TCS plans to diversify to Japan, Latin America, and Southern Europe
India’s leading software-services exporter Tata Consultancy Services (TCS) has revealed its plans to focus its efforts on markets such as Japan, Latin America, and Southern Europe. This decision comes as TCS is facing weakness in its mainstay market, North America. The CEO of TCS, K. Krithivasan, stated that the company is not consciously reducing its exposure to North America but is actively increasing its presence in other geographical regions. TCS aims to tap into the potential growth opportunities offered by markets like Latin America, Southern Europe, and Japan.
North America weakness prompts TCS to explore new markets
TCS witnessed its slowest quarterly profit growth since 2020, and revenues from its primary market, North America, have declined for four consecutive quarters. With IT clients in North America reluctant to spend on discretionary projects due to economic uncertainty and inflationary pressures, TCS is compelled to seek out alternative markets. This shift in focus is driven by the need to explore new regions that offer room for growth, despite potential language and other barriers.
TCS seeks growth opportunities in Latin America, Southern Europe, and Japan
Among the markets TCS plans to concentrate on, Japan stands out as one of the largest tech spenders, yet its revenue contribution to the Indian IT sector remains miniscule. This presents an immense growth opportunity that TCS aims to capitalize on. Additionally, Latin America, which currently accounts for only 2.1% of TCS’s revenue, is another market where TCS sees significant potential. By expanding its presence in these regions, TCS hopes to tap into untapped revenue sources and diversify its client base.
Indian IT giant TCS eyes expansion beyond North America
Traditionally, TCS has generated a major portion of its revenue by catering to clients abroad. However, with revenue contributions from North America declining, TCS is now turning its attention towards its home turf in India and exploring other regions. India’s contribution to TCS’s revenue reached its highest level since the second quarter of fiscal 2018, accounting for 6.1% in the latest third quarter. This shift in focus reflects TCS’s strategy to not only diversify its geographical presence but also leverage the growth potential of its home market.
TCS optimistic about fiscal 2025 as industry faces challenges in 2024
Despite the challenges faced by the Indian IT industry in the current fiscal year, TCS’s CEO remains optimistic about the upcoming financial year. Many analysts have labeled the current year as a “washout” for the industry, with competitors like Infosys, HCLTech, and Wipro also experiencing difficulties. However, TCS believes that fiscal 2025 has the potential to be a better year, providing further growth opportunities for the company. As TCS expands its presence in new markets and strengthens its position in India, it aims to navigate the challenges of the industry and emerge stronger in the coming years.
Analyst comment
Positive news: TCS plans to diversify to Japan, Latin America, and Southern Europe.
Short analysis: TCS aims to tap into potential growth opportunities in new markets, diversify its client base, and offset weakness in its mainstay market, North America. This strategic shift positions TCS for future growth and potentially improves its financial performance in fiscal 2025.
