Tata Will Drive Chrysler`s IT

By Lawrence Walsh  |  Posted 2008-02-21

Tata Consultancy Services, a subsidiary of the multibillion-dollar India-based Tata Group, won a major contract to provide IT services to struggling American automaker Chrysler.

In an announcement made this week, Tata said it would provide the third-largest U.S. automaker with a “comprehensive portfolio of IT services.” Services include IT maintenance and application support, particularly for Chrylser’s sales, marketing and shared services divisions. While official figures on the value or scope of the deal were not released, the multiyear contract is estimated to be worth tens of millions of dollars.

“This growing trusted partnership is a testament to TCS’ competencies and capabilities which continue to help the customer in its business transformation by providing innovative IT services scalable to their needs,” said N. Chandrasekaran, executive director and chief operating officer of Tata Consultancy Services, in a statement. “The expertise and in-depth knowledge of the automotive industry and Chrysler’s business, coupled with our ability to deliver certainty of results will provide sustained value to Chrysler.”

Chrysler was not available for comment, and Tata declined to provide more specifics on the contract. Neither firm would comment on whether the deal will affect Chrysler jobs or result in cost savings for the carmaker.

IT outsourcing is a growing trend among multinational enterprises. Several major Global 2000 companies have announced IT outsourcing initiatives to shave operation costs and gain access to IT talent. In January, Royal Dutch Shell announced it would outsource most of its IT operations in an effort to save more than $500 million annually. When the deal is initiated in June, Shell is expected to layoff up to 90 percent—or 3,200 people—of its global IT staff.

Ironically, Tata Consultancy Services is a sister division to Tata Motors, a company that will compete in India—and potentially other parts of the world—with Chrysler. Tata Motors will introduce its Nano subcompact sedan this year, a car that will retail for $2,500. The Nano is designed to provide affordable, no-frills transportation to the burgeoning middle class in India, a country with a population of more than 1.1 billion.

Tata Consultancy Services is no stranger to the global automotive industry. More than 15 percent of its $4.3 billion in annual revenue comes from services provides to auto manufacturers. The company says it provides product development, manufacturing, supply chain and customer service support for most of the North America, Japan and Europe automakers and their tier-one suppliers.

Chrysler was spun off as a privately held company last year when the venture capital firm Cerberus bought the automaker from Daimler for nearly $7 billion. The acquisition ended a 10-year relationship between the parent company of Mercedes-Benz and its struggling American counterpart, which ended up costing the German company nearly $30 billion in lost equity.