Tata Consultancy Services (TCS) SWOT & PESTLE Analysis

Strength

1. Healthy balance sheet with strong financials: TCS has a healthy balance sheet with strong financials. Its FY18 revenues stood at $19.1 billion, a growth of 8.5% over FY 2017. It is a zero debt company with around ~ US $7 billion (Rs. 47,686 crores) in invested and investible funds as of March 2018.

2. Flagship Company of Reputed TATA Group: TCS is the flagship company of the US $ 110 billion TATA Group. The brand of ‘TATA’ has always provided credibility and reliability to TCS and has helped it win many clients.

3. Strong dominance in domestic market: TCS commands a strong dominance in the domestic market as it can be seen from its order book that it bags most of the government projects in India. Though these projects command a low operating margin, it helps TCS in keeping high resource utilization. Also being an Indian company, it has the advantage of securing confidential government projects, which may not be outsourced to a foreign firm. Notable Indian government projects for which TCS has been recognized include the Passport Seva Project and the Department of Posts transformation project.

4. Comprehensive business portfolio with end-to-end technology service offerings: TCS has a comprehensive business portfolio spanning across geographies, industry verticals and services. Thus it can be the end-to-end technology consulting and services provider for its clients. It leverages its Global Network Delivery Model (GNDMTM) to provide round-the-clock services to its clients.

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Weakness

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Opportunity

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Threat

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Political

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Economic

1. Large workforce strength with higher compensation increasing operating costs: TCS has a huge workforce; 394,000 employees as of March 2018. While the attrition is steady hovering around 10-12%, it is mainly at the entry level, with maximum attrition in the experience bracket of 3-7 years. The cost of revenue increased to 56.7% in FY17. The attrition of employees with higher experience is considerably lower which is resulting in a flatter pyramid at the top and also increases the salary pay-out of the company.

2. Increase in local hiring in U.S and other countries to impact cost structure: TCS has been indirectly forced to increase local hiring in the countries where it serves its clients. The US, UK, Australia and some other countries have brought in tougher visa norms in 2017 which leaves increase in local hiring the only viable option. While this will increase costs for the company it will be good in the long run as engaging local talent will be beneficial for the organization.

3. Tax benefit from extension of Special Economic Zone (SEZ) scheme: Information technology companies like TCS have greatly benefited from the SEZ scheme which provide tax breaks and duty free imports of computer systems if the importers would export software services worth twice the value of the imports. Tax breaks of up to ten years are provide on setting up development centers in approved location. The scheme has been extended in India till 2020, by the finance minister in 2016 budget.

Social

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Technological

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Legal

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Environmental

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