Customers are seeking more automation given the success of efforts over the past few years, even as the pandemic-led pause spurred them to cut wasteful expenditure, said N. Ganapathy Subramaniam, COO and ED, Tata Consultancy Services. In an interview, he said the pandemic had not impacted TCS’s campus hiring plans. Excerpts:
How have client priorities changed in these past months?
In wave one of the pandemic, client priorities were: their IT infrastructure and application landscape should never go down; to improve their employee experience so that there is no dilution of effort when working from anywhere remote and so that they are able to service their customers just as well; and, to improve their customers’ experience.
In wave two, they realised the automation they had earlier deployed — be it artificial intelligence or robotic process automation — has helped. Now, they want to extend automation to other areas. A key factor driving this is the need to lessen their staff’s work burden.
The fourth priority is cloud. Cloud has been proven beyond doubt that it is secure and scalable.This is important as organisations are embarking on a massive digital transformation on native cloud architecture, which will support not just one cloud; it could be hybrid cloud, with the ability to switch from one cloud to another seamlessly.
Life sciences/ healthcare is the only vertical that has grown both year-on-year and quarter-on-quarter. The telecom / media segment has seen the biggest hit… In geographies, Continental Europe has also shown growth, considering it is no more an insignificant contributor to your revenue… Could you throw some light on these counts?
Continental Europe has grown significantly for us in the last three years because of the investments we have made there, specifically in the way that we have structured our business, the opening of several offices, development centres, innovation labs; the investment towards market expansion has helped. Our own journey on agile was also fruitful there because European clients have adopted the agile way of working very quickly. The U.K. is struggling a bit due to Brexit and the uncertainty related to the pandemic, but in terms of business sentiment, people still believe that they should conserve cash. In life sciences and healthcare, we have done a terrific job in the last three years. Three years ago is when we started to focus there. Within healthcare, different segments have been affected differently by the pandemic. Scheduled surgeries have been postponed due to COVID-19; other surgeries that can be deferred are getting deferred. So, medical device manufacturers are seeing muted prospects. But in the pharma segment, clinical trials, investments in new discoveries… they are all seeing significant growth.
Broadcast media and entertainment have not been doing too well. Sporting events have taken a back seat. Telecom and information services are doing okay.
Are deal closures taking time?
For huge transformation deals, if the client wants to change existing systems completely to a new architecture, that is big-time investment; so in such instances, they would take their time. But we are looking at the pulse; if the customer is willing to take a long-term bet and invest quickly, and if investment dollars is not a constraint, then we structure it as a large deal.
There are others who really want to conserve cash, because they’re a bit uncertain about their market. In such situations, we break up the deal into incremental innovations and see how we can structure it as a series of smaller deals.
We are seeing enough new deal sign-ons. In the latest quarter, we had $8.5 billion worth of new deals. If take away the single $2 billion deal, it’s still $6.5 billion, which is a broad-based collection of a lot of smaller, midsized deals across segments. It is true that execution is preferred to advice, but if you can stitch together both and say you can get this piece done in six weeks, or let’s say, in six months, then that’s valued a lot more.
Do clients now feel they over the peak; are they looking at a return to normalcy?
No, I think people are not even talking about returning to normal. All they’re asking is how to continue to stay relevant to their customer base, to ensure their business can still take what is happening around them, whether they should tweak their products, pricing and access to channels, and how to make themselves visible so that there is no question of ‘out of sight, out of mind’ with their customers.
On automation, you had talked about cannibalising your own revenues about 3 years ago. Have results start kicking in or is it still work in progress?
It is still work in progress. Our machine-first philosophy and disrupting ourselves to do what is right for the customers has been our mantra. What has gone out from my pocket comes back many times over. But it’s a journey. Wherever we have done automation of some sort, be it deep learning, machine learning or artificial intelligence, our clients have found that in these challenging times, those areas have proved to be the most resilient. So, they have come back and asked for automation to be expanded to other areas . For example, if 90% of payment transactions are going through without exception they want the same thing on the security side, or the audit process, employee payroll processing. They want to see if employee interventions can be reduced to an absolute minimum and fully exception-based. Some of the stickiness that we are seeing is also due to that.
Are clients now weeding out waste in their businesses?
Almost everyone has taken this opportunity to step back and see what is actually working or not working for them. When they discover pieces of a business that are not adding value, they have the opportunity to shut it down or sell it off.
Does it mean prospects for a significant amount of offshoring, from which India would benefit?
The whole idea of onsite, offshore… that’s old thinking; nobody’s bothered about it any more. So many of our customers have operations running out of India. Does that make for offshore? If I call them strategic development outfits, then we are an extended part of their enterprise.
Second, it’s no longer about onsite-offshore, but about integrating talent across the globe in a seamless manner. Previously, we used to be very preconceived about it – I’m going to do this project out of my facility in Phoenix, ship some of the work to Budapest or Mexico, and some more work to Chennai. Now, because of our secured border-less workspaces, talent has become completely fungible. It doesn’t matter where they are working from.
Then comes the question whether this is going sustain for a longer period. In the technology industry, in the 80s and 90s, a technology arrived and stayed for at least 7-10 years. First the Y2K, then the Internet, then Java; 2005 onwards, innovation gathered pace. The technology obsolescence cycle began to contract. From 10 years, or seven years, it’s now about probably 3-4 years. Cloud and agility are making it even more rapid.
With tech obsolescence quickening, reskilling is not a one-off task…
Absolutely. Gone are the days of classroom training. It’s important that the learning doesn’t stop. It’s lifelong and is pretty much linked to your performance.
That’s where [as learning providers] you will have to gamify the learning process, because your digital learning platform as well as the content that you want to push onto that platform are both important. We have a huge team that curates the content that finds its way to the platform. In the last six months, the number of learning days or hours you put in per person has actually increased 30-40%.
Have TCS’ campus visits for recruitment been delayed this year?
This quarter is where normally we are in the planning cycle for demand for the next year. It’s reasonable to expect that we will make offers similar to last year — i.e., we made about 40,000 offers. Some of the universities have still not completed their exams. So, we are onboarding these students under condition that they will have to finish the exam whenever it is offered.
At your scale, what kind of acquisitions make sense?
It makes a lot of sense; the timing is right. We are open to banking, financial services, life sciences and healthcare; horizontally, things like variability of pricing engines is an area that interests us. We are looking at possibilities – should we partner with them, or should we really buy the model
Given your Q2 numbers, are there any levers you have for cost control?
We have done well in the [latest] quarter… if you exclude the provision that we made for the legal claim matter in the U.S… our EBIT margins have come to 26.2% which is more than a 250 plus basis points improvement quarter on quarter.
Is TCS still sticking to the vision articulated at the start of the lockdown, on having a chunk of your workforce work from home by 2025?
We call it the 25 by 25 vision. We believe there is no need for everybody to come to office and spend more than 25% of their time, maximum. The rest of the time, you should be able to operate remotely. It is clear that we need only 25% of the workforce in offices in order to make 100% productive. Today, we have only 3-4% in office, but all of us are productive. With our machine-first philosophy and automation, we should be able to achieve about 25% improvement in productivity and efficiency in the way we deliver our services. That’s a stated goal and vision and we are well on our way to be operating in that manner.