Tata Consultancy Services (TCS) Aims for Global Diversification in Light of North American Weakness

Tata Consultancy Services (TCS), India’s premier software-services exporter, has announced its intention to shift focus towards burgeoning markets in Japan, Latin America, and Southern Europe, Reuters news report said.
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This will be a strategic move of TCS, the #1 IT services provider, to counter the challenges posed by a weakened North American market. North America’s contribution to TCS revenue during the October-December quarter fell to 50.6 percent of its total revenue from 53.7 percent – indicating that some of the enterprises have started cutting their IT spending.

Despite North America historically serving as a vital market for the $245 billion Indian information technology sector, TCS has experienced a decline in revenue contributions from the region for four consecutive quarters. Industry analysts attribute this trend to hesitancy among North American IT clients to invest in discretionary projects amid inflationary pressures and economic uncertainty.

Krithivasan, TCS’s Chief Executive, revealed this strategy following the company’s recent quarterly financial report, which marked its slowest profit growth since 2020.

Krithivasan clarified, “I wouldn’t say we are consciously reducing our North America exposure, but we are consciously increasing our play in other geographies because we want to work more in markets like Latin America, Southern Europe or Japan.”
TCS job and employee growth in 2023Latin America generated 2.1 percent of TCS’s total revenue as compared with 1.8 percent in Oct-Dec 2022.

TCS has generated 16.4 from the UK as compared with 14.9 percent.

Continental Europe has contributed 15 percent of its total revenue vs 14.8 percent.

Asia Pacific’s revenue contribution to TCS total revenue was 7.8 percent vs 7.9 percent.

TCS India generated 6.1 percent of its total revenue vs 5.1 percent.

The revenue contribution from the Middle East and Africa was 2.0 percent vs 1.8 percent.

TCS is eyeing alternative markets with significant growth potential, despite potential language and other barriers. Japan, despite being one of the largest tech spenders globally, currently contributes only a “very miniscule” portion to the revenue of the Indian IT sector, according to Krithivasan.

Additionally, TCS is turning its attention to its home turf, with India’s contribution to revenue reaching 6.1 percent in the latest quarter, the highest level since the second quarter of fiscal 2018. Latin America accounted for 2.1 percent of TCS’s revenue.

The Mumbai-based company, which thrives on serving international clients, is now considering a more balanced approach that includes a stronger focus on domestic markets.

Despite recent challenges, Krithivasan remains “generally optimistic” about the upcoming financial year. This positive outlook comes in contrast to industry peers such as Infosys, HCLTech, and Wipro, which have recently adjusted their annual revenue forecasts amid concerns for the current fiscal year.

“We believe it (fiscal 2025) could be a better year than fiscal 2024,” stated Krithivasan, highlighting TCS’s resilience and adaptability in navigating the evolving landscape of the global IT industry.

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