artner says TCS, Infosys and Wipro are Likely to Emerge as The Next Generation of IT Service Megavendors by 2011

IBM, Accenture and EDS to Face Stiff Competition from Emerging Megavendors MUMBAI, India, August 13, 2008 Tata Consultancy Services (TCS), Infosys Technologies and Wipro Technologies, collectively referred as India-3, will emerge as the next generation of IT service megavendors, according to Gartner, Inc. These vendors are increasingly being considered for strategic service deals, and will augment or, in some cases, replace todays acknowledged megavendors by revenue - IBM Global Services, Accenture and EDS - in this space by 2011. These emerging megavendors are much smaller than the current megavendors but will increasingly compete for the same megadeals that had been the exclusive domain of the incumbent megavendors. The India-3 have leveraged their strong success with meeting client needs to achieve record growth levels during a long period of time (30 quarters continuously) and have outperformed the incumbent megavendors by almost a 3:1 margin in growth rates. A comparison of the key data and statistics between the India-3 vs. the current megavendors shows the differences in growth rates between these companies and reveals the rise in the market capitalization of the emerging megavendors. The market capitalization of the Indian providers is significantly higher than that of EDS, and almost on par with Accenture, which are much larger companies in terms of revenue (See Table 1). The emerging megavendors have made dramatic progress in the past few years and have more than doubled their revenue in a four-year period, with the 2007 revenue being 2.6 times the 2004 revenue, said Partha Iyengar, vice president, distinguished analyst and regional research director, Gartner. This level of growth differential has continued even as these vendors have become multibillion dollar enterprises. To put this in context, there are just 100 service enterprises globally with more than $1 billion in revenue. Table 1. Statistics for Emerging and Current Megavendors (Service-Related Statistics Only)

Company

Year Revenue End (Millions of Dollars) 5,718 4,317 2,979 2,235 4,176 3,090 2,152 1,592 3,393 2,459 1,815 1,354 54,144 48,291 47,407 46,283

Growth Head Rate Count

Revenue per Employee (Dollars) 51,320 48,280 44,820 48,890 45,800 42,770 40,820 43,320 41,310 36,260 33,770 32,340 146,910

Market Cap (Millions of Dollars) 27,800 29,294 19,747 13,240 23,563 29,101 19,250 12,156 17,388 19,187 13,913 11,651 149,744 146,355 129,381

2007 2006 2005 2004 2007 Infosys 2006 2005 2004 2007 Wipro 2006 2005 2004 IBM Global 2007 Services 2006 2005 2004 TCS

32.45% 44.89% 33.31% 35.15% 43.59% 35.18% 37.94% 35.50% 34.09% 12.12% 1.86% 2.43%

111,407 89,419 66,480 45,715 91,187 72,241 52,715 36,750 82,122 67,818 53,742 41,857 368,558

355,766 135,740 329,373 143,930 329,001 140,680

Company

Accenture

EDS

Year Revenue End (Millions of Dollars) 2007 22,134 2006 21,268 2005 19,757 2004 19,863 2007 21,453 2006 18,228 2005 17,094 2004 15,114

Growth Head Rate Count 4.07% 7.65% -0.53% 17.69% 6.63% 13.10% 170,000 140,000 123,000 103,000 139,000 118,000 119,000 117,000

Revenue per Employee (Dollars) 130,200 151,910 160,630 192,840 154,340 154,470 143,650 129,180

Market Cap (Millions of Dollars) 23,951 18,647 15,076 14,312 9,483 14,389 13,913 10,431

Source: Partially compiled by Gartner from company annual reports, Capital IQ, OneSource, Hoovers and 10-K filings. Additional inputs from company responses and Gartner analysis The emerging megavendors have leveraged four critical competencies to achieve their status as emerging megavendors. The competencies are: process excellence; world-class HR practices; providing high quality services at a low cost; the achievement of significant and disproportionate mind share compared to their actual size. To achieve process excellence, the India-3 providers have invested heavily to establish frameworks and have aggressively marketed these capabilities as evidence of being able to deliver in a consistent, predictable manner. Supporting the levels of growth witnessed by the India-3 has required a high level of HR excellence and capabilities. This has helped them to create a world-class human resource management (HRM) infrastructure. For the past few years, these companies have been adding more than 30,000 people to their workforce every year. The recruitment, training, induction and overall onboarding challenges of this kind of scale could only be supported by the creation of a world-class HRM infrastructure, which has been a significant competitive differentiator for Indian companies. By combining process excellence to deliver higher quality with the less expensive (and larger) workforce available in India, the India-3 providers were able to create the combination of low-cost, high-quality services, which has proved to be the most alluring factor for clients. These qualities have resulted in a higher level of mindshare among clients and prospects globally that is significantly disproportionate to their revenue and overall size, as compared with the incumbent megavendors. However, the challenges facing emerging megavendors to truly achieve this status are also evident in Table 1. Looking at the "revenue per employee" data, it is clear that there is a divide between today's megavendors and the aspiring Indian megavendors. The Indian providers will have to address the issue of moving away from resource-intensive revenue growth to a model that provides higher leverage and increases revenue without a linear relationship to head count, which is the situation that exists today. They will have to achieve similar (to the current megavendors) levels of revenue per employee benchmarks to truly achieve megavendor status. Furthermore, they will increasingly have to deal with the business constituency that is often deeply involved in these higher-end projects and develop strong relationships with the business stakeholders. There are strong indicators that India-3 (TCS, Infosys and Wipro) will be the next megavendors in IT services. However, to achieve this, the current standing of the India-3 will need to expand quickly to keep pace with the changing client environment for IT delivery in the future, said Mr. Iyengar. Revamping and continually reinventing their delivery capabilities, even as they address the challenges of managing their growth opportunities, will determine how and when these emerging megavendors will actually achieve megavendor status. India-3 is an acronym devised by Gartner for Tata Consultancy Services, Infosys Technologies and Wipro for the purpose of this research.

Additional information can be found in the report India-3 Are the Emerging Megavendors which can be found on Gartners Web site athttp://www.gartner.com/DisplayDocument?id=713207&ref=g_fromdoc