Bengaluru: Tata Consultancy Services Ltd (TCS) will build both technologies and talent rather than buy it from outside. TCS, India’s largest software services firm, maintains that it is the company’s DNA to build technologies and groom leaders to take up senior roles, even if implementing this strategy means the company has to sacrifice some growth in the short term.
“I don’t know if insular would be the right word but definitely, we believe in building talent and technologies in house," chief executive officer Rajesh Gopinathan said in an interview on Wednesday.
“As an organization, if I don’t offer you space to grow the capability that you don’t have, then it is just a transactional buy and sell relationship. It (the decision to build talent) is very core to our DNA," said Gopinathan, 46, who joined TCS from Tata Industries Ltd back in 2001.
A Mint analysis found that TCS’s senior leadership team (vice presidents and above) comprises executives who have had at least a decade-long stint in the company.
“People ask me why our attrition is low. Our attrition is low because of this. Because my promise to you (my employee) is that I will give you the space to be who you are not today. And If I don’t give that space, then why will people stay with me?"
“I agree, it is a risk," conceded Gopinathan, when asked if the company runs the risk of slow growth as building both technology and talent takes time.
“We are betting on our people that this culture is the more robust and resilient culture that will allow us to go over multiple cycles of technology. Otherwise, I am merely a financial investment engine," said Gopinathan, who took over as chief executive officer in February after N. Chandrasekaran was appointed chairman of Tata Sons Ltd, the Tata group holding company.
For now, this risk has already started manifesting in lower growth at the Mumbai-based company. TCS managed 6.2% dollar revenue growth to end with $17.6 billion in revenue in the year ended March 2017, slower than the 7.1% in the previous year, and less than half the 15% growth reported in 2014-15.
Globally, firms across industries are cutting their spending on legacy work such as application maintenance, and ploughing the savings on newer projects into areas such as data analytics and cyber security solutions.
This means that information technology (IT) vendors like TCS now have to deploy tools like automation and data analytics platforms to help their clients run their businesses more efficiently. TCS’s build-everything approach contrasts with Accenture Plc’s strategy of buying companies and hiring executives as they make themselves future-ready by investing in newer technologies.
Other Indian IT firms like Infosys Ltd and Wipro Ltd too have been relying on buying companies and hiring people.
Accenture spent $1.7 billion to buy 37 companies last year, with these acquisitions helping the company improve its dollar revenue growth to 6% (from 3.5% in 2015-16) to end with $34.9 billion in revenue for the year ended August 2017.
TCS last invested $50 million in stitching together a joint venture partnership with Mitsubishi Corp. in Japan in 2014.
“To ensure we have the most relevant talent at the most senior levels, we promoted 600 new managing directors in fiscal year 2017 and hired more than 300 managing directors from outside Accenture. These leaders are bringing highly differentiated industry expertise and specialized skills,"Accenture CEO Pierre Nanterme told analysts in a post-earnings call on 28 September. A few experts maintain that hiring of new talent is essential for success.
“Accenture has done a tremendous job of acquiring new talent, new clients, and new skill sets. I also understand the risk that Rajesh (Gopinathan) raises. It is often very hard to integrate new organizations into existing culture. (But) the market is at point where consolidation and scale play a role, but acquisition of new talent is essential for success," said Ray Wang, founder of Constellation Research, a technology research and advisory firm.
“Few organizations can re-skill their workforce fast enough to meet the pace of change. It’s not impossible, it just requires a strategic approach."