Tata Consultancy Services, India's largest IT services company wrapped the year gone by with blockbuster deals from large global customers such as Nielsen, Transamerica and Marks & Spencer. As digital deals grow in scale, TCS says it is best positioned to stitch complex backend systems built for desktops with applications on smartphones and deliver it to customers.
"It's one thing to touch only frontend or backend but being able to do both together is a great thing. I think more opportunities for such deals will emerge as clients go beyond the design elements to more integrated enterprise elements of the Digital," Rajesh Gopinathan, CEO and Managing Director of TCS said in an interview with Romita Majumdar, Raghu Krishnan and Bibhu Ranjan Mishra.
In the last three months, we have seen TCS winning large deals? Do you see this momentum to continue?
It's been a good three months. The pipeline is strong enough so there is a good possibility of few more (deals) like that. It'll be a combination of both new and legacy customers. For example, Transamerica is a brand new customer and it's a complete end-to-end transformation engagement leveraging the TCS product suite. It's a digital deal in many ways. It includes front-end transformation; their customer experience journey will be re-imagined. They are positioning themselves for the transformation that is in progress in the insurance space.
There is also a backend transformation where we are going to re-architect all the various platforms and touch-points of customer interaction. You can't do that in bits and pieces and it leverages every element of the stack (of products), that's our sweet spot. It's one thing to touch only frontend or backend but being able to do both together is a great thing. I think more opportunities for such deals will emerge as clients go beyond the design elements to more integrated enterprise elements of the Digital.
The second category is also equally important. The Marks & Spencer (M&S) deal is a complete business transformation deal. What we are doing is taking a part of the business management layer and integrating that very tightly with the technology layer to transform to our agile delivery model. In agile business, ownership becomes a core part of it. While it might be a "renewal", but the deal that is currently there is unlike anything that has been done before. It's not five vendors put together and a large deal stitched out of it. It's a totally different approach to technology architecture model on the client side. In the past, we were about "platforms" and now we're really positive about "agile" as a transformative lever.
Analysts say there are over $50 billion IT outsourcing deals that are coming up for renewal? Are you seeing customers moving away from traditional request for proposals (RFPs) to look at transformation contracts?
There will be all kinds of deals. When existing deals mature, people will club them together and put them out as standard RFP model with various third parties advising them. That is one end of the spectrum. On the other end, we will have collaborative deals like the M&S deal or Transamerica deal which evolve significantly. These are not RFPs because the deal construct changes significantly over the course of dialogue. In a few years, these kind of deals will also mature into RFP moulds. So that kind of maturity will keep on happening. But today, you will see a full diversified spectrum of some RFP-led deals and some which are totally transformative.
These type of deals require investments?
We have been consistently talking about our investments in very large scale training infrastructure and sharing the metric for the same. We have trained enough people to deliver this kind of scale. It is about having the vision, appetite and capacity to engage with customers to create a transformative deal and that you have the ability to deliver on that. Deals like Rolls Royce, Transamerica etc. are validations of what we are doing. We are competing in global space where our customers are also global. These are industry defining deals.
We see the BFSI sector continues to remain soft. When will we see an uptick?
The BFSI industry is looking for transformation and different revenue streams. Certain parts of the industry are embracing transformation at a faster pace, especially in Europe, because they are more challenged. While other parts of the industry are still discovering these areas of transformation. BFSI is also an industry which is open to experimentation and is an early adopter of technology. As it changes to large-scale adoption and gets its competitive models right, as in case of Retail, the participation will change. We are very focused there and there is action happening in different parts of the segment such as Insurance. As asset ownership reduces and we shift to a sharing economy, Healthcare industry is also changing due to the extent of biometric information out there, there are changes happening throughout.
So BFSI is an industry where we are deeply engaged whereas Retail is relatively new for us where we have built up scale in the last ten years. It will take time for it through work through. We are very disciplined on it. We called large scale Digital deals early on and subsequently we have seen Digital scales increase. We got Retail and Platform deals early on and we are also delivering on those. As things crystallize, we will talk about them but we will not crystal gaze about what can happen.
Hiring continues to remain muted. What's your talent strategy?
We were positioned for higher growth last year than what we delivered. So we hired for that (in anticipation of that growth) and we didn't consume it because growth was lower than anticipated. At the end of the day, it is a supply chain management issue. We are also focused on reskilling our employees. We do not approach talent on use and throw basis. We hire people for careers and we are as committed to their career growth aspects as we would expect them to commit the company. ‘Retraining’ is at the heart of our culture and as a company it’s our responsibility to do it. It's combination of the fact that we had excess bench due to lower growth, the fact that we were in the midst of a massive retraining exercise and the fact that automation is steady and making its impact felt, all those came in together. Our attrition was at 13 per cent four quarters back and now it is at 11 per cent with a steady downward slope. All these put together helped us come to a decision on employee intake.
You have been hiring in the US? Does the US have enough talent supply to meet your requirements?
US is massively supply-constrained when it comes to technology, by various estimates. There is a gap of more than a million (people) between the demand and where the current supply is. Our approach to it is that it won't get fixed unless we attack at the school level. One of the underappreciated aspects of TCS' success is that we did a very good job of building up our talent pool and the capacity required to generate that talent pool. So higher education in India was primarily government-led area. TCS however actively partnered with over 700 institutes and invested into and developed the supplier base. The US by contrast has a phenomenal higher education base. Their higher education base there is multi product oriented and not split into engineering or medical base as such. So the base isn't required but the kids need to be encourage to get into STEM (Science, Technology, Engineering and Mathematics) and computational sciences as a preferred area. So seven years back we started a programme called “goIT” which touched about 10,000 odd kids and it was very successful. To make it effective, we needed to improve it. So we have now started another programme called “Ignite My Future” and it is targeted towards touching a million kids over the next 5 years. These kind of industry wide initiatives require scale and timeframe to execute and we have a history of developing our own talent this way.
It’s almost a year since you have been at the helm of TCS. What has the past year been like in your new position?
Change in TCS has always been and continues to be evolutionary. We don't believe in revolutionary change. These large deals have been in the pipeline for quite some time. We have been investing consistently in our platform business for over ten years and it is delivering great deals now. Even before the unexpected change in leadership, we had maintained that Digital is moving up in scale. We are stitching Digital to more integrated offerings and reorganising our service lines to create tangible deals. For us, this (leadership change) has been very incremental. Personally for me, it has been an unimaginable change but for the organization, the last year has been a steady acceleration of a path that we were already up on.