At TCS, ‘focus on re-skilling has paid off’

Re-skilling of employees has had a positive impact on the operating margins of Tata Consultancy Services (TCS).

According to Ajoyendra Mukherjee, Executive Vice-President, Global Head - Human Resources, TCS, cost and subsequent (adverse) impact on margins would have been more if the company had the go in for outside hiring.

“Yes, we have made sufficient investments towards (tech) re-skilling programmes over the last few years. I think, margins would have been lower had we gone for outside hiring,” he told BusinessLine during a visit to the company’s Kolkata campus.

Mukherjee, though, could not quantify the actual impact on margins.

Through programmes under digital transformation and ‘agile’, the IT major has trained over two lakh of its 394,998 workforce. Not a single employee has been retrenched so far by TCS, he claimed.

For the Indian IT industry, newer avenues like automation have come in as a threat to lower-level jobs. The solution, sources say, is to upgrade skills.

Operating margins

For FY18, the company reported an operating margin – a measure of its profitability – of 24.8 per cent (25.7 per cent in FY-17). While on a year-on-year basis, margins dipped, sequentially (between Q2 FY-17 and Q4 FY-18), there has been an improvement.

Mukherjee pointed out that currency fluctuations have been one of the primary reasons for the drop.

“A major part of margin reduction is because of currency fluctuations. We can hedge against a few currencies only. Moreover, any benefit that has arisen out of currency hedging has been put back for re-skilling programmes,” he said. Sequentially, margins improved from 23.4 per cent in the April to June period of FY18. It went up to 25.1 per cent in the July-Sept quarter and to 25.2 per cent for October-December and to 25.4 per cent in January-March.

Local hires in the US

Incidentally, the company has brought down the number of H-1B applications to nearly half of what it was three years back. Locally hiring in the US, Mukherjee said, is sometimes a cost-effective option.

The move comes at a time when the Indian IT companies are confronted by closer scrutiny and tighter visa norms in the US, a market that accounts for nearly 60 per cent of India's IT exports.

Mukherjee categorically claimed that there was a “dearth of talent” in the US with fewer youths opting for “STEM” subjects (science, technology, engineering and mathematics).

“We have significantly ramped up (local hiring), replicating some programmes that have worked well for us in India such as partnering academic institutions and engaging with high school students,” Mukherjee said without mentioning the hiring target in the US. In India, the company has issued job offers to 20,000 trainees in FY-19. Net employee addition stood at around 8,000 in FY18, the lowest in recent times.

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