 "K Krithivasan, TCS")
In an increasingly uncertain macro environment, K KRITHIVASAN, chief executive officer (CEO) and managing director (MD) of Tata Consultancy Services (TCS), continues to reiterate that 2025-26 (FY26) will be better than 2024-25 (FY25) in terms of growth for the company. He remains confident due to the $39.4 billion in total contract value (TCV) the company signed in FY25 and growth from its international markets. In an interview with Shivani Shinde in Mumbai, he talks about what is driving this TCV growth. Edited excerpts:
TCS signed $12.2 billion in TCV, its second-highest ever. What is driving this, especially when other parameters are not as strong?
You can look at this from a few angles. We had a $10 billion TCV in the third quarter (Q3)... but TCV does not flow in a uniform way — it tends to be lumpy. Additionally, the first quarter (Q1) and second quarter (Q2) were not particularly strong, but we now have a good pipeline. What didn’t materialise in Q1 and Q2 is starting to come through. The delay was largely due to slower decision-making on the client side. That said, in Q3, we had noted that the deal cycle was improving. The fourth quarter (Q4) was also strong in that regard, at least until the early part of March.
We also secured large deals — not necessarily artificial intelligence (AI) deals, but deals powered by AI. However, some uncertainty started to creep in from late February into early March.
In the past, we’ve seen that strong TCV doesn’t necessarily translate into strong growth. What percentage of TCV do you expect will convert into actual revenue?
We do not share that number, but we have our internal metrics. This TCV is a good starting point for the year, especially when looking at both cost-optimisation and discretionary programmes. In an environment like this, it’s fair to assume that cost-optimisation programmes will continue, even if discretionary spend comes under pressure.
My most important assumption is that this (macro environment) will be short-lived. Governments will come together and resolve it soon.
The $30 billion milestone is commendable. Are you on track to reach $50 billion by 2030?
I believe the media mentioned 2030, but as far as I recall, Rajesh (Gopinathan, former CEO) never set that as a specific target. When we originally did the calculation, we didn’t anticipate a couple of years of very slow growth. However, if we can return to double-digit growth soon, reaching the $50 billion goal is still a possibility.
It’s my aspiration. I’d rather operate under the assumption that growth will improve going forward.
Are the traditional cost takeout large deals back on the table?
Yes, but I think there are additional factors at play, such as vendor consolidation or AI-led cost optimisation. In certain deals, AI can help reduce costs. For example, we told one of our customers that they could achieve a 20 per cent cost saving by leveraging AI in a part of their portfolio. In response, they asked us to take on the larger portfolio, implement the same AI solutions, and deliver similar savings across the board.
Does that mean generative AI (GenAI) and AI-led deals will also go up in value?
Cost-optimisation deal sizes will go up, but when it comes to GenAI or AI-specific deals, they will likely continue to be in the few-million-dollar range. AI for information technology, which involves cost-optimisation deals, will be higher in value.
With the Bharat Sanchar Nigam (BSNL) deal coming to an end, how do you intend to bring that boost back to this market?
Close to 90,000 sites have been rolled out, and we’re now in the final phase. However, we anticipate that additional sites may need to be commissioned beyond the original contract. We intend to participate in any upcoming tender processes and look forward to working on them. This could also evolve into a new revenue stream as the BSNL deal winds down.
Secondly, we’re exploring opportunities to take this solution global. There’s strong interest from many markets around the world. Since the solution is built on commodity hardware and uses indigenous software, it eliminates the need for proprietary hardware — a key consideration for several countries. We're in discussions with multiple nations across the Global South.
With India growth slowing and international business growth at 0.6 per cent in Q4FY25, what gives you confidence that the latter will drive growth in FY26?
We still see North America as an important growth market. We’re also hearing about renewed interest in Europe — more people are talking about increased government spending there, including in the UK. This is apart from growth markets, which will continue to grow at a higher pace, albeit from a smaller base.
We are growing very well. Our West Asia and Africa, Latin America businesses are growing... in fact, every regional market is experiencing growth. Even without the BSNL deal, India has also grown well.
TCS is splitting the AI.Cloud business unit into two — AI.Data and Cloud. What’s the strategy behind this?
This reflects trends in the market. When we created the AI.Cloud unit, the story was led by the hyperscalers. This business is also very partnership-focused. Over time, however, we realised that many more AI-native partners are emerging and the space is evolving rapidly — it requires dedicated focus.
Also, the Cloud business is growing. We didn’t want to club both together and create a bandwidth issue. The skill sets required for each business are also different.
The two senior management appointments were part of a strategic review. What will be the focus for FY26 and beyond under this review?
We believe AI, data, and Cloud are important growth drivers. We also looked at digital engineering, cybersecurity, enterprise solutions, and a few others — these are key service lines that will drive growth. Once we identified them, we realized we needed to double down on each.
We appointed a chief operating officer and a chief strategy officer to focus on executing this strategy. We’re also setting up an India consulting business. We’ve been offering consulting informally, and now we’re moving towards a formal structure.
Almost 40 per cent of hires are now in advanced technologies — up from 17 per cent last year. Does this mean the pyramid structure will change?
It may not change significantly because we still hire 40,000 people at the trainee level, which is a substantial number. The advanced-technology hires are in areas where we want to quickly augment the mid- to senior-level talent pool within TCS. Sometimes you need top talent from outside to bring in a different perspective.
What opportunities do you see in India’s journey in the semiconductor and AI space?
We are working with Tata Group companies in the semiconductor and electronics space. We have some expertise in semiconductor design and can collaborate with them. We can also help build the factories of the future — that’s our area of expertise, along with AI.
We are not, at this time, looking to build our own models, but we are very interested in exploring humanoids or physical AI... you’ll see us investing heavily in those areas.
How does this uncertainty compare to the pandemic or other global events?
This will be resolved much sooner than those problems.
