‘We are more confident now'

When asked to do a SWOT analysis for Tata Consultancy Services, its CEO and Managing Director, Mr N Chandrasekaran, said that “there was only strength and opportunity. I feel there are only two quadrants in SWOT (strength, weakness, opportunity and threat).”

His reply only shows the high confidence with which the $10-billion software major has entered this fiscal, while some of its competitors are nervous about how the year is going to be. “If you are looking for any negative comment, you will not get it. Things are very positive for us,” Mr Chandrasekaran told Business line in an interview at the company's Cathedral Road office in Chennai.

During the 30-minute chat, Mr Chandrasekaran dwelt on various issues such as visas, product differentiation and the competition.

Excerpts from the interview:

You reported good financial numbers last fiscal. Will you sustain the momentum this year, too?

Yes, it was a very good year. Overall, the situation looks better as we enter the first quarter of this year, compared with when we entered fourth quarter of last year. That's because the momentum is there in all markets and we see the easing up of discretionary spend, which was a bit of a concern in January.

Where will the growth come from?

We will see growth coming from all areas, including retail, consumer products, telecom, pharmaceuticals and life sciences, and banking, financial services and insurance (BFSI). New technologies such as mobility, cloud and digital will be another stream what will drive growth.

Will you see any major changes in geographical spread?

The traditional markets of the US, Continental Europe and the UK will continue to do well. We see a lot of traction in emerging markets, including India, Latin America, Egypt and Middle East.

You look very positive...

Yes. We look at the deals that we had closed and what our customers tell us. As I have said in the recent past, we are going to have a global environment that is somewhat unpredictable. So, we have to assume that we are operating under that environment. But the data we have; the deal signings; the traction with customers and the order pipeline, all of that, I feel, tell us that we are more confident today than in the past.

What is the key focus this year?

We need to get more revenue from the non-linear segment. This means more than revenue, getting non-linear platforms industrialised, getting it strong, getting a number of customers on it. We have the banking products; technology platforms for HR, procurement, analytics and insurance. We are looking at a couple of more areas to invest. We also have a small and medium platform.

Are there budget delays?

By and large, we do not see that, because customers working with us are positive. There will be always in individual cases where they may delay the projects. We do not see any pattern.

Is pricing an issue?

Pricing is likely to be stable from where it is today. Last year also, we said the same thing. On a yearly basis, we delivered a 1.3 per cent growth due to price. I believe the pricing improvement has to largely come from specialised services and non-linear offerings (various products).

Could you give examples?

For example, you create a solution, which is based on intellectual property. Then we can command better prices. Those kinds of initiatives are what will drive price improvement in the near term. The normal business model will not work.

Looking at deal sizes, has a lot changed in the last one year?

Anything to do with large outsourcing of infrastructure or application or analytics models could lead to deals large in size. For deals that are specific projects, where we need to build a particular application on a mobile, the size will be smaller. Previously, the discretionary spending was very soft. We are seeing demand in both.

Is issue of visas a concern?

It has been of concern for some time. Nothing has changed now. As unemployment continues to be a worry in countries outside, visas will continue to be a concern. We already have a model.

We use a combination of local recruitment and better visa planning. But the good thing is that we were able to execute engagements.

Does this mean that there will be work offshore?

There will be specific cases but cannot make general statements.

How is business in Japan?

Yes, it is very tough. We have made investments there and created a joint venture with Mitsubishi for onsite development.

Definitely, our interest is to penetrate that market and we are making lot of investments there.

Is it the same with China?

Yes, both Japan and China are tough markets.

Are the issues similar in both the countries?

Japan is a very established market with big companies having big operations there. It is just the language and cultural barrier. China is a growing market. But the cost structure and mobility offers a different challenge. China has a high attrition while Japan does not have. While there is big opportunities in both the market but they are tough. However, we are bullish on both the markets.

How do you differentiate?

Differentiation comes in terms of solution, opportunity and domain knowledge. If you are implementing big solutions around security, corporate taxes, trade finance or wealth management, we have our solutions.

We have built our solutions on value propositioning around that. Sometimes the execution makes the difference. Sometimes, the track record with the client or intellectual property brings the differentiation. You cannot make a generic point that this is my differentiation against so-and-so in this industry, in this client and in this opportunity.

Could you do a quick SWOT on TCS?

We have an excellent platform, a great team and a wonderful set of customers. We have the momentum. In terms of challenges, we need to maintain and continue to scale effectively in a way that we continue to be agile.

We have made significant bets on non-linear and are in the process of creating future business models that are either cloud-based, outcome based or service-based and define the way the IT services are delivered in future. We need to make that shift. It is not a one year journey but a few years' journey.

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