Mumbai: India’s largest software exporter, Tata Consultancy Services Ltd (TCS), beat analyst forecasts with an increase in net profit and revenue both sequentially and from a year ago in the December quarter. The company, though, disappointed analysts with its low volume growth of 1.25% sequentially. However, TCS chief executive officer and managing director N. Chandrasekaran said in an interview that too much should not be read into volumes in a seasonally weak quarter. While he wasn’t willing to go out on a limb in forecasting that the worst was over for the information technology (IT) sector, he expressed confidence that his company would take bigger strides in the outsourcing space by leveraging newer technologies such as cloud computing, big data (making sense of the deluge of information churned out by companies), analytics, mobile and social media. Edited excerpts:
With TCS and Infosys Ltd posting better-than-expected results in a seasonally weak quarter, some believe that green shoots are beginning to show in the IT sector.
Our volume growth has been 4-5% for the last three quarters. In the October-December quarter, it was low but it will always be low (during this quarter) because of business seasonality and furloughs. So, you shouldn’t read too much into these figures. We continue to do well. I think there are lots of opportunities but you can’t say which companies will do well and which won’t. So, I can’t make a prediction.
What’s your view on the currency fluctuation?
The currency at Rs.54 to a dollar is not sustainable. It has to appreciate and it is a function of macroeconomic considerations like the fiscal deficit and current account deficit on which we have no control. Hopefully, it (rupee) will strengthen. Mentally, as far as the currency is concerned, I always feel I am operating on borrowed time.
The nature of outsourcing has changed with robotics, automation and cloud computing. You are doing a lot in this field with your non-linear (other than headcount-related) initiatives and templates...
Customers are adapting to this new paradigm. Technology cycles are getting shorter. But for the first time, you are seeing the proliferation of very powerful technologies—all happening simultaneously. So, a combination of these technologies, and what they do to businesses, is something that happens only once in two decades or so. So, customers and companies are adopting these technologies from a business model transformation point of view and also to drive growth, get new services, increase the time to market and introduce more agility.
The fundamental theme for the next decade is that technology will be at the centre of everything. There will be more technology in cars, consumer electronics, banks, ships, logistics, retail stores, healthcare services, everywhere. This provides a huge opportunity. For example, in an airline we see how technology impacts their customers; for retail companies, it’s how we can change the experience of shoppers in a retail store in loyalty and consumer behaviour. In the next five years, these technologies will create a profound impact on how we work and deliver value to clients.
How do you balance the need for headcount or linear growth with such automation? It does imply a change in employee skill sets too.
I always maintained that non-linear is important but linear is growing, so we pursue both. Skill sets are also changing all the time. We make investments in not just technology, but skills. Our biggest benefit is collaboration skills. We have a collaborative platform not just to partner but also to communicate with our customers. There will always be skill gaps. But they are addressable if we can plug it at source. We have to work with educational institutions to enhance the level and quality of education and skill sets—it is very important since we have 50,000 associates (employees) joining our company every year.
Are companies spending less on core infrastructure services?
There is no uniformity in spending, but our addressable space is increasing is the way to look at it. The reason is multifold—one, customers are driving efficiency; that means they are leveraging our global model more. So, there may be an overall reduction in spends but our addressable space is increasing because we are doing more things today; we have more capabilities; and third, we are at more places and serving more markets.
Are you exploring new regions?
No. We are not thinking of going anywhere new. We are going to expand in Latin America, Africa and the Middle East.
What about India revenue?
There are higher discretionary spends in India, so we are trying to get more service management contracts and have more engagement with clients.
How are you mitigating visa issues like the new rules in the UK?
We have huge manpower in the UK. We are sending people from here (India). We are dealing with it by making more work offshore (on, or near, the client’s premises). If we get right skills, we hire locally, we also plan visas in advance.