Will focus on cost management, efficiency: TCS CEO

Varun Aggarwal Thomas K Thomas Mumbai | Updated on July 10, 2019 Published on July 10, 2019

After achieving a double-digit growth in the first quarter, IT services firm Tata Consultancy Services (TCS) wants to reflect on internal processes and ensure its investments are returning value. In a conversation with BusinessLine, TCS CEO Rajesh Gopinathan talked about how he is taking a strategic call to divide management focus and work on improving efficiencies. Excerpts:

Your growth in BFSI and North America has slowed. What are the challenges that you’re facing?

There is moderation on the capital markets side. People are uncertain about how it is going. We had called it out last quarter. That softness is actually increased during the quarter. A lot of impact in North America is coming from BFSI and retail. Manufacturing is doing very well for us in North America. Overall, I would say there is weakness volatility in the environment. We hope retail will bounce back next quarter. We’ll wait and watch BFSI.

You’ve talked about focussing on stability instead of growth. Why?

It’s not that we are not pushing for growth. In the last couple of years, we were completely focussed on getting to double-digit growth to capture the opportunity as well as to address credibility issues. We made big strategic calls that were counter-intuitive to the industry. That credibility has been established. Now, we need to step back and look at the efficiency paradigm. Our customers are faced to work on demand, efficiency and growth altogether. We will also focus on cost management part.

Earlier, we were leveraging investments for growth, now we’ll see whether the productivity benefits are coming through from our investments.

To me double-digit was a milestone. I’m not interested in pushing that up. Our strategic agenda is now broader.

When Digitate was set up, TCS said it had the opportunity to be a $2-billion business. How is it living up to that expectation?

Let’s take the first product they’ve launched — Ignio has already crossed $60 million in revenue. It is the fastest growing software product in that category. It will be a meaningful part of TCS portfolio but it will take time.

Digitate has been set up as a separate entity. They act independently, but are strongly linked to TCS. We have worked for a Canadian retailer who was not a customer of TCS. Ignio worked with them independently as product vendor. We hardly have any services business with them but Digitate is at the front lines without the dependency on TCS. Two of our competitors are service providers and we are, in fact, training their people to use the product.

On the flip side, we have set up our intelligent enterprise automation group, which works with Digitate and other vendors across a spectrum of automation tools.

Last year, TCS talked about plans to bifurcate digital revenues into specific technologies such as cloud, cyber security etc. When can we expect to see that?

It is a long standing demand. Given the level of flux, we are not yet ready to talk about it. Coming out with numbers every 13 weeks itself is a burden. Disaggregating it further, I want to keep on doing it to a level where it is value adding for us also.

There is a lot of pressure on margins. You’ve mentioned impact from rupee and cost related to hiring, is it that or there’s more to shrinking margins?

If you don’t innovate, you lose price resiliency. Constant innovation and investment gets reflected in the ability to hold prices and your competitive position. That’s reflected in our best-in-class industry margins in an industry that has been struggling to maintain growth and margins. By our historical trends, margins are slightly lower, impacted by external events such as currency and political events.

Do you think investing internally as against acquiring companies has worked for TCS?

To me, it is always better to fund from P&L than from the balance sheet. We are very disciplined not to use our balance sheet. We have been systematic about it.

Digitate and Ignio are works in progress. The fact that it is homegrown, has given us the confidence to constantly change.

Published on July 10, 2019
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