May 2016 | tata.com
'No one gives you business if it doesn't make economic sense'
Chief operating officer of Europe, Nick Sale is a Tata Technologies veteran of 15 years. He has served in a number of critical roles in the company including as UK services manager, EU PLM services manager, European delivery head, global delivery practice head and consulting manager for North America. In this interview with tata.com, Mr Sale speaks about the company’s aim of reaching $1 billion in revenues by 2017, despite a weak European economy.
How would you define the European market from Tata Technologies’ (TTL) perspective? How is the geography different from other vital markets of the company?
Technically for TTL, Europe means the continent of Europe plus some countries in the Middle East. In reality, given our focus on manufacturing, the countries of interest are: the UK, Germany, France and Italy. In the Middle East, we are just starting operations in the UAE. It further boils down to specific regions such as the south west of France and the UK for aerospace, the midlands in the UK for automotive, etc.
In the engineering services industry, customer intimacy is extremely important both for the business development and project delivery teams. So in each area we operate, we have teams comprising local employees (Swedish teams in Gothenburg, French teams in Paris, etc). These teams, when combined with our 15 delivery centres across the globe, differentiate us from competition.
Where does Europe fit in for TTL with its stated ambition of getting to $1 billion in revenues by 2017 and helping the world “drive, fly, build, farm and mine”, especially since recessionary pressures are dragging down manufacturing in the continent?
Europe is the largest territory within Tata Technologies’ market and in our strategic plan that’s likely to continue with a mix of inorganic and new business growth. The aerospace, automotive and industrial machinery industries are at different points in the economic cycle. Each of them represent significant opportunity for TTL.
Aerospace is in a production phase so our focus is on manufacturing engineering and simulation rather than product development.
The automotive industry has over production issues but is very focused on the introduction of new model variants quickly and as cheaply as possible. Additionally, we have fantastic opportunities in the push to lower emissions with new PHEV [plug-in hybrid electric vehicle] and BEV [battery electric vehicle] vehicles under development by every OEM [original equipment manufacturer].
The construction and agricultural machinery players are facing stiff competition from new entrants from China and India. This means that established players need to raise their game to bring in new products that are tailored for the Asian markets, while holding down product development costs, which in turn means more opportunity for TTL.
We are also looking at opportunities in related industries, like wind energy or rail (rolling stock as well as infrastructure).
What are the challenges the company faces in securing more from its operations in Europe, which has been a growth driver for TTL despite the economic slump there?
The simple answer is that progressive companies invest in new products during a recession, because they will be in the best place to accelerate out of the slump when the economic outlook improves. Outsourcing engineering activity at such times is always attractive as companies will be cautious about investing in fixed costs to drive product development activity. Tata Technologies has the advantage of being able to give companies access to a global resource pool while containing costs.
That being said, TTL is still challenged by the skills shortage in the European market. Our commitment to local teams to face off to our European customers means that as we grow we still need to recruit in the local market. However, our issues are less compared to that of our competitors, so we still have an edge.
What kind of growth opportunities is the company looking to tap over the longer term in Europe, and what will it take to make the most of these opportunities?
We have deliberately reduced the number of customers we target over the past few years, while at the same time have focused on larger and more strategic business with our customers. Consequently, our average deal size is much larger and our sales team is smaller.
In engineering terms, it means we’re looking at large programmes of work or initiatives to set up new engineering centres in low-cost countries. On the product development IT side of our business, we focus on large change programmes, global business expansion or the introduction of the latest technology to drive efficiency in product development or manufacturing.
How much of a factor is India, and Indian talent, to TTL in realising its ambitions in Europe?
A very significant factor. The skills, scale and cost advantage of Indian engineering talent is the key differentiator. We can take on projects needing new resources with confidence whereas our local competitors are constrained by the lack of qualified resources.
What are the advantages of being a Tata company in the space that TTL functions in? Also, what about the drawbacks, especially since you also service the needs of Tata as well as non-Tata enterprises in industries such as automotive?
It depends on the industry. In aerospace and defence, being a Tata company means access to one of the largest emerging economies, whereas in automotive we’re more likely to face questions about Tata Motors or JLR being competitors. Ultimately, the value proposition is most important. No one gives you business if it doesn’t make economic sense. Concerns about working with a company that is in the same group as your competitors can be overcome with a compelling proposal and the best skills in the industry.
Please tell us about the collaborations that TTL has with other Tata companies, with research institutions and the like. How has the company been faring on innovation in the European market, in particular?
Our links with academic institutions in Europe are extremely important to us, especially since it gives us access to new talent through internships and graduate recruitment, and also collaborations for cutting edge research in varied fields such as lightweight materials technology to automotive propulsion. In the UK, we have particularly strong links to Coventry University and WMG at Warwick University.
Our collaborations with other Tata companies tend to be on a project-by-project basis, but we are spearheading a consortium of Tata companies in a new venture with a leading business group in the UAE. Initially this focused on military vehicles, but our plans go much further than this.
How do you see the European operations of TTL panning out over the next, say, five years?
I have never been so optimistic about our business prospects. With the launch of our new European headquarters, we plan to give a world-class workspace to new and existing employees whilst demonstrating to our customers our commitment to information security and quality.
We have a large pipeline of business spread across about 25 customers that gives me confidence in our ability to meet our budget obligations and more. Our value proposition resonates with our new and existing customers; we’ve practically stopped selling our value proposition, it speaks for itself.