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TCS Brand Grows Fastest as it Reaps Rewards from Cloud Services

07 March 2018
This article is more than 3 years old.

· Tata Consultancy Services leads brand value growth in the IT Services sector with 14% increase to US$10.4 billion, according to Brand Finance report.

· IBM stays at #1 in the industry with brand value of US$19.5 billion

· Accenture well positioned for brand growth despite 4% value fall

View the full list of the world’s 15 most valuable IT services brands here

Tata Consultancy Services leads with 14% brand value growth

Tata Consultancy Services (TCS) is the star of the IT Services sector this year, adding US$1.3 billion of value to its brand, which is now worth $10.4 billion. TCS’s growth contrasts with stagnation in the sector, which saw the combined value of the 13 brands in both 2017 and 2018’s rankings slip 1% to US$94.4 billion, according to new report from Brand Finance, the world’s leading independent brand valuation and strategy consultancy.

TCS’s digital services are driving the business forward, with a 40% increase in year-on-year revenues in the third quarter to December 2017. Digital services, including Cloud, Cybersecurity, IoT, Digital Interactive, Enterprise Intelligent Automation, Enterprise Application Services, Consulting & Service Integration and Cognitive Business Operations, saw more than 150 contract wins, including the division’s first US$50m-plus client. An additional 12,543 employees were recruited, taking the total to 390,880. Despite its strong business performance, TCS’ BSI score and brand rating stayed at 78 and AA+.

Savio D’Souza, Director at Brand Finance, commented:

“Spending on traditional IT outsourcing has reached a natural limit and companies have been slow to reposition around value-added services with a few exceptions. TCS has done a great job over the past 4-5 years shifting perceptions, positioning themselves as an international company at the forefront of technological developments, which is a fair reflection as that is where they generate the majority of revenues and where they are expanding.”

TCS’s 14% rise in brand value is in stark contrast to many of its peers, including Cognizant (-10%), Infosys (-3%), Fujitsu (-14%), Wipro (-7%), Hewlett Packard Enterprise (-65%) and Xerox (-33%), whose brands have either stagnated or lost value.

IBM stays at #1 in IT Services

IBM retained its position as the IT Services sector’s most valuable brand, with a 1% rise in brand value to US$19.5 billion. IBM’s brand rating improved two scores to AAA and its Brand Strength Index (BSI) was the highest in the sector by almost 10 points at 87.6. In 4Q2017 IBM broke a 22-quarter streak of declining revenues with 3.5% growth, though 2.5% of this was attributed to the weaker dollar and annual sales were down 1% at US$79.1 billion.

Savio D’Souza, Director at Brand Finance, commented:

“IBM is a very strong and well respected brand within the industry. If it can leverage that reputation, it will be able to gain momentum in areas where it has been slow to move, particularly cloud computing. IBM is focusing on repositioning itself as the leading provider of cloud services, blockchain and AI for enterprises.”

Accenture well positioned for brand value growth

Accenture, the sector’s second most valuable brand, lost 4% of its brand value, which now stands at US$16.8 billion. The fall is likely to be a blip for the consultancy, which has invested heavily in differentiating itself in digital, cloud and security services, which now account for more than half of its revenues. Of the US$10 billion in new bookings for 1Q2018, 59% were in consulting.

Capgemini captures new business

Aside from TCS, Capgemini was the only company in the top 15 to achieve double-digit brand value growth, gaining 10% to US$4.6 billion. Capgemini generated 30% of its €12.5 billion revenue from its new Digital & Cloud offer and has positioned itself well as understanding how to implement these key technologies.

Hewlett Packard Enterprise plunges

Hewlett Packard Enterprise’s woes continued, with brand value down 65% to US$3.1 billion. The company plunged from 4th to 12th in the ranking. HPE was formed in November 2015, when Hewlett-Packard split the PC and printers business from the enterprise products and services business. In 2017, HPE spun off its enterprise services division as DXC Technology and its software business to Micro Focus, with DXC now treated as a separate brand with a brand value of US$6.0 billion, a BSI of 64.0 and a lowly brand rating of A+.

View the Brand Finance IT Services 15 report here

ENDS

Note to Editors

Every year, leading valuation and strategy consultancy Brand Finance values the world’s biggest brands. The 15 most valuable IT services brands are included in the Brand Finance IT Services 15 league table.

Brand value is equal to a net economic benefit that a brand owner would achieve by licensing the brand in the open market. Brand strength is used to determine what proportion of a business’s revenue is contributed by the brand.

More information about the methodology as well as definitions of key terms are available in the Brand Finance IT Services 15 report.

Media Contacts

Konrad Jagodzinski
Konrad Jagodzinski
Communications Director
Brand Finance
Florina Cormack-Loyd
Florina Cormack-Loyd
Senior Communications Manager
Brand Finance

About Brand Finance

Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.

Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.

Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.

Methodology

Definition of Brand

Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.

Brand Strength

Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.

Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.

Brand Valuation Approach

Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.

The steps in this process are as follows:

1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.

2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.

3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.

4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.

5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.

6 Apply the royalty rate to the forecast revenues to derive brand revenues.

7 Discount post-tax brand revenues to a net present value which equals the brand value.

Disclaimer

Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.

The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.

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