TCS to start disclosing revenue from digital business
This decision will make TCS the first home-grown IT company to disclose digital revenue as none of its peers, including Cognizant, disclose business from individual components of digital
Mumbai: Tata Consultancy Services Ltd (TCS) will start outlining the business from some of the individual components it now calls digital, a top company executive said. Beginning next quarter, India’s largest information technology (IT) outsourcing company will also disclose revenue from cloud computing, data analytics and TCS Interactive, reflecting its confidence in monetizing business from these newer technologies.
The decision also mirrors the recent trend which has seen companies like International Business Machines Corp. (IBM) and Accenture Plc disclose business from these newer technologies as they look to retain investor faith in the management’s efforts to make themselves future-ready.
“Today, we show you how much we make in geographies. We also share how much we make in industry segments like BFSI (banking financial services industry), retail etc. Now, very soon, we will share the service line breakup also. So, how much we are making in cloud, artificial intelligence, analytics, interactive,” TCS chief operating officer N. Ganapathy Subramaniam said in an interview.
“Hopefully, from the next quarter onwards, we will start publishing it (business from individual components of digital technologies)” said Subramaniam, who took over as COO in February 2017.
Subramaniam’s elevation followed TCS appointing Rajesh Gopinathan as chief executive officer, after his predecessor N. Chandrasekaran was named chairman of Tata Sons Ltd, the Tata group holding company.
The latest decision will make TCS the first home-grown IT firm to disclose business revenue from digital technologies, as none of the IT firms, including Nasdaq-listed Cognizant Technology Solutions Corp, disclose business from individual components of digital.
Bengaluru-based Wipro Ltd only discloses business from data analytics in addition to outlining business from digital. For now, digital accounts for 23-28% of total revenue at the largest IT firms.
To be sure, TCS until March 2017 used to share business from some of the technology areas which are now called as legacy technologies as they are getting commoditized. These included service lines like application development, infrastructure maintenance and back-office services. In FY17, TCS’s share of the digital business was 16.7% or about $2.93 billion.
Over the last 15 months, TCS claims its digital business has grown at a scorching pace. In the July-September period, its digital technologies grew 60% year-on-year and accounted for 28% or $1.47 billion. This implies that digital revenue in a quarter is what the company generated over six months in 2016-17.
Some industry executives gave their thumbs-up to the move.
“I very much welcome TCS sharing greater details with regarding ‘digital’ revenue, as all the providers are loosely slapping the ‘digital’ tag of any contract that didn’t involve moving hardware around,” said Phil Fersht, CEO of US-based HfS Research, an outsourcing-research firm. “In fact, I would go as far as declaring the term ‘digital’ as largely meaningless today, so being able to badge revenue as AI, analytics, cloud, and interactive is much more relevant and meaningful. I hope the other Indian leaders to follow suit and stop sugar-frosting everything.”
Subramaniam added: “Please understand that when there was widespread scepticism about IT industry a couple of quarters back, we made a bold statement that there are no legacy people but only legacy technologies. We started re-skilling our people and started investing in technologies. We then decided we have to come back to double-digit growth, and the whole organisation rallied behind this. Today, we are proud of having secured double-digit growth.”
TCS, on the back of 1.6% and 3.2% sequential dollar revenue growth in the first and second quarters respectively, will see full-year dollar revenue growth of 9.25% if it grows 1% in both the third and fourth quarters. For now, the management has said that the company will surely clock a double-digit growth in constant currency terms in the current financial year.
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