Interview with MD & CEO, TCS
The consolidated revenue of the country’s largest information technology company, Tata Consultancy Services, touched $10 billion in 2011-12, the first in the sector here to do so. It also increased the revenue gap with the second-largest IT services provider, Infosys. Unlike its competitors, N Chandrasekaran, managing director and chief executive officer, is confident the company will do better than the growth target given by industry body Nasscom (11-13 per cent) for the year. He talks to Shivani Shinde about the challenges and growth opportunities. Edited excerpts.
It seems TCS has managed to grow in a new normal.
Our approach has been very simple. The macro economy will continue to be uncertain and volatile. But, my customers have to run their businesses in this new normal. So, we have to understand the environment they’re in and how to work with them. That has been our approach and it seems to be working.
BFSI (banking, financial services and insurance) continues to be under pressure?
Banking sectors’ overall spending falls into several areas. This would include insurance and capital markets. It’s no secret that banks and financial institutions around the world are under pressure. The regulatory standards and norms they need to comply with are getting stringent. That is creating pressure for their Indian partners. While they are working with regulators to comply, they are also internally driving a lot of optimisation. And, any optimisation will have a technology component, differing from company to company.
Additionally, adoption of digital technology is something every institution needs to embrace for getting better insights. This propels a shift towards adoption of cloud, mobile, big data. These are driving growth. I also believe that among many institutions, there will be an opportunity for core system replacement. This might be a business case based on three to four years.
All these institutions are going through these changes and you need to see the opportunity and partner with them.
Where do you see opportunity in BFSI?
We see opportunity in terms of optimisation in financial services. We see it in products, especially non-major markets, and lot of transformational initiatives in the insurance space. Even in terms of core banking systems, we see growth in emerging markets. This quarter, we have won large deals in the insurance space.
On what basis do you say discretionary spends are easing?
We are seeing project ramp-ups. We have seen development spending in sectors like insurance, retail, pharma, and healthcare. There have been projects in the discretionary segment and that’s were spends are coming from.
The hiring target of 50,000 for 2012-13 seems a tad soft. Is that how you see demand?
You have to look at a few parameters. We have already hired 70,000 and given offer letters to over 40,000. Our utilisation has come down a bit. Hence, the capacity we have created is huge. Besides, in other markets we are hiring more locals. It is nothing to do with demand. I think, as of now, this is the right number to go with.
You are saying Europe will see growth in the next quarter. Which regions do you think are driving this?
We had done exceptionally well over the last two quarters in Europe, so this one was a tad slow. But the deals we have won will drive growth in the coming quarters. Germany, UK, Benelux and France will drive the momentum.
What are the key challenges ahead?
While the size we have attained gives us certain advantages, there are challenges. We need to continue to manage growth and scale. This will be significant, as we need to sustain with non-linear growth. We had stated that by the end of the fourth quarter of 2011-12, we will clock 10 per cent revenue from the non-linear segment. We have done that. Now, we need to scale it. Our SME (small and medium enterprises) growth has been slow; we need to scale that as well.
What gives you confidence that you will see opportunities in this environment?
Over two to three years, we have been able to grow my client metrics. That means we have been able to partner with clients. We have maintained growth in all sectors. I agree telecom was a significant drag last year. If telecom would have grown better, our growth numbers would have been better.
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