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Below are Views On Strong structural demand and competitive positioning By Mr. Rajesh Gopinathan, MD and CEO, Tata Consultancy Services - Motilal oswal Financial Services Ltd.

Global tech intensity

Technology is having an impact across sectors, and this is the first time in its history that a single industry is affecting the entire economic spectrum. Technology intensity is increasing across the value chain and tech spends are growing 3-4% higher than global GDP growth. Spending is more strategic today and is integrated into the cost of the goods sold (v/s SG&A earlier). While the CIO remains a major stakeholder, the CIO function has become the procurement arm rather than the consuming arm.

Can industry double revenue from the current rate?

While there is visibility on revenue doubling from current levels, it is difficult to pinpoint whether it will occur in five or 10 years. Visibility is led by: 1) overall expansion of technology spending, 2) current clients’ technology spending, 3) market share gains, and 4) addition of new clients. TCS’ strategy is to maintain strategic vendor status within key clients and grow above the industry growth rate.

Demand acceleration and longevity of momentum

At present, less than 25% of potential workloads are on the Cloud. This is a multiphased demand environment, with infrastructure spending, led by Cloud adoption, likely to continue for some time. The next phase will be realizing of real business value as enterprises start exploiting native capabilities of the Cloud. This phase will not be as intense as the first one, but it will be much more powerful.

Supply-side challenges transient

Overall demand for digital talent will remain, but the current intensity of supply-side challenges is transient. This is due to a sudden spike in demand, along with a lack of investment in entry-level talent and on the supply-side in the last few years. There is still a lot of talent at the entry-level, and hence this is transient in nature.

Focused on gaining client budgets

Instead of taking advantage of the current high demand, TCS’ focus is on deepening integration with its customers. It is fine absorbing the current volatility in the market. The management does not view the current environment as a buyers’ v/s sellers’ market, but will focus on being a strategic partner.

Products v/s Services approach

TCS believes customers need a wide set of technology service models from strategic suppliers, as: 1) they can’t have all their tech consumption on a standard platform based model, as it will curtail differentiation, and 2) they can’t afford all technology consumption on a bespoke model due to the higher cost. TCS has built its business to maximize wallet share at the customer level, has a full portfolio of services, and ensures heterogeneity of its services and engagement model.

In-house talent development better than M&A

The management believes that complexity of technology has significantly reduced over time. Thus, the learnability of technology has increased, as every new generation of technology has become easier to master. In line with its fundamental belief, it believes that it is easier to train rather than acquire talent.

India at the center stage of technology talent

Currently, India enjoys the largest share in total available technology talent. The way it is growing, it can end up with majority of the IT business. While the industry was at a nascent stage 20 years ago, it has scaled and is currently well positioned.

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