TCS marketing UK Life & Pensions platform – but rather quietly!

(By Anthony Miller – Sunday 19th July 2009 4:30pm). During Friday’s quarterly results concall, I asked TCS COO (and CEO-elect) N. Chandrasekaran when they will have the new ‘converged’ Life & Pensions BPO ‘platform’ fit for purpose (you may need to read TCS inches closer to opening the ‘Pearly’ gates to remind yourself of the background, but this is basically TCS’ tilt at the UK L&P BPO market based on the April ’06 Pearl deal). It turns out that Phase 1 of the platform is already complete and TCS has started the migration of Pearl pension polices off the (dozen or so) legacy systems. But the critical second phase is apparently the key – and this is scheduled to complete by the end of this FY (i.e. March 2010). I’m not aware of any new wins as yet, and until then I would still be placing my bets on Capita, by far and away the market leader. But one should never dismiss a ‘strategic’ investment made by TCS – they always play the game for the long haul.

For me, this was about the most interesting aspect of TCS’ 1Q10 results, as they basically mirrored those of Infosys last week (see Infosys barely less bearish on FY outlook). OK, TCS’s revenues increased a bit sequentially (to $1.48b) whereas Infosys’ declined a bit (to $1.12b), but this is splitting hairs. TCS also expanded margins, with gross up 4.5 pts yoy and 30bps seq to 45.6%, the peer leader, by the way. Operating margins rose 2.7 pts yoy and 1.1 pts seq to 24.8%, vs 30.1% at Infosys. It’s just how it is between those two! Else the tone of the ‘messages’ were much the same.

Mind you, TCS made nearly 25,000 job offers in the last campus hiring round – hugely more than any other player. You’d expect a high level of acceptances in the current employment market, and TCS says they will start ‘onboarding’ this very quarter. I know it’s cheaper to keep a bench in India than most places, but even TCS can’t afford one that big without taking a margin hit. But I’m sure they’ve done the sums – even with the lowest IT services attrition level (10.7%) for over two years – and I wouldn’t expect to see utilisation hurt too badly. Actually, volumes (basically, pure demand) rose nearly 4% seq – higher than management had expected – and near half ‘normal’ levels. May be there won’t be too many sore bums on the bench after all!