Although the differences in business practices between India and Japan were initially confusing, in a short time, TCS has grown to become a leader in the IT business in Japan. Collaboration with Mitsubishi Corporation was a key to success in Japan.
TCS, the core of the Tata Group, began to accelerate its business in the 2000s, and Subramaniam Ramadorai, who became the second CEO of TCS in 1996, focused on organizational reforms and the establishment of a public listing.
Subramaniam Ramadorai, who became the company's second CEO in 1996, focused on organizational reforms, stock listing, and other measures to build the company's structure and visibly improved its performance. During his 13 years as CEO, annual sales jumped from $140 million to $6 billion. In the process of this performance improvement, TCS surpassed the $1 billion mark in annual sales, and in 2004, TCS became one of the top 10 IT services companies in the world.
Currently, TCS has annual sales of $25.6 billion (fiscal year ending March 31, 2022). In 2004, when the company recorded annual sales of $1 billion, it established a Japanese subsidiary, Tata Consultancy Services Japan Ltd.
In fact, TCS began doing business in Japan nearly 20 years before the establishment of its Japanese subsidiary, in 1987, when TCS realized that Japan, with its large number of large companies, would become an important market as it strengthened its global business. At the time, many Japanese companies lagged behind the rest of the world in the use of digital technology for business.
This was partly because Japan's traditional business practices (business methods) did not rely on machines (or machines, in this case, digital), but on the implicit element of trust formed between people. This was a wonderful form of business that Japan is proud of, but it was not very efficient.
Of course, the Japanese were aware of this inefficiency, but they did not know how to get out of it. In addition, they had no idea how to utilize outside resources and know-how. This was one of the reasons why Japanese companies were lagging behind the global giants in terms of business speed.
If TCS could expand into Japan and help Japanese companies grow their businesses through digitalization, something they had never done before, their competitiveness would grow to match that of the world's leading companies. This would eventually lead to the expansion of TCS's business.
However, it seemed quite difficult for TCS to provide IT services in Japan from a clean slate. This was because, as mentioned earlier, Japanese business practices were quite different from global standards.
In July 2014, TCS chose Mitsubishi Shoji as its partner to establish a joint venture called Tata Consultancy Services Japan Ltd. In fact, the Tata Group and Mitsubishi Corporation had much in common. Both companies were more than 150 years old, both had annual sales of more than $100 billion, both had extensive business operations ranging from consumer goods to finance, automobiles, and aerospace, and both had networks around the world.
Not being close to the customer
As mentioned earlier, TCS focused on the Japanese market because of its potential to expand the needs of its Japanese customers, but it did so in an unusual way. However, the company's focus on the Japanese market was unusual, as more than 80% of TCS's sales came from the U.S. and European markets, leaving opportunities for business expansion in emerging markets such as Asia, China, South America, and Africa. In particular, Japan, where many of the world's largest companies are located, was a market that TCS could not ignore as it pursued its global business.
The full-scale business in Japan was developed by building a strong hybrid company, TCS Japan, backed by TCS's knowledge of the Japanese market and MC's wealth of experience and knowledge of the Japanese market, which had been cultivated through its support of clients in the global market. The focus of its activities has been to understand the weaknesses of its customers and partner Japanese companies, and to provide them with the optimal services and solutions they require.
As a first step, in 2015, TCS opened a Japan-centric Delivery Center (JDC) in Pune, about 100 km southeast of Mumbai, India, where the company is headquartered. The delivery center is not a logistics center that delivers products of any kind, but rather a development center that provides optimal services to Japanese companies. In other words, it is a business solution delivery center. The JDC employs about 4,000 engineers. Looking at the Japanese business as a whole, JDC's 4,000 employees are complemented by Japan TCS's 4,000 employees, for a total of 8,000 employees providing business support to Japanese companies.
Among the many companies supported by JTCS, Japanese clients include listed companies such as Nissan Motor, TEPCO Fuel & Power, TOYO TIRES, and Kao Corporation.
Of course, each company has different requirements. For Nissan, it is car body development, software development, and support for engineer training; for TEPCO, AI is used to optimize thermal power plant operation (combustion efficiency adjustment); and for Kao, as its business becomes more globalized, it helps with regulatory compliance and checks on concerned business partners.
Still, there are many issues that need to be resolved if business in Japan is to expand further in the future. First, there is the language barrier: English is the common language in the IT world. However, this does not mean that Japanese customers should speak English like native English speakers.
If non-native English speakers can communicate with each other in a common language, business can be conducted to some extent. Of course, there is more to it than just language; engineers who support Japanese companies at JDC are also required to understand Japanese culture and business practices. In this context, they need to understand the style that Japanese corporate clients require so that they can communicate smoothly with them. However, TCS does not adopt a style of being close to the customer. That is TCS's policy.
One of the reasons TCS opened JDC is the shortage of IT human resources, which is a social issue in Japan. Compared to Japan, India has an overwhelming abundance of IT human resources.
Companies in India can hire 100s of IT engineers, whereas in Japan it is extremely difficult to hire even 10 to 20 engineers per company. In India, the population of new graduates majoring in science and technology at university is not less than 1.5 million every year. This is due to India's advanced science and mathematics education system. India has a very strong science talent pool. In addition, there is a strong desire to improve, and everyone is full of energy to aim for the top. TCS will bring this strength to Japan.
Contributing to local communities through sports
TCS is not just all about IT services. The company is committed to the philosophy advocated by Jamsetji Tata, the founder of the Tata Group, that "the purpose of a company's existence is to contribute to the local community," and is engaged in a variety of CSR (Corporate Social Responsibility) activities worldwide.
Corporate Social Responsibility (CSR) activities are being developed around the world. The fact that these activities are possible is proof that the Tata Group's core business of IT services is performing well, but it is also a testament to the spirit of the Tata Group's founders that the company is able to carry on such activities. To focus on Japan, the Tata Group is developing a variety of CSR projects in the three areas of education, health, and the environment.
Another characteristic of TCS is that it places great emphasis on the area of health through sports. A typical example is its title sponsorship of marathons in major cities around the world, including New York, Amsterdam, Mumbai, London, Boston, and Chicago. In addition to sponsoring these marathons, TCS contributes to the revitalization and smooth operation of the events through the development of official apps and the participation of employees as charity/volunteers. In fact, it is said that TCS began sponsoring marathons when its third CEO, Chandrasekaran, started jogging to improve his own health.
Sports are deeply related to the CSR activities that TCS Japan focuses on, such as education, health, and the environment. It is an indispensable element for young people, especially those who will lead the global society in the future. It is also important to understand that sports are not only physical exercise.
For example, Formula E, in which TCS-supported Jaguar TCS Racing participates, is a race using electric vehicles (EVs), and TCS, together with Jaguar TCS Racing, aims to build a platform to lead the development of commercial EV technology. TCS will support Nakajima Racing, which competes in Japan's top race, Super Formula, as title sponsor and technology partner. This initiative contributes to the promotion of motorsports as well as deepening understanding of automotive technology through racing.
The TCS engineers working with the Nakajima Racing pit crew on the circuit are aware of the severity of the racing world, where a few tenths of a second can make the difference between victory and defeat, but they also believe that TCS' digital technology know-how can help take motorsports to a higher level, and they are working together as a team to compete in the series.
In the next installment, we will be featuring a conversation between Satoru Nakajima, General Manager of Nakajima Racing and Douglas Foote, Deputy General Manager of Marketing & Communications for TCS in Japan. Their conversation will shed light on the role of TCS in motorsports.
