We want all our stakeholders to be rewarded post Q2: Tata Consultancy COO

In a Q&A, N Ganapathy Subramaniam explains why his company went for a pay hike in the face of economic concerns brought on by the pandemic

After a better-than-expected performance in the September quarter, IT services major TCS is seeing a ‘V’ shape recovery in most of the segments it operates in except for Travel & Hospitality, and thus is quite positive about its growth prospects. In an interview, TCS’s chief operating officer (COO) N Ganapathy Subramaniam tells Sai Ishwar about the changing business and operational dynamics and how it has helped the company to show a sharp improvement in performance and the road ahead. Edited excerpts:

You had a strong performance in Q2. What really has changed during the past three months which led to this improved performance?

We have always stated that this is not something like a global financial crisis. And we believe that the recovery here (in the case Covid-19 triggered financial crisis) will be swift, and whenever it happens, it will come like a V-shaped recovery. Also, governments across the globe have provided balance sheet support especially to the financial services and important companies, which has helped in the business revival. The only exception here is the Travel and Hospitality sector (which has not recovered) as people didn't want to move out of their house. So except these two, all the other industries are finding new ways of doing business. Besides, clients are placing three factors as their top priorities—resiliency of their IT systems, providing connectivity to their employees and continuity of customers' experience through a touchless and contactless model. They also want automation processes to be extended to other areas such as security and payments. So opportunities are coming in those areas.

Do you already see a V-shaped recovery happening actually?

It is too early to comment, but we are seeing the signs of it. Especially, in some sectors, we are seeing that kind of recovery. Six months ago, people felt they have to wait till the pandemic is over. Now, they realised that pandemic is not going to get over anytime soon and they have to live with it. They have realised that they have to be cautious because even if the vaccine comes, it has to be distributed. That is a bigger effort and may take another 18-24 months before everything gets sorted out.

You are so far probably the only IT firm to offer wage hike. What triggered the departure from the earlier decision?

We felt that in a pandemic situation, something like this can really cheer them (the employees) up. Every year, we took these ways to manage the cash position in a meaningful way. So during every September quarter, we used to take a call on whether to go for a buyback or offer a special dividend. Given that we have done better this quarter, we felt that all the stakeholders should participate in it, and the first among them are employees. For shareholders, we offered dividend of 12 per share this time and not in the usual range of 4-5 per share. The whole idea is, people will be happy to have an extra cash in their hand. But overall we have said, between the options available we used to return 80-100 per cent of free cash flow.

Q3 is seen as a weaker quarter due to more number of holidays and furloughs when new projects are not taken up. What’s your visibility now?

It is prudent to assume that there will be seasonality. Some of those behaviours will continue. It is better to assume that and then model your business accordingly. For most of our customers, December will be their last quarter of the financial year. So they would like to save whatever they can so that their results can look better. But I hope that it (furloughs) will be less (this year) than what we normally see because everything has moved online and people are working from home. 

The visa regime in the US is getting stricter while the recent changes will mage H1B holders more costly than before. How do you plan to deal with those?

Our operating model has always been to hire talent locally. In our sector, we are the top two recruiters (in terms of local hiring). But, there is a supply constraint in the market (in the US) as only a limited number of resources available in the technology field. So we'll get the business talent locally and technology talent from India or elsewhere, and then integrate these two to deliver the right value proposition for the clients. That is the way to look at the operative model. Also, remote working has changed the way of working completely. Whether you are working from Sydney, from New York, Chennai or Kolkata, it doesn't matter anymore. As long as they have the talent, they are able to connect and able to deliver the project, the location doesn't really matter. It's like a ‘talent cloud’ where talent are available in cloud. We have projects today where talent are coming from Poland, Slovakia, and India—all of them connecting and delivering to somebody in the United States.