 "N Chandrasekaran")
N Chandrasekaran, popularly known as Chandra, sums up his four-year stint as the CEO of India's largest IT services provider, the $10 billion TCS, in the following words: "We remain humble, but at the same time, hungry for growth."
"Our principle has been that we would be aspirational. It is a journey. I would always look at how things could have been done better. I would never say that I am satisfied. But yes, I feel good about the way we are performing," adds Chandra.
There is every reason for him to feel good about what the company has achieved in the last four years. TCS has not only managed to do better than the industry average - as Nasscom has affirmed - but has left peers like Infosys, Wipro and Cognizant far behind. More importantly, under Chandra, revenues have increased from $6 billion, when he took over as CEO, to $10 billion in four years, and profitability has also been maintained.
TCS has maintained a compounded annual growth rate (CAGR) of 28 per cent over the last three years, while its net profit grew at a CAGR of 25.6 per cent over the same period.
In terms of recent performance, for the last two quarters (Q1 and Q2 of FY14), TCS went on to deliver industry-leading volume growth of 7.3 per cent for the second quarter (July-September) and 6.1 per cent for the first quarter (April-June). For the recently concluded quarter, TCS' revenues in each of its key operating regions - as well as verticals - increased by over 10 per cent.
Along with growth, TCS has increased its margins, too. Though Chandra has focused on application development and maintenance projects, he has also been aggressive in taking risks. Unlike several of its peers, TCS invested the gains made from a falling rupee back in the business, mainly in deals and contracts that were different in structure and required upfront investments. This has helped the company win large deals and create new platforms.
The robust performance has also driven up the company's valuation. The rally in stock prices in the month of September 2013 made TCS the second-most valuable IT services company -ahead of Accenture and HP (Hewlett Packard). TCS' market value was then around $60 billion, compared with Accenture's $50.5 billion and HP's $43 billion.
Moreover, the company also has one of the highest headcounts in the industry, both globally and locally. As of September 30, 2013 the company's total headcount was 285,250. Among its global peers, Accenture has over 266,000 employees and IBM (with its hardware business) has a total employee base of some 430,000.
On Chandra's watch the company has seen galloping growth, but with the scale that TCS has and with challenges like the Immigration bill in the US, he has his hands full. "What really makes TCS work is the attention given to details. Despite becoming a huge company, if a client calls the CEO, he prefers to solve the issue on his own. The fact that he is available itself is a big support," said a senior employee of TCS.
Chandra, who is a marathon runner, also believes that this sport has made him a better leader. "Running allows you to ponder. It has also made me calm and patient," he told Business Standard in an earlier interview.
Analysts believe that the growth that Chandra has delivered will continue, because of the company's scale and its presence in multiple verticals and geographies; the question that is being asked is whether it can grow its non-linear strategy.
For the CEO, however, that's not an option, because it has to be done. In any case, as Chandra says, he doesn't like the term 'difficult'.
Company profile: Tata Consulting Services, India's top IT-services company, was set up in 1968 as a division of Tata Sons. TCS was incorporated as a separate entity in January 1995. TCS has been recognised by Forbes as one of the World's Most Innovative Companies.
TCS has over 285,000 employees and IT consultants in 44 countries. In FY13, the company's revenues stood at Rs 62,989 crore - over $10 billion - with an enviable operating margin of 27 per cent. The company is the world's first organisation to have achieved an enterprise-wide Maturity Level 5 on CMMI® and P-CMM® based on SCAMPISM, the most rigorous assessment methodology.
TCS is ranked among the top four most valuable IT services brands worldwide by Brand Finance, a leading brand valuation firm - the other three being IBM, Accenture and Hewlett Packard. Brand Finance assesses the dollar value of the reputation, image and intellectual property of the world's leading companies.
Analysts' view: Analysts tracking the company and the information technology sector are of the view that TCS under the leadership of Chandra has the potential to be India's first company to have attained a market capitalisation of $1 billion. The analyst and brokerage firm CLSA has said in a report: "With a low but growing share of the global IT market and superior execution, TCS is shaking up industry league tables. Scale and innovation in delivery should help it maintain its sector-leading margins and premium valuations."
| 'It's no longer about the past, it's about predicting the future' |
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TCS' scale and global footprint have placed it in a unique position to become a strategic partner of its clients, says Managing Director and CEO N Chandrasekaran
What's next for TCS?
While we have got the scale, we still represent a small percentage of the global market place. That has to improve; we have to achieve the next evolution of growth. Mobility is entering every aspect. It's not enough just to leverage technology, and we have to be much more than that. For example, a book store today can't survive just by selling books unless it sells a learning experience. Earlier, it didn't know who is buying the book; now they know everything - your coordinates, your interest areas, how you can be engaged. Every industry is going through this - consumer companies sell products to the retailer but now they know exactly who the end customer is, what's his experience, etc. TCS gives them the ability to engage with customers by providing the right platform.
How is it that your attrition rate is one of the lowest?
We manage that by worrying about it every single day. We try our best to keep them engaged by investing more, and it's not only about money. We start conversations with students and bring them into our eco system much before they join us. I would be foolish to say we have cracked the code. What we do is give them a platform where they can realise their potential. I believe everyone in the company has to behave like GenY. They are more ambitious. But can you fault somebody who says he or she wants to get better?
Is the worst over?
2014 will be better than 2013. First, though companies are looking for cost optimisation, they are now looking for growth, too, and that's why we are seeing a movement towards discretionary spends. Second, the five digital forces - mobility, cloud, social, analytics and big data - are maturing. It's no more about building a few apps but how these five can transform the client's business landscape. Third, our skill and the rate of change in technology are requiring clients to partner with us.
Your growth has been stupendous over the last couple of years. Are you worried over maintaining the momentum?
We have a growth mind-set. Technology is changing fast, prompting companies to redefine themselves, and we want to lead the change. Our scale and global footprint have put us in a unique position to become strategic partners with our clients. We are addressing more industries, more geographies and our service offering is expanding. It's no longer about the past, it's about predicting the future. For example, we realised quite early that the technology we offered five years ago is going to be very different from what we offer now and what we have to offer five years from now. The common theme here is that technology is embedded in all of the strategies of the company.
So what are you doing to lead the change?
We know we have to be open and agile. We are already 300,000 people. That means the scale is pretty large. The positive side of this is that we can leverage this base, but on the other side we need to continuously evolve to manage this growth in manpower. Second, we need to grow our non-linear business and increase its share. We are investing a lot in this. Third, we know as long as there is pressure on jobs in different regions, there will be continuous regulatory change and we need to cope. To sum up, we have to work as a smaller company which has the advantage of a large company. We want to remain humble and hungry.
Your presence in some overseas markets is still quite small. Are they difficult to crack?
I don't like the term 'difficult'. We have to find solutions and we will. We are doing very well in the US, UK and other European countries, even LatAm. It's true we need to do much better in some non-English speaking markets such as China.
