TCS offers cloud to small companies, hopes for billion-dollar rain

On Tuesday, Tata Consultancy Services Ltd (TCS) waded into a business which it sees has the potential to grow into a billion dollars in five years — a cloud computing offering to small and medium businesses or SMBs.

India’s largest software company promises 30-40% savings in information technology spends for SMBs.

Interestingly, TCS is entering a market that is increasingly getting crowded from a service provider perspective, but is yet to see substantial business transactions in terms of technology adoption.

The offering has been in pilot phase for nearly a year now and serves about 130 clients, according to TCS chief executive N Chandrasekaran, who wants to ramp up the customer base to at least 1,000 in a year’s time.

“Current revenues from the services is practically negligible, but within the next five years, we hope to get at least a billion dollars,” Chandrasekaran said.

This revenue would be counted towards the TCS’ ambitious target of earning 10% of its revenues from non-linear initiatives, which seeks to de-link revenue growth from head count.

The new cloud offering will combine individual hardware and software components to offer solutions that address specific requirements of SMBs, who can pay for the services on a monthly basis as they would for a typical utility service like electricity or cooking gas.

Such service offerings promise to free SMBs from the burden of having to maintain and update an in-house IT infrastructure that is always at the risk of becoming obsolete in the face of continuously evolving technology.

TCS believes that the service offering is unique and more comprehensive than any other currently available in the market.

While analysts agree that SMBs represent a prime market for cloud-based services, it is yet to be validated in terms of actual number of adoptions.   

“In terms of actual instances or transactions, we don’t have many examples in India, but other parts of the world where IT infrastructure and spend is more mature has seen fast uptake of similar service offerings,” said Aman Munglani, research director at technology research firm Gartner Inc.

“In India the service providers might have to put in a bit more efforts especially on client education and awareness,” he said.

Mitali Ghosh, Pratish Krishnan and Kunal Tayal, analysts with Bank of America-Merrill Lynch, said the advantages of the move are fivefold.

These include, “a) TCS takes complete accountability for hardware, network, software & services; b) it is on-demand; c) it is operational expenditure-based; d) it incorporates business process knowledge; and, e) embeds compliance processes”, the trio wrote in a note to clients on Tuesday.

It may be noted that less than six months ago, enterprise networking and telecommunications firm Tata Communications - a sister company within the Tata Group - had announced a tie up with Google to offer a similar set of “cloud services” priced in a similar “pay-as-you-go” model called Insta Compute.

In October, much like Chandrasekaran, the then chief operating officer of Tata Communications, Vinod Kumar, had said that by 2015, he expects the market for such services to be about $1 billion.

It wasn’t immediately clear whether the similar offerings from sister companies would lead to cannibalisation. Chandrasekaran declined to comment, except to reiterate the ‘end to end’ nature of his firm’s solutions.

Tata Communications did not respond to queries from DNA.