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TCS to take less staff from US clients as it builds BFSI muscle

TCS to take less staff from US clients as it builds BFSI muscle

TCS deal of $2-billion-plus — its largest ever — with Transamerica, marked the Indian outsourcing leader's entry into the highly specialised US third-party insurance administration business.
TATA Consultancy Services (TCS), India's largest IT outsourcing firm, will take on fewer employees from clients in the Banking and financial services sector in the United States as it builds scale and capability in platform business.

In the past one year, TCS signed three mega deals in the insurance totalling $4 billion in value, signalling a steady turnaround in the insurance platform. All the contracts had a component of absorbing some of clients' employees.

"In these kind of deals, it is likely to have more in sourcing at first. As we build scale and capability in the geography the need to insource from deal could become less over a period of time," said K Krithivasan , President of the Banking and Financial Services Business Unit at TCS. "Early deals may have insourcing but successive deals may not."
TCS absorbed 2,200 employees from Transamerica, 1000 employees from Lloyd's Banking Group's insurance division and 1800 from M&G Prudential, the UK and European savings and investments business unit of Prudential Plc.

TCS deals of $2-billion-plus deal —its largest ever — with Transamerica, marked the Indian outsourcing leader's entry into the highly specialised US third-party insurance administration business.

Banking, financial services and insurances(BFSI) clocked a growth of 3.7% quarter on quarter recently. It accounts for 31.1% of TCS revenue, making it its largest vertical and expected to contribute over $ 6 billion this fiscal.

In contrast to TCS' strong growth in the segment, Infosys growth in BFSI actually dipped 0.2%.

"In general, the BFSI segment is slowing down investments in traditional outsourcing work, but increasing aggressively in emerging areas such as automation and digital. Hence this is more an indication that TCS is currently winning the larger piece of the emerging tech areas and Infosys is playing catch-up," said Phil Fersht, CEO at HfS Research.

TCS is trying to broaden its revenue base. Revenue contribution from BFSI declined at the company to 31.1% in the first quarter from 32.5% a year earlier.

"As an organisation we are broadening our revenue base across multiple industry verticals. We don't have a target. We want to grow BFSI and every other segment," Krithivasan said. "Even if you have broad-based revenue coming in you are likely to have more revenue coming in from BFSI than any other industry."

TCS' overall revenue is weighed heavily towards large banks in the US. Percentage growth from regional banks is high but in absolute terms the value coming from large banks is more. Geographically, Europe is contributing more to growth than the US.

"European banks are continuing their growth. Europe has been a growth driver for us. We find demand is coming from multiple streams - many traditional large banks in Europe which have not outsourced in the past, they are trying to do their first generation or maturing outsourcing journey. There is a market share and new work is coming in," said Krithivasan.
Source: ET

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