Bushroda
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Tata offers free IT services to lure banks
Rhys Blakely in Bombay
The Times, UK
April 23, 2008
India's largest IT outsourcing company is to give away services as it fights to import more jobs to the subcontinent and to persuade its most important clients - the West's beleaguered banks - to sign new contracts.
Shares in Tata Consultancy Services (TCS) fell by more than 10 per cent in Bombay yesterday - a record one-day fall for the stock - after India's largest private sector employer missed earnings targets and reported its first quarter-on-quarter decline in earnings in three years as a result of the slowdown in the United States.
In response, TCS, which relies on the financial sector for more than 40per cent of sales, said that it would bear the cost of transition work on several big outsourcing contracts.
Transition charges, which previously would have been paid by clients, cover preparations made before jobs are transferred to India from the City and Wall Street.
The move is designed to buttress future earnings, TCS executives said, but the company is likely to forgo tens of millions of dollars in revenue in the short term.
A big contract, such as the ten-year $1.2billion (£602million) deal that TCS agreed recently with Nielsen, the data provider, may require more than 100 staff carrying out transition work for up to six months at a cost of up to $25million, analysts said.
A TCS spokesman said: This is an investment that will be recouped as contracts proceed.
The company announced plans to win more contracts in emerging markets to reduce its exposure to the ailing US economy, the source of about half its revenues.
Outsourcers are seeking the attention of Western banking executives shell-shocked by meltdown in their sector.
Indian executives say that banks are delaying spending decisions, often after the exit of senior bankers in the wake of the sub-prime debacle.
TCS's spokesman said: Banks have been too involved in their own problems so far to look at new contracts.
Even before the global credit crunch, India's IT sector was under pressure from wage inflation and the rupee's sharp rise against the dollar.
Rhys Blakely in Bombay
The Times, UK
April 23, 2008
India's largest IT outsourcing company is to give away services as it fights to import more jobs to the subcontinent and to persuade its most important clients - the West's beleaguered banks - to sign new contracts.
Shares in Tata Consultancy Services (TCS) fell by more than 10 per cent in Bombay yesterday - a record one-day fall for the stock - after India's largest private sector employer missed earnings targets and reported its first quarter-on-quarter decline in earnings in three years as a result of the slowdown in the United States.
In response, TCS, which relies on the financial sector for more than 40per cent of sales, said that it would bear the cost of transition work on several big outsourcing contracts.
Transition charges, which previously would have been paid by clients, cover preparations made before jobs are transferred to India from the City and Wall Street.
The move is designed to buttress future earnings, TCS executives said, but the company is likely to forgo tens of millions of dollars in revenue in the short term.
A big contract, such as the ten-year $1.2billion (£602million) deal that TCS agreed recently with Nielsen, the data provider, may require more than 100 staff carrying out transition work for up to six months at a cost of up to $25million, analysts said.
A TCS spokesman said: This is an investment that will be recouped as contracts proceed.
The company announced plans to win more contracts in emerging markets to reduce its exposure to the ailing US economy, the source of about half its revenues.
Outsourcers are seeking the attention of Western banking executives shell-shocked by meltdown in their sector.
Indian executives say that banks are delaying spending decisions, often after the exit of senior bankers in the wake of the sub-prime debacle.
TCS's spokesman said: Banks have been too involved in their own problems so far to look at new contracts.
Even before the global credit crunch, India's IT sector was under pressure from wage inflation and the rupee's sharp rise against the dollar.