SMEs next big opportunity: TCS
Business Standard — March 6, 2008

Tata Consultancy Services will launch IT-as-a-Service (ITaaS) solution for small and medium enterprises (SME) in April, and sees this market rising to Rs 2,000 crore in three-five years.

"The next stage of growth globally as well as for India is from the SME segment. We expect SME business to grow at 25 per cent," said S Ramadorai, CEO and MD, TCS.

"Our aim is to be the leading end-to-end business solutions provider in the SME segment as part of our overall strategy to expand into new markets and customer segments."

ITaaS will be subscription-based, allowing SMEs to scale as they grow and pay as they use. SMEs for TCS will be companies with a turnover in the range of Rs 100-500 crore.

V Ramaswamy will head the Small and Medium Business (SMB) unit. IT spend by Indian SMEs was about $8 billion (Rs 32,000 crore) in 2007, a growth of 24 per cent over the previous year, according to AMI-Partners research. India has 65,000 medium businesses, 1.4 lakh small and 17 lakh home office businesses.

ITaaS allows clients to use hardware and software that would be owned and managed by TCS.

ITaaS will be hosted centrally on a common platform in order to facilitate alignment of technology adoption to the needs of the business and bring scalability to the business model. ITaaS has seven different layers of solutions.

The first four layers will cater to aspects that are common to organisations across verticals such as hardware, networking, office applications (email, software, and so on) and business applications such as CRM, payroll, HR.

The fifth layer will have core vertical applications specific to that industry and the next segment will have niche vertical applications such as space management, loyalty management. Over these layers the final step will include services such as consulting and outsourcing.

The first year of the SMB unit's operation will focus on the customer base. The company already has 10 clients on board. "Once we have an addressable market in India, we will also look at offering this in other markets," Ramaswamy said.

TCS will offer flexible pricing options, including a pay-per-use model and a revenue share model.

"The IT needs of SMEs have not been met in a holistic manner. These solutions will not only address their business needs but will also take care of talent issue, need to compete in a global environment and also adhere to global best practices," added N Chandrasekaran, COO and executive director, TCS.

TCS shares gained 2.34 per cent (or Rs 19.95) to close at Rs 873.50 on Wednesday, hours after the announcement was made.