Thomson Reuters has reached an agreement with Tata Consultancy Services to outsource a portion of its informationtechnology services as the global news and information company looks for ways to trim costs and build efficiencies at a time when its bank clients in Europe and Asia are cutting back on spending. Thomson Reuters will shift 400 employees at its back-office in Bangalore to India’s largest softwareservices company, according to three people close to the transaction. They did not disclose any financial terms. “Thomson Reuters is routinely looking at ways to run our global business operations more efficiently and effectively. This disciplined approach sometimes includes the need to make personnel, or other, changes which allow us to focus on what we do well and balance our internal resources with the needs of our customers in a highly competitive environment,” a Thomson Reuters spokeswoman said. A TCS spokesman declined to comment.
The deal signals the growing appetite for companies, especially in the financial-services space, to outsource captive processes. Thomson Reuters, which reported a net loss of $343 million for the October-December quarter, derives a large proportion of its revenue selling financial information to clients in the financial-services sector. In last October, the New York-based company unveiled plans to shed as many as 3,000 jobs, mostly in its financial and risk division, to save cost. Sanjoy Sen, senior director at consultancy Deloitte, expects more companies to revaluate how they use their captives, particularly those in the financial-services sector. “Earlier it was a question of captives moving up the value chain. But now, companies are looking at focusing the captives on those processes that add the most value to the company,” Sen said. “In the past, technology did not allow you to break up the processes – to outsource some and keep others. But now you can do that and more companies will consider it.”
TCS, with more than $10 billion in annual revenue in the last fiscal year, is targeting nearly 18% growth in fiscal 2014-15. But large deals, the life-blood of the IT industry, have been hard to come by in the recent past. “If Thomson Reuters is transferring 400 people, it will be a large deal and it (TCS) needs large deals to maintain its pace of growth,” an analyst with a foreign brokerage told ET. “This is positive for TCS and we should expect more deals because there are more rebid deals this year,” he said, referring to the contracts that would come up for renewal. He declined to be named because he is not authorised to talk to the media. TCS has been investing in social, mobile, analytics and cloud technologies and the company expects the newer offerings to add “a few billion dollars over the next few years” to its revenue. It also created a division to focus on the newer opportunities. “The size and pace of the deals in the digital space is increasing,” TCS chief executive N Chandrasekaran said in January.