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Leslie D’Monte & Beryl Menezes

There will always be enormous opportunity in IT: N. Chandrasekaran

There will always be enormous opportunity in IT: N. Chandrasekaran
Chandrasekaran says digital will keep evolving because it is a combination of the basics. Photo: PTI

Mumbai: India’s largest information technology (IT) services exporter Tata Consultancy Services Ltd (TCS) posted a slightly lower-than-expected net profit in the December quarter, a seasonally weak one for IT firms. N. Chandrasekaran , chief executive officer and managing director, remains bullish about the IT sector’s prospects in the coming quarters. In an interview on Friday, he said TCS sees continuing demand for traditional IT services as well as digital technologies that help boost discretionary spending by clients. He also shared his perspective on the reported lay-offs of some employees on grounds of non-performance. Edited excerpts:

What were the key takeaways from the December quarter?

There were three big key takeaways. First is in terms of addition of clients in different revenue buckets, which is an indication of the future and hence a very big positive. The second is broad-based growth, both from an industry point of view and from a geography and service-line point of view. The third thing is the headwinds from Diligenta (a UK-based life and pensions business process outsourcing provider and subsidiary of TCS) and retail.

Your traditional applications, development and maintenance (ADM) services growth has slowed down. Is it an indication of companies moving up the value chain?

One should not read much into the flat ADM result in the Decemeber quarter, primarily because our business has multiple contract formats, like fixed price, time and material, etc. And in a quarter with fewer working days and furloughs (leave) leading to volumes going down, ADM, which has a lot of such contracts, get impacted. But what is important is that there were no ramp-downs, only seasonality causing low volumes. However, whatever the nature of the industry or the situation of the client, the digital phenomena is an imperative that everybody has to adopt and it is just expanding—earlier it was about mobile and channels, then it was about cloud, then it was about analytics, Internet of Things, and sensors.

So where do you see the increase in IT spending coming from?

IT spends differ from company to company. Many companies are investing in digital—so digital spend is more. The second thing is that companies need to simplify their service offerings to better leverage digital–so a lot more rationalization or simplification of those platforms is necessary. Thirdly, the more companies cut costs and their budgets, the more we gain market share.

What is your perspective on the digital journey?

Digital is now a combination of all technologies and will keep evolving, because it is a combination of the basics—data, cloud, channels, social, analytics. The issue is how to gather data from ERP (enterprise resource planning) systems, social media, sensors, etc., in real-time. We also plan to provide more colour in terms of a break-up of our digital revenue, but we have to figure out how to do it as digital is integrated into most of our services.

Your attrition rate was higher in the quarter...

Not really. Our absolute attrition in the December quarter is lower than our overall attrition in the June and September quarter. And India attrition is below 12%—including IT and business process outsourcing (BPO)—so it’s not a cause of concern. However, since the total number crossed 13%, which is marginally higher than usual, we will try to bring it back to around 12%.

Will you look at metrics like full-time equivalent per employee (a metric to track revenue per employee)?

We are not looking at that, as our business model is very different. You can chase as many metrics as you want, and as far as we are concerned, it’s a huge opportunity and is a function of where you do the work, and what service line you offer. We are a full services company, and we are focused on being the technology partner of choice, helping customers navigate the technology changes that are happening and then allowing them to prepare for the future. And that will require us to do several things like digital reimagination, infrastructure, and business process outsourcing.

There are many ways to improve the revenue per employee, but we have made certain choices in the way we structure our business and that is not a metric we are chasing.

You had 318,625 employees as of 31 December and you plan to hire additional 55,000 in 2015. Given this context, what is your perspective on the recent news regarding the layoffs of about 25,000 employees?

We don’t know where this information originated from, and initially we didn’t really take it seriously discarding it as a rumour. But the way it has picked up has come as a shock as there is no truth to it, and we have given out more data than usual to clarify our stand. We are an employee-driven company, and we are performing so well because we are very strong together, and we have built a culture of collaboration. We need to deal with where this has orginated. We are growing very well and there are so many opportunities.

Do you believe that some employees have reason to be aggrieved, which explains why the noise has picked up?

This is business as usual. We do performance-based exits every year, and it’s a very small number and that’s a process we go through... Lets leave it at that, as I don’t want to conjecture or speculate on that.

Has it led to a rethink in the organization on how to tackle such situations better?

But this situation has been there every year. I don’t think anything different has happened, that’s why the question I want to ask is why the noise this time around.

But at some point, as the nature of this business changes a lot more, automation and digital is going to come in, and we have had this discussion about linear versus non-linear growth that could lead to lower hiring numbers...

Non-linear and automation will happen but that does not necessarily mean that there will be no more opportunities for people. At $15 billion, digital is still a small drop in the ocean—we are a $1 trillion-plus industry, there is so much more to do. So I don’t see any dearth of opportunity. I have always said there will always be enormous opportunity in this industry and it is only going to get better. There will be automation—we are investing heavily in automation tools, there will be platforms, and intellectual property (IP)-based growth. But there will also be linear growth.

From an IT industry perspective when you look at the Budget, what kind of expectations would you have?

One definitely is that the ease of doing business in this country has to go up, because that will reflect on key investments, and secondly tax disputes have to be resolved with more simplified taxation guidelines.

What is the sense you’re getting based on global economic cues?

It’s very difficult to start analysing and interpreting every macro. For instance, how do you account for a situation when Euro or oil weakens so sharply? So you have to look at the macros to some extent, but can’t only look at that. We have taken hedges and are covered for the March quarter and to some extent for the June quarter also.

Japan has performed better than the company average...

Japan is a huge opportunity but it’s still early days. We are integrating a huge workforce and have put the new structures in place and the India and Japan team have been brought together, are working with each others customers and are integrating all the capabilities that TCS has. So Japan will grow, but it will take time.

Unlike in earlier quarters, you now are bullish on India too...

In India we have done well, and we see a good pipeline building up so I think we will continue to grow from here, based on the government, private sector and overall sentiment.

What is TCS’s progress on the collaboration that you have with technology start-ups?

TCS has been expanding its co-innovation network since the last five years and we have a large number of start-up partnerships. So while we don’t have an investment approach to start-ups, we have a partnership approach, wherein if there is a start-up with certain capabilities, technologies and a unique value proposition, we partner with them in the overall solution that we offer to the client.

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