Unmatched strengths

Strong synergies
“There are several reasons why such increased collaboration should work,” says Rino Raj, chief (planning), information technology and e-enabled services at Taco. “One, it would sharpen the focus of the group in the automotive area.

“Two, there are skill gaps in the resources of each of the companies we are talking of, if you consider the entire gamut of engineering services for the automotive industry. But if we consider the resources available with all the companies in the group, these gaps get filled up, and we are in a position to compete more effectively for large and turnkey projects.

“Three, joint delivery means that we don’t wastefully duplicate skills in different companies in the group. Instead, we utilise the existing resources more effectively. And, finally, avoiding unnecessary competition among group companies can help us get better margins.”

Unmatched strengths
This view is echoed by Dr Gopinath. “At TCS, we are not experts in product design, but we understand the principles of automotive design. We are IT specialists,” he says. “So if we can work with people with automotive domain expertise, we gain and they gain. This is where our collaboration with Taco or Tata Technologies makes sense.”

TCS has built substantial strengths in its own area. This has enabled it, for example, to sign up with CAD software producer Unigraphics to help this American company develop some parts of its programs. TCS has also been selling Unigraphics packages in India since 1992.

TCS has been recruiting people with the domain expertise in the different industry areas in which it offers solutions and services. But, in the automotive area, its domain knowledge gets vastly augmented by the resources of Taco and Tata Technologies.

This is something that a casual observer may not see. Being a part of the Tata Group gives TCS a latent strength that other software organisations cannot match. Latent, because the real results will come if the group can weld these companies into a closer-knit unit, in which their synergies can be exploited better than they have been so far.

The facility that TCS’s engineers have -- of being able to interact with engineers and managers in the group’s automotive, engineering, electronics and process industry operations -- gives them the proximity to real-life situations that others can achieve only when they depute their engineers to clients’ sites, and then too it’s not the same thing. But being able to interact, and actually doing it, and doing it routinely are two different things.

The work it has done for three decades for leading global companies has enabled TCS to touch frontier areas. Combine that with routine shopfloor-level expertise in the other companies and you get a very, very potent mix.

Which is what the group management wants to create.

High confidence level
Being a part of the Tata Group helps each company. The group generates enough confidence for other automotive manufacturers to avail of its engineering services. Even its rivals believe the group will be ethical in all its dealings with them.

Toyota’s Indian subsidiary has assigned the design and prototyping of the outer door panel of its Qualis multi-utility vehicle to Taco, which will design the panel and have it produced by Tata Engineering, whose Sumo competes directly with the Qualis. The outer door panel is considered a ‘class A’ surface because of the precision and smoothness required in its manufacture.

This is where, curiously, the existence of a separate entity outside Telco helps. The group has managed to get orders like the Toyota Qualis door panel job because rivals have confidence in Taco's skills.

A larger piece of a large cake
The combination of resources is so powerful that it can catapult the Tata Group into the position of a major supplier in the automotive engineering services business.

It’s a large cake we are talking about. Dr Anturkar estimates the global engineering services market at about $100 billion, of which, he says, work worth about $10-15 billion is outsourced. There is a growing dependence on IT-enabled skills and this favours Indian groups like the Tatas, which have invested massively in developing IT expertise and in building a global presence in this area.

While the links with Tata Engineering may remain ad hoc and project-based, those among some of the other companies - to begin with, TCS and Taco - are likely to be strengthened soon. Will they merge? Unlikely, and even unnecessary - the fit between them seems suited to a strategic alliance rather than to a merged entity. But you never know how things shape up. Some reshuffling may make sense.

What exact shape the alliance will take is not clear yet. Joint ventures? Joint bidding? Joint project groups? These issues are being hammered out.

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Courtesy: www.tata.com