Tata Technologies, which started as a provider of specialised IT-enabled consulting, services and products to leading manufacturers, has now diversified into areas like infrastructure, industrial, heavy machinery and construction equipment verticals. Ratan TataÂ´s dream to see Tata Technologies acclaimed as one of the most innovative and successful design companies in the world is actually taking shape. Sumantra Das explores the success story behind Tata Technologies.
In early 2009, the worldÂ´s lowest-cost passenger car, Tata Nano, was introduced at the Delhi Auto Expo and a year later in Detroit, North America. The Tata Nano is considered to be an integral part of an evolution within the automotive industry, and it was Tata Technologies, yet another Tata company, that was behind this innovative thinking. Its regional headquarters in The Novi, Michigan, branch of the Singapore-based Tata Technologies, played a key engineering role in the production of the Nano. The innovation highlights Tata Technologies` vehicle engineering and design capabilities to both the auto industry and customers. The company has been involved right from the concept to the launch of the Nano-working on the design, advanced engineering, the interior, the exterior, right up to the process of manufacturing.
The journey so far…
Tata TechnologiesÂ´ origin lies in disparate organisations started in India, Europe and the US, more than 20 years ago. Gradually the European and North American companies came together and set up a single entity called INCAT, which then spread its wings in North America, Europe and Japan.
Tata Technologies started in Singapore in 1994 as a provider of specialised IT-enabled consulting, services and products to leading manufacturers. The company got its first contract from Tata Motors and then in 2005, acquired INCAT to establish a prominent presence in the global market.
Â´Initially, the objective of our former Chairman, Ratan Tata, was that if Tata Technologies can offer this kind of work and people to the large original equipment manufacturers (OEMs) like Tata Motors which is specific and domain-oriented, why canÂ´t we look at the whole world, and try and create a niche for ourselves,Â´ says Samrat Gupta, Chief Financial Officer, Tata Technologies.
Presently, the company serves major automotive and aerospace OEMs, virtually all the top ten automotive OEMs, and their suppliers. Tata Technologies has an integrated workforce of over 6,200 professionals in 17 countries, and an active presence in 25 countries including North America, Europe, the Middle East and the Asia Pacific region.
Over the period, the company has understood that a better product only comes through with some factors in place. These include:
Being different: The companyÂ´s focus is exclusively on projects that demand engineering skills and product development, IT and that focus means the companyÂ´s engineers and software architects are always at the leading edge of every new development.
Being better: The companyÂ´s intention is to access more and better engineering resources, experience, knowledge, product development and IT, to ensure a complete solution to design and manufacturing issues.
Gaining maximum value: Some clients chose to rely on engineering skills, offshore facilities, design capabilities or knowledge of IT system in support of product development and manufacturing processes. The company offers all this together in combination better than anyone else which makes its offering a unique one.
All these have helped Tata Technologies to attract premier projects and deepen client relationships, resulting in record earnings and fresh cash flows over a period of ten years. In 2012-13, the company achieved a significant financial milestone by crossing Rs 2,000 crore consolidated revenues, with a profit of Rs 300 crore.
In the last five years, the revenues have increased twice while profit has jumped ten times. This achievement validates the companyÂ´s focus on quality customers with long-term, multi-year engagements. The company generated a record cash flows from operations of Rs 354 crore during the years, bringing the cash and cash equivalent balance to Rs 775 crore.
However, the journey was not smooth from its inception with Tata Technologies hardly able to garner big clients in the initial period. Recalling those initial days, Gupta says, Â´It was not an easy task for a new company in the initial period. In 2007, then Chairman Ratan Tata called us and said just focus on performance and makes sure the consequences of both failure and success will affect everybody. Make sure, He said, that we are on a journey where we will make Tata Technologies a profitable business and as an enterprise, we will provide value to our shareholders. We have worked very hard since then and have not looked back.Â´
Gupta adds, Â´The journey from $3 million to $55 million in just five years was not an easy one but it was a learning experience for all of us. Initially, our margins were hovering around 2-3 per cent; in 2013, we closed the margin at 15 per cent.Â´
Initially, Tata Technologies as an engineering services organisation, focused on the automotive sector as it got its first contract from Tata Motors. Later, the company diversified into infrastructure, industrial, heavy machinery and construction equipment verticals which remain the situation at present.
Gopinath Jayaraj, President, Global Delivery, Tata Technologies, says, Â´As engineering services are very domain-specific, we have to earn the trust of the customer by demonstrating domain competence over the period, by showing them that we know and understand the business and products and, of course, the market. It takes some time to build up competency. Having said that, the focus of company is very much in and around construction and heavy engineering domain. This is a diversification domain for us; we are consciously moving in this area to expand our revenues from organisations that depend on the construction and heavy engineering sector because that has a different cycle as compared to automotive and aerospace.Â´
Â´Three years ago, in order to to gain competency, we started hiring people laterally, from either product development companies or other companies who have experience in this domain. As we gradually began expanding our competence range and bagging projects with more complexity, we started focusing on construction and infrastructure equipment so that we can have customers both in North America and Europe. In India, we have started on this domain working with both. We have started on our own and not partnered with anybody for technology. This year, we acquired Camric Corporation, a premier engineering services company that provides turnkey engineering services in construction and heavy equipment. This acquisition will add more competency value to the infrastructure and industrial heavy engineering services arena in the coming yearsÂ´ Jayaraj reveals.
With the present growth momentum, the company is coming out with various offerings to help manufacturers where they can meet all challenges to provide safer, environment-friendly, innovative and content-rich products tailored to the local markets at the same or lower costs.
Samir Yajnik, COO Asia Pacific and President, Sales, says, Â´This momentum of growth is only the start of our story. The way I look at it, the earlier phases of engineering companies are more about being able to do lower level services for Western companies. The next phase is about integrated product development for developing markets. With companies in the West being able to capitalise growth of developing markets like India, China and other countries, the next phase will be how we can use products that are developed for developing markets and reverse the flow; which means, sell outside India. So, I think it is exciting times and every industry we operate in auto, aerospace and industrial machinery-is beginning to pick up well. Clearly, the next phase will be about developing markets and exporting products to other markets as well.Â´
The convergence of product and technology remains an important differentiator for Tata Technologies. The best-in-class industry domain knowledge, together with the skills and partnerships with leading technology providers to the manufacturing industry, gives them the edge compared to the competition. In this regard, Tata Technologies offer a unique initiative called the Global Engineering Centre (GEC) which provides its clients with a competitive advantage beyond traditional off-shoring, as it distributes responsibility for engineering and product innovation across global teams without the segregation of low to high complexity work regionally. The propitiatory technology knits these distributed teams together with leading edge Product Lifecycle Management (PLM) tools and practices, substantially improving efficiency in the product development process.
Commenting on future strategies, Yajnik said, Â´Considering it as a challenging market, I think growth opportunities in the markets where we play are pretty substantial. We are not talking about single-digit growth but a clear double-digit growth and in certain parts, it is in excess of CAGR of over 20 per cent; aiming for a revenue growth of Rs 1,000 crore in the next five years. It is a market with its own challenges, in terms of the challenges we face in policies, standards and shortage of talent. Our strategies are formulated to address these issues and to work closely with the influencers of the enablers.Â´
In addition to accelerated revenue growth, the company has launched a new programme Ã¦One to WinÂ´ which re-engineers sales by improving the identification of customers and projects where Tata Technologies delivers long- term value. In FY 2013-14, the company plans to integrate services and product sales into a single customer-driven team from each territory. Besides business, the company also focuses on community development; it has expanded its Ready Engineer programme in India and launched the same at Coventry University in the UK. In addition, North American operations are partnered with Square One Education Network, an STEM-focused education co-operative that supports high school students who plan to pursue a college education in the areas of technology or engineering.
Ratan TataÂ´s dream to see Tata Technologies acclaimed as one of the most innovative and successful design companies in the world is actually taking shape, as the Hinjewadi campus in Pune, (the very first campus of its kind which started with five technical centres and dedicated employee learning and customer innovation centres) is now, within ten years, has 12 technical centres, a guest house, a wellness centre, corporate, HR and IT facilities with 1,829 professionals, including an SEZ. Tata Technologies today ranks 246 in the Indian Fortune 500 companies and is positioned as the 19th largest IT company in the India Infotech Index.
Major achievements at a glance
BAE Systems: BAE Systems was a prime contractor for Eurofighter Typhoon, a multi-role combat aircraft which needed to change its organisation and working practices. Tata Technologies worked with BAE to implement and integrate CATIA solutions with minimal disruption to the workflow and to develop better processes in order to optimise the design cycle.
PAIG-Premium Aircraft: Contour Premium Aircraft Seating, a subsidiary company of PAIG was given orders to develop and lead a design project and outsource strategy to redesign, engineer and optimise a premium quality first class Airbus 380 cabin seat. Tata Technologies delivered a project solution that placed more than 60 per cent of the work with offshore resources.
Tata Motors Nano Project: To introduce the Tata Nano, a small car offering comfortable and safe transportation, Tata Motors asked Tata Technologies for additional support in design, manufacturing, packaging, engineering and knowledge-based engineering. Both companies together created a global team that improved the programme timing, costs, development process and tools, as well as product design, quality, knowledge capture and transfer.