The Hindu Business Line : TCS cautious on US scenario

Chennai, Jan. 17 Tata Consultancy Services says it remains cautious with regard to the macro-economic environment in the US, which in turn could affect IT budgets. However, so far, large client budgets for IT spending have remained unaffected, top officials at TCS say.

At a conference call with analysts, TCS’ Executive Director and Chief Operating Officer (COO), Mr N. Chandrasekaran, said, “Our clients have confirmed to us that there are no indications of a budget cut or reduction.”

Asked if the caution applied to particular kinds of services that IT companies provided, Mr Chandrasekaran said, “For now, we are confident that application maintenance and development, infrastructure management outsourcing and BPO are all healthy. The things we need to look at carefully are the transformational projects.”

In other words, budget decisions on discretionary spending and new projects would hold key.

Asked if clients had yet come back to TCS with requests for discounts, Mr Chandrasekaran said, “The October-December quarter, as always, did not see too many renewals. The quarter ending March would see more renewals. We are confident of an uptick in pricing. What remains to be seen is whether we can see 3-5 per cent rise in pricing for existing clients and the 5-8 per cent rise for new clients we had talked about earlier.”

He added that the company had made the best of opportunities in emerging markets. “We used to be small, but are now reaching critical size in these markets, such as Latin America, Asia-Pacific, Middle East and India. We are seeing larger deals in these markets.” He also pointed out that the company had seen healthy growth in Europe.

However, to a specific question as to whether the rise in contribution from emerging markets was because of acceleration in those markets and not because of a slowing US economy, he said, “No. The quarter ending December is a typically slow quarter, with a lot of holidays. In the quarter ending March, we need to see how the US performs.”

Asked if there was any more visibility for the March quarter, Mr S. Mahalingam, Chief Financial Officer, said, “We do not give guidance but we have given you good wins this quarter (54 clients added in the quarter). Some would start ramping up in the March quarter. There is a healthy pipeline – of some 25 deals of each over $ 50 million. You will also have to remember that over a nine-month period, we have shown revenue growth of over 40 per cent in dollar terms.”

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