The TCS Story by S.Ramadorai
Today the Indian IT Industry is doing a business of over $155 Billion worldwide, but it all started with TCS and F.C.Kohli, Father of the Indian Software Industry in 1969. During his tenure at TCS from 1969 to 1996, Kohli defined most of the rules by which Indian IT Outsourcing business works even today.
In the last two decades of starting and running an IT Services firm myself, Tata Consultancy Services (TCS), the largest of them all, presence in my world was unmistakable. Not that at my firm we partnered or competed with TCS directly, we were too small compared to them, but often we spoke about the company internally in our brainstorming sessions, we heard about them from our customers or we had seen people who left us to join them and so on. In this book, S.Ramadorai who succeeded Kohli in 1996, grew the business from 400 Million Dollars a year to well over Six Billion Dollars a year, an increase of 12 times in a roughly equal number of years, looks at his journey with TCS.
Ramadorai did his graduation in Hans Raj College in Delhi and IISC, got accepted to UCLA with a full scholarship to study computer science at Master’s level. Travelling from Bombay to Los Angeles in 1969 should have been exciting and scary for him. His first job was with NCR (National Cash Register) for $12,000/year. After returning to India and joining TCS in 1972, working there for few years he comes back to New York to promote TCS and seek business from US clients after their existing businesses were taken over by Tata Burroughs. In today’s world of globalisation, you could buy something from Amazon USA or Alibaba China and get it delivered in a week, the story of TCS importing a computer – a Burroughs B1728 (a mainframe) in 1974 for $300K plus an equal amount as taxes to Government of India looks strange. On top of this, TCS had to give a commitment to Government that they will export twice this amount over next five years. In 2003 for my business at Vishwak Solutions, we had to give a similar commitment to STPI (Software Technology Parks of India) when we imported equipments from abroad but that was to tax concessions and not on top of taxes. If you thought importing original equipment in India of the 70s & 80s were tough, importing spare parts to repair the machines were even more tough with strict foreign exchange rules. For those unfamiliar with the draconian license Raj of India, Ramadorai recalls the ten different licenses they had to get from more than ten different departments of the government to import a computer. Even with Tata’s formidable relationship with India’s power corridors, it was mind-bogglingly complex.
Indian software industry was born, not by grand design but by accident of history because India was short of foreign exchange and we had to earn foreign exchange to pay for the importation of a new Burroughs mainframe
I am a believer of less government and a lesser role for public enterprises, especially in the services industry. So I was surprised to read about in the book J.R.D.Tata’s letter to the principal secretary of (then) PM Indira Gandhi: “… it took no time at all for our politicians and our burgeoning bureaucracy to block or stifle in the process of concentrating of all economic power in the government. Instead of releasing energies and enterprise, the system of licenses and all pervasive controls imposed … brought success and wealth to a new breed of bribers, tax evaders and black marketers“. Unbelievable that someone could’ve been so brutal and frank on his comments especially at the time around license raj and emergency rule. Remember, this was the time when Government of India imposed 98% personal income tax.
Ramadorai shares an interesting data point, in 1974 time frame when they had imported the mainframe, 90 percent of a project cost TCS quoted to a client was hardware related, while software and people costs were about 5 percent each. Today Hardware and Software costs are mostly less than 5%, with the cloud still lower, but people costs for Indian IT Services firm have more or less remained static at about 50%. The first “outsourcing” contract TCS got was a migration project from Burroughs medium systems COBOL to small systems COBOL and it was for $24,000. TCS had identified in its early days servicing US clients three things which would go on to define IT outsourcing to India as such – the time difference between Bombay (India) and New York (USA) which allows to do round-the-clock delivery, due to attractive salary paid by IT industry and cultural reasons TCS engineers on projects not watching the clock, and, on the job learning especially on migration projects. In my own experience of working with customers from over 10 countries, I have found global clients to be easier than working with Indian clients. Ramadorai captures the reason when he says “They would state their requirements clearly and reject work that did not meet these standards“.
While most of its competitors were busy with exports, due to its Tata heritage TCS was doing domestic business as well. Around 1992 when NSE (National Stock Exchange) was setup in India, TCS partnered as a Systems Integrator (SI) with a US-based company TCam to implement their trading system. TCS had to prepare a proposal weighing 6.5 kgs spread over six volumes and had it hand delivered simultaneously in Bombay and in Hong Kong and the UK, where the consultants of NSE resided. Similar was the project TCS did for NSDL (National Securities and Depositories Limited) within 5 months in 1996. Ramadorai quotes NSE and NSDL to be examples of how financial and banking systems in India are world class as they embraced IT early enough in the game.
After taking over from Kohli who tended to authoritative and definitive, Ramadorai follows a style of participative management that involved discussion and suggestions rather than directives from the top. As a manager, he not only listened to what people are telling but tried to understand what they are saying and how they are saying it. In a work environment like in India that was hierarchical, a CEO needed to do this to truly understand what he hears. Today it is common across most industries but TCS under Ramadorai had created a think tank and brought in Pankaj Ghemawat, a respected professor from Harvard Business School.
Today it is fashionable for IT companies to say we are moving away from throwing resources at a problem to automation and machine learning. But in the late 1990s, the Y2K problem was the big turning point for Indian IT industry and for TCS. TCS had established their first software “factory” in Chennai where they used their own tools for migration like PQCC (Production Quality Compiler Compiler) to fix the Y2K problem and had developed a seventeen-step assembly line processes. This approach had enabled TCS to migrate between 600 to 700 million lines of mainframe code for Y2K – far more than anyone else. In the late 1980s and 1990s when TCS was developing software for Telecom companies in North America like Nortel, software code was sent on tapes back and forth between Canada and India, but as India opened its telecom sector it moved over data links of speeds of 64KBps initially.
Moving forward Ramadorai talks about how he setup an HR department under S.Padmanabhan which enabled TCS to seamlessly hire and integrate 500 people in a year to about 30,000 people a year in 2010. Here I should say TCS really set a benchmark and showed others in the industry that you could do this volume, without which their growth would not have been possible. In early days of Indian IT outsourcing, it was mostly of young engineers (then mostly men) moving to a western country with their newly married wife. The young wife often found herself setting up home in a foreign country, with a husband who was too busy to help. To help on this and to provide psychological counselling service and assistance Ramadorai’s wife Mala had made a suggestion which led to TCS setting up Maitree, an HR initiative. Today it includes Toastmaster’s clubs to salsa dancing classes and even hiking. Software is a knowledge industry and one that changes drastically often. To be competitive in that world, it is imperative an organisation has a well-developed training programme. In 2006 Ramadorai sets up a program called Ignite under Dr Raman Srinivasan. I am surprised that it took TCS this long to come up a learning programme – today even a start-up won’t be able to survive without a continuous learning programme.
In my own experience say in the late 90s, when I approached an American manager seeking for business I had to first educate them about India, the vast talent pool of engineers and my team’s own technical capabilities. Today it is all assumed, discussions starts and ends with price, features and timelines. So when Ramadorai talks of the evolution of TCS own business model and engagement with clients it resonated with me. One such example was in 1995-96 a large procurement team from GE coming to India to inspect, evaluate and select partners; for TCS the partnership that came out of it was a major learning experience which led to the setting of several dedicated ODCs (Offshore Development Centre). When Ramadorai mentions about Ultimatix, TCS internal Information System and ERP, I got very interested but quickly was disappointed when it was just 2 pages covered superficially. Similar was the mention of TCS quality process iQMS.
Under his watch, TCS did many successful acquisitions including CMS from Government of India, Citicorp Global Services and went on to establish a global presence especially in Latin America and China. The book then quickly jumps to 2004, when TCS came up with its famous IPO done which got 7.7 times oversubscribed in what was then a dull market. But as Ramadorai himself acknowledges unlike the IPO of its peers like Infosys, TCS IPO did not end up creating a huge amount of wealth for individuals (its employees) rather it achieved well the objectives of its parent (Tata & Sons).
The last few chapters of the book are mostly about Tata groups legacy and Ramadorai’s vision for Tomorrow’s India with Technology. One of the projects which TCS did that I have heard about earlier was the world-class IT system they developed for Chennai based Sankara Nethralaya, a hospital chain that provides premium eye care for the poor.
For all its historical importance recalled the book tends to be slagging and repetitive in many places, chapters run over 60 pages each with no logical grouping other than 3 broad buckets. Little to nothing told in the book was unknown to anyone who was interested with TCS. Few of the internal workings of what makes TCS tick have been revealed. This is something I find it to be in sharp contrast to books written by American CEOs.
The TCS Story … and beyond by S.Ramadorai is a good read for anyone who is interested to know how it all started for the Indian Software Industry.