The Hindu Business Line : TCS sees shift towards health, life insurance — `There is more money being invested in IT than in any other branch of technology'

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TCS sees shift towards health, life insurance — `There is more money being invested in IT than in any other branch of technology'

Kripa Raman

Mumbai , Jan 16

TATA Consultancy Services (TCS) reported a 5.57 per cent year-on-year increase in net profit for the third quarter of the current fiscal on a revenue growth of over 28 per cent. Soon after the announcement of the results Mr S. Ramadorai, CEO and Managing Director, TCS, and Mr Clayton M. Christensen from Harvard Business School who has been newly appointed Independent Director for TCS, and best known for his work on "disruptive innovations" spoke to Business Line.

TCS' third quarter growth this year does not seem to be as spectacular as that of the competition's. Is there any reason for this?

Ramadorai: Q3 over Q2 of this year, the net profit growth is 8.59 per cent, which is way above competition's. Second, Q3 of last year included a one time exchange realisation of Rs 109 crore. To compare real operating profit, you must compare around Rs 600 crore of the last Q3 against Rs 750 crore of this Q3. That is phenomenal growth.

What led to Mr Christensen taking on an independent directorship at TCS?

Christensen: I first came 15 years ago and fell in love with India. Second, the economy here is where the action is so I wanted to get involved here. The US has been a leader in technology, not because Americans are great technologists but they are able to attract to America the best in the world. But the IT industry does not have to come to America any more.

What exactly would be your (Mr. Christensen's) brief at TCS?

Christensen: There is more money being invested in IT than in any other branch of technology in the world. That can be translated into productivity and economic growth. TCS's strategy of enabling customers to use their infrastructure and leverage it can produce tremendous results.

I hope that some of my strength in design and strategy will be useful to them. It is a different model and paradigm here, TCS added 6,076 professionals this quarter.

Ramadorai: In many ways we are changing the definition of the industry, we are tying to bring the back-end platforms and create a common platform with flexibility so that the customer can leverage that platform in operational matters. Nobody is doing that.

Christensen: It is critical for India that they succeed in this. Every time the economy begins on a disruptive growth path, the initially low-cost labour translates that advantage into process-based advantages, which is going on right now.

What are TCS's plans for the consulting practice? Forrester while naming your competition in India as "leaders" has mentioned TCS as only a "strong performer".

Ramadorai: We are strong in assurance services, quality consulting, and in many other areas. We see where and when operational efficiencies come in. To us, consulting has to be very specific in certain areas of business and MUST translate into implementation. We do it slightly differently.

Recently, Forrester had also said that consulting and systems integration might slow down. Do you agree with this and are you prepared for this?

Ramadorai: We think systems integration growth will be phenomenal. Where rollouts of SAP in finance and HR are happening, customers want the other sections of their business integrated too. Systems integration is going to give ample opportunity in India and in any part of the world.

Christensen: Take by way of analogy the drug companies, the large ones have merged globally to become huge, the market is slowing down for them and there are just not enough blockbuster drugs which give sales of billions of dollars. Amongst the small drugs companies there is a burgeoning market for companies of the $50 million to $500 million size. We will come in at a point helping them to create and implement an economic model creating strategies for the high-end and growth at the low-end.

Will there be more deals of the size of the ABN-Amro deal of last year for TCS?

Ramadorai: After we won the ABN Amro deal, we find that others (customers) are also going to look at that very carefully, they are in a competitive situation too.

Going ahead do you see any shift in emphasis or weightage in the verticals that you serve?

Ramadorai: There is a shift towards health, life insurance. The banking and financial services sector has always had a predominant role for us. Definitely there are opportunities in manufacturing and engineering and retail for country like India.

We think media and entertainment are going to expand in a big way in the country. We are also working in cutting edge technology in bioinformatics, life sciences, RFID.

One thing very important to us scaleability, and performance engineering of any system, we are addressing that. The other concern is - can we take industry to zero defect?