For two consecutive quarters, Tata Consultancy Services (TCS) has recorded volume growth of five per cent, leaving its peers behind. Chief Executive Officer and Managing Director N ChaNdrasekaran is confident the company’s growth would exceed the National Association of Software and Services Companies’ growth estimate for the industry. In an interview with Shivani Shinde, he talks about customer information technology (IT) spends and growth momentum. Edited excerpts:
Now, you sound more confident on growth, compared to the previous two quarters. What seems to be working for TCS?
Frankly, we have seen good volume-led growth back-to-back. The growth has been well-rounded, across markets and verticals. For instance, financial services grew four per cent. Of the 11 large deals, four were in the banking, financial services and insurance sector.
I have been talking to clients. They understand the role of technology. Everyone is looking to invest in the digital space. We have seen discretionary spends increasing; we are not seeing any delay in the decision cycle. Our deal pipeline is good. We are winning deals and, from a market perspective, we have a good mix. This means we do not have only infrastructure-led wins or transformational deals; we have a mix of deals in our portfolio. Moreover, though emerging markets have grown this quarter, we have seen positive growth in the US, the UK and Europe as well.
Do you think you can maintain the growth momentum?
I think we will continue to deliver. But you also have to consider certain cyclical issues. The third quarter (October-December) is generally a soft one, owing to planned shutdowns, which would have an impact on volumes. If you ask how much, I don’t have an answer. But barring this, there shouldn’t be any worry. I think we are seeing momentum and I am not going to use any cautionary comment at this point.
Would you say the same for FY14 as well?
Budgets are yet to be closed. But based on what I hear, customers are on track to closing budgets, making decisions and moving forward.
TCS is perhaps the only company seeing an uptick in discretionary spends.
I believe the macro environment is what it is. Nobody knows how soon the situation would be one in which everyone is comfortable. But companies are going about their business and technology is at the centre of whatever they want to do.
We are seeing an uptick in discretionary spends across sectors. Unlike the last quarter, in which we saw a one-off impact due to the Friends Life deal, this quarter, discretionary spends were spread across several deals. A large part of the discretionary spend is being accounted for by small projects in the digital and mobile space, etc. This quarter, we have a few transformational deals as well.
Your peers have been talking about a $40-billion renewal market coming up. They add the next six months would be crucial. What is TCS’ strategy?
We have a very holistic strategy; we are present across all types of deals — transformational, efficiency-led, as well as renewal deals. We work and participate in all these segments. Our strategy is to be client-centric, not deal-centric.
TCS has been winning large deals in the government sector abroad. Is the company increasing its focus on this segment?
We participate in the government sector wherever we can. In India, we have been active. The UK is another market and in Africa, we have started discussions. Even in the US, we have carried out some deals. Basically, it depends on our solutions and skill sets. In the government sector, we have predominantly taken the solutions-led approach. Today, we are in a stage in which we have scale, competency and a wide range of capabilities.
Your recent acquisition of Computer Research Lab (CRL) offers you space in high-performance computing (HPC). How would you leverage this?
We have a large number of customers who have applications that need HPC. That’s the space we have not addressed so far. Now, we have the capability. The second significance of this acquisition would be its impact on our cloud computing business. So far, we have been working on the cloud space only from an applications point of view. Our infrastructure services revenue of about $1 billion is based on the services model; now, we will leverage HPC in the cloud segment.