight."
India's biggest provider of computer services on Jan. 15 reported a 33 percent increase in third-quarter profit as Chandrasekaran overcame flat pricing by winning business from restructuring U.S. financial companies and managing currency risk from a rising rupee. Sales in North America, Tata's largest market, held at 52.5 percent of total revenue even as the world's biggest economy was trying to recover from a recession.
"In the U.S., the tech recovery will be much stronger than the overall economic recovery," Forrester Research Inc. analyst Andrew Bartels wrote in a Jan. 11 report. Technology spending in the world's largest economy will grow at more than twice the rate of gross domestic product this year, he wrote.
Tata,[link widoczny dla zalogowanych], whose clients include Citigroup Inc., climbed 1.4 percent to a record close at 802.20 rupees in Mumbai trading, while the benchmark Sensitive Index rose 0.5 percent. The stock more than tripled in value last year, outperforming the Sen***'s 81 percent advance and nearest rival Infosys Technologies Ltd.'s 133 percent increase.
U.S. Technology Spending
The U.S. information technology market will expand 6.6 percent this year to $568 billion, more than a third of the total $1.6 trillion in technology spending worldwide, according to the Forrester report. Spending in China will grow 10 percent to $120 billion, ranking it third after Japan, the Cambridge, Massachusetts-based researcher said.
Spending on technology outsourcing by companies in the U.S. will increase 3.8 percent in 2010, from a 2.1 percent gain last year, Bartels wrote. Economists surveyed by Bloomberg last month say U.S. gross domestic product will expand 2.6 percent in 2010 after shrinking 2.5 percent last year.
��Largest Spender'
"The U.S. is still the largest spender in IT," said Chandrasekaran,[link widoczny dla zalogowanych], a long-distance runner who participated in Mumbai's annual marathon yesterday. "We may be $3 billion in the U.S. but still it's very small considering the overall tech spending in the U.S. So while we continue to focus on other markets, we always said that the U.S. will grow, financial services will grow."
Chandrasekaran, promoted in October to the top job at Mumbai-based Tata, on Jan. 15 unveiled net income of 18 billion rupees ($394 million) in the three months ended Dec. 31, beating the 16.1 billion rupee median of 22 analyst estimates compiled by Bloomberg. Sales rose 5.1 percent to 76.5 billion rupees.
Tata started operations in China about six years ago and has about 1,400 employees there, Chandrasekaran said. The software-services provider has a venture with the Chinese government and has opened offices in Beijing and Shanghai.
China Market
"China will always be important," said Chandrasekaran, referring to at least five projects for clients in the financial services industry, which he declined to name. "We have created references but we need to see how we can scale."
Tata plans to increase the workforce in China to 5,000 people in the next five years, Girija Pande, head of Asia- Pacific operations at the software provider, said Oct. 21,[link widoczny dla zalogowanych], citing contracts including Bank of China Ltd.
Latin America, where Tata has some 7,000 employees in nations including Argentina,[link widoczny dla zalogowanych], Brazil and Chile, has been an easier market in which to expand, Chandrasekaran said. Revenue derived from Ibero America was 4.9 percent of overall sales last quarter, while the Asia Pacific region, excluding India, accounted for a 5.6 percent share.
"We more or less started at the same time in Latin America and China," he said. "Even in revenue terms Latin America has grown faster."
The software exporter plans to step up local hiring in China and invest in training to grow its business there, Chandrasekaran said, citing the need to overcome "complexities" including language and cultural barriers.
"Recruit, train, recruit, train,[link widoczny dla zalogowanych], there's no magic formula," he said. "You just have to invest, recruit, train people and integrate them."