TCS begins restructuring to focus on digital technologies

As growth slows in traditional business units, India’s largest software exporter TCS has begun the process of restructuring to focus better on digital technologies.

TCS, which crossed $3 billion in digital revenues in fiscal 2017, will be focussing on the three core areas of digital, namely Cloud, agile and automation.

“The three teams are shaping up so that we get organised and there is much more focus from a customer perspective; more direct connect between customer expectations and our promise to the customer — from the perspectives of delivery, engagement and outcomes,” TCS’ recently appointed CFO V Ramakrishnan told BusinessLine .

While TCS reported a growth of just 8.6 per cent for FY 2017, digital revenues of the company grew 29 per cent year-on-year, consistent with the previous year’s growth of about 30 per cent.

“To go back 10-12 years, when enterprise solutions started, it started as a small group. As we grew, the individual offerings within that grew into businesses and we had leaders driving that and building the team. That is how digital will happen and this will only drive growth,” Ramarishnan said.

Ramakrishnan agreed there would be headwinds going forward, given the macroeconomic situations; and if some of the anti-immigration legislations go through in the US, it could have cost impacts for the company. Focus on digital, in this case, could come as a respite for the company.

He, however, said the existing industry verticals will continue to exist, and digital will act as an additional layer that’ll cut across all verticals and geographies.

“We’ll continue to have the verticals that we have. They’ll drive businesses within the domains and engage with customers and have end-to-end responsibilities for delivery as well as resources. The service lines (for digital) will provide a layer which will work on understanding what is happening in that particular space — what are the technological changes taking place. Also, they’ll cut across different markets and customers to develop deep skills within their space.

“From a digital perspective, we’ll do some more reorganisation to bring a sharper focus to technology and offerings,” he added, acknowledging that digital deals, although smaller in size compared with traditional outsourcing deals, come with better margins, which will help the company maintain its 26-28 per cent operating margin target.

In the fourth quarter, TCS missed this target band and reported operating margins of 25.7 per cent.

Ramakrishnan said as digital deployments mature across industries, which have so far been just testing waters with digital, deal sizes will also go up.

In order to build digital skills, Ramakrishnan said the primary focus will be on internal training and partnerships, rather than acquisitions.

“Digital technologies have evolved over the past 3-4 years and are maturing. We believe in partnering with players who are working on niche parts of digital technologies, and our own abilities to internalise the technologies and train resources on a rapid, sustained manner. We don’t need to acquire companies to get that scale and technology.”

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