Europe provides growth for TCS despite year floored by pandemic

Continental Europe provided India-based Tata Consultancy Services (TCS) and the wider IT outsourcing sector with reasons to be positive emerging from the Covid-19 pandemic.

In its results for the latest 12-month period, TCS reported continental Europe as the only region where sales grew, with a 5.5% increase.

The 2021 financial year, which ended in March, also saw continental Europe account for more TCS revenue than the UK, at 16.3% of the total, compared with 15.6% in the UK. 

Meanwhile, the final three months of the year saw the region record over $1bn in quarterly sales for the first time, with 16.8% of its global sales of just under $6bn in continental Europe. 

During a year of unprecedented uncertainty and business challenges for IT suppliers and their customers, the results from TCS, a bellwether for the IT sector, show positive signs as the global economy looks to accelerate after the Covid-19 slowdown.

Globally, TCS reported sales worth just over $22bn for its latest full year, an increase of 0.7% over the previous year, with a profit of $4.5bn. The company also added over 40,000 employees, taking its total to more than 488,000.

In continental Europe, TCS won a diverse range of notable contracts, going beyond traditional outsourcing associated with IT services firms from India.

These included a software deal that saw French bank Société Générale Securities Services adopt TCS’s BaNCS platform and in Belgium, insurer AG signed a contract with TCS as part of a project to improve its digital channels and modernise its IT systems.

The Nordic region also had significant wins for TCS, with construction company Skanska contracted to support its ambition of becoming the most digitally advanced company in the construction industry, while Sweden’s Ericsson is using TCS’s expertise to help it build and operate its cloud-based R&D digital workplace.

But perhaps the highlight of TCS’s continental European growth was its takeover of Deutsche Bank’s Postbank Systems IT operation as part of its long-term relationship with the German bank, worth over $100m. The takeover will see TCS add 1,500 staff with extensive skills in SAP banking and deepen its relationship with one of Europe’s biggest companies.

“Our investments over the last decade in building newer capabilities, and in research and innovation, position us well for the multi-year technology services opportunity ahead,” said Rajesh Gopinathan, CEO at TCS.

Peter Schumacher, CEO of management consultancy The Value Leadership Group, said TCS’s performance reflects strong demand from businesses in continental Europe to take out cost and undertake large-scale, digitally enabled transformation initiatives at an accelerated pace. “But beyond customer-driven demand, its results also demonstrate its ability as an organisation to respond appropriately to market situations and compete effectively,” he said.

“Based on our conversations with decision-makers across Europe, demand for TCS services is strong.”

Schumacher said TCS has avoided buying market share, adding: “While TCS have steadily pursued their organic growth approach, focusing on their customers’ needs and their staff’s capabilities, some competitors have been getting drunk on acquisitions.”

Suppliers need to get in shape because demand is already picking up, according to ISG. The company, which records all contracts worth $5m or more, said just over $17bn was spent on IT and business services in the first three months of this year, which is 11% more than the equivalent period last year.

These numbers reflect a recovery in spending, which has been held back after economic activity collapsed during the Covid-19 crisis, which began to hit enterprises in March last year.