Towards A Digital Future

Apart from being the market leader, Tata Consultancy Services remains one of the top stock bets in the Indian IT sector.
 Ajita Shashidhar        Print Edition: November 8, 2015
Tata Consultancy Services CEO N Chandrasekaran
Tata Consultancy Services CEO N Chandrasekaran

RANK 1

Tata Consultancy Services (TCS) CEO N. Chandrasekaran is a wired elite who has always been as excited about new gadget launches as teenage geeks. In fact, he wears another teenage personality with equal ease - cool and confident in both good and bad times. What sets him apart though is his vision for the company he heads . So, it came as no surprise to journalists when Chandra, as he is referred to by his friends, fended off uncomfortable questions about TCS's lower-than-expected results for the fifth consecutive quarter on October 14, and the subsequent 4 per cent fall in its share price, without a hitch. In fact, the tide soon turned in his favour when he had journalists listening to him about the digital promise TCS holds , going ahead. "At TCS we are in investment mode and, in the coming months, we are going to enhance our digital capabilities," he told Business Today.


TATA CONSULTANCY SERVICES

  • RANK 2015: 1
  • RANK 2014: 1
  • MARKET CAP FY15 APRIL-SEPT: Rs 5,01,476 crore
  • TOTAL INCOME: Rs 78,083 crore
  • NET PROFIT: Rs 18,750 crore
  • ROCE: 41.7%
  • SO WHAT: Invincible at No. 1 for past three years. Steadily increasing lead over others

Source: CMIE Prowess, Standalone data


TCS's constant currency revenue grew by just 3.9 per cent in the September quarter against the expected growth of 4.5 per cent. Analysts say the $15.5 billion company's 5.8 per cent revenues growth to Rs 27,166 crore was marginally higher than their expectations. The muted growth, according to Chandra, was, however, not worrying. "The concept of digital has really moved on in the last couple of years from people looking at digital as a set of technologies which enable access on mobile and doing transaction on the mobile or building analytics around data to holistic transformation of businesses," he added.

For the next hour or so, the discussions revolved around the TCS app that enabled SMEs to manage their businesses more efficiently. "If you are a restauranter, you will most likely have a separate tool to take orders, a separate cash-collection system and a swipe machine. We have eliminated all these and created one single application by which you will be able to manage all the aspects of the business, from taking orders, managing transactions and getting a daily report," he explained, adding that TCS is transforming and positioning itself to operate in the digital world and cater to every sector, be it large automobile giants, retailers, banks or small businesses.

This is, however, not the first time that Chandra has talked about going digital. In fact, he has been carefully transforming TCS into a digitally-sound company for over two years and the first step towards achieving that goal was to make his own workforce be digitally-enabled - encouraging them to create an in-house social media platform to build a women safety app. Today, TCS has over 4,000 in-house digital tools that facilitate employee engagement.

'TCS has upheld its traditional strategy of offering solutions, at the lowest prices. It has invested in creating digital solutions for various industries,' says Sagar Rastogi, Equity Research Analyst, Ambit Capital.
In 2014, he had set himself a goal to ensure TCS's digital business becomes a $4 billion entity in five years. Barely a year later, digital has gone past the $2 billion mark and contributes 13.3 per cent to the company's overall revenues. In the last one year alone, over one lakh out of the 3.3 lakh TCS engineers have received training in digital technology. This year, the company plans to hire another 70,000 to add to its digital workforce.

Well-known IT consultant Sid Pai, compliments TCS's digital strategy. "TCS is investing ahead of the curve. It always had a long-term vision and, therefore, retained its position as the most valuable Indian company, says Pai. Even in the September quarter, TCS managed to crack the highest number of deals, compared to its peers in the industry. In the past one year, the market cap of TCS was higher than all the other Tata Group companies put together.

Tata Consultancy Services, Chennai
Unlike its peers, such as Cognizant and Accenture, which have also been building their digital business through acquisitions and digital consulting services, TCS, says Sagar Rastogi, Equity Research Analyst at Ambit Capital, hasnt invested in consulting. "TCS has upheld its traditional strategy of offering solutions at the lowest prices. It has invested in creating digital solutions for various industries. These moves have worked in its favour, as it has ensured that it maintains higher margins." In comparison, other Indian IT majors, which have been offering consulting services to various companies, have suffered. This, says, Rastogi, may not necessarily work. "Indian IT companies are not known for their consulting services. They are better known for their solutions," he says.

Digital TCS

Chandra says investment in digital would be on a war-footing, to offer cutting edge digital solutions to its customers and transforming its own work environment. "You go to our various centres now, you will see that we are changing our office environment to become agile spaces. We no longer have cubicles," he says.

The company is also setting up innovation labs and digital studios. Chandra feels digital solutions are no longer restricted to merely creating a functional solution, but is all about creating an experience. "The whole idea is how we get customers to think through the art of the possible; not only from the point of view of business models and business processes, but also in terms of experience by designing solutions which are experience-rich."

For instance, TCS has created an application for a leading global retailer that has enabled the entity to offer better customer-experience. "They have a large consumer base. So, we have built knowledge platforms working closely with them. We help them track every customer that visits their many stores, the nature of the shopping they do and, through analytics, help them predict what they would like to buy the next time they visit the store. Accordingly, we help the retailer to give tailor-made discounts or customised promotional offers to their customers."

{blurb}While a techie creates the apps, Chandra has felt the need to include sociologists and psychologists into his workforce to understand the psyche of consumers or the consumption habits of different communities, where the stores are situated,. "We also have people with artistic ability and design in our workforce. I expect this number of non-techies to increase manifold." Pai, lauds this strategy. "To offer cutting edge technical or digital solutions, one has to understand consumer psyche and human behaviour. Therefore, it makes sense."

With businesses across industries increasingly depending on data to offer real-time services and insights, TCS has invested in 12 real time platforms. Chandra says that while some of them are already producing revenues, some are in the build-out stage. "But over a period of time it will be matured enough to solve problems of different industries."

Analysts feel this over emphasis on digital could backfire. But, Chandrasekaran is confident: "There is so much opportunity. It has got so many elements. The Internet of Things is a big thing in itself, sensor analytics is a big thing, so is data analytics," he explains.

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