It's all about being digital: TCS

The IT major said at an analyst meeting that 52% of its clients are engaged in digital technologies

India’s largest IT services provider Tata Consultancy Services (TCS) on Friday told analysts that 52 per cent of its clients were engaged in digital technologies.

The TCS management met analysts before its fourth quarter results to provide an update of its digital capabilities. The company’s digital revenue touched $2 billion in 2015.

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TCS also for the first time provided details of digital revenue in each of its large business segments. For instance, 24 per cent of the revenue in media is derived from digital, 19 per cent in retail, 16 per cent in high tech and travel, 15 per cent in life sciences, and 12 per cent in financial services.

The company also stated that segments within digital that had been growing fast included analytics (10 per cent), cloud (12 per cent) and mobility/channels (8 per cent).

“While there were no hints about the strength of demand in the near term, the company sounded bullish about long-term prospects. This stems from its belief that the IT services opportunity is large, it has a miniscule market share in most geographies, and that it had made investments to address this,” said Girish Pai and Shubham Gupta of Nirmal Bang in their report.

The TCS management also said the company’s market share was less than 3 per cent in IT services in every continent despite its $16.2 billion size and 16 per cent compounded annual growth rate over the last five years.

TCS also said of the $16.2 billion, almost $4 billion came from new customers and $3 billion from new services, according to an analyst who attended the meeting.

“The management reiterated that the company had invested ahead of time in the digital segment. It also said the employee base had been trained to address the digital needs of customers,” said an analyst on condition of anonymity.

Since April 2015, TCS has trained more than 111,000 associates in the TCS Digital Learning Programme. TCS has also invested in a new delivery model.

“The company has made investments in technology products (Ignio), horizontal products and platforms, and vertical products and platforms. One of the products garnered $100 million in annual revenue, and some are at $10-15 million,” said the Nirmal Bang report.

TCS is also tapping into the startup ecosystem. The company is looking at more than 1,400 firms to collaborate with.

Over the past few quarters TCS’ results have disappointed the street as it faced issues in Japan and Latin America and in business segments like telecom and insurance.

However, traditional business still accounts for 85 per cent of the company’s revenue. “Over the past five years, TCS has led in incremental revenue and operating profits. The outperformance has waned, but it has invested in building digital capabilities,” said a Motilal Oswal report.