N. Chandrasekaran on what makes TCS tick
Thursday, 20th January 2011
In his 14 months as chief executive officer of India�s largest information technology (IT) exporter Tata Consultancy Services Ltd (TCS), 46-year-old N. Chandrasekaran has strengthened the company�s leadership and helped it pull ahead of domestic rivals such as Infosys Technologies Ltd and Wipro Ltd.
While TCS has always been the leader by revenue, Infosys enjoys the highest operating margin among leading Indian IT players, as reflected in its higher market capitalization.
Under Chandra, as he�s universally known, TCS has been able to narrow the margin gap and get almost on par with Infosys. This he has been able to do by deftly managing costs, boosting volumes and increasing prices in a tough environment.
Traditionally, Infosys has been known for its strength in the BFSI (banking, financial services and insurance) segment, Wipro for its telecom and outsourced research and development (R&D) prowess. However, among Indian players, TCS is probably the one with the widest portfolio of offerings and the biggest geographical footprint in terms of delivery centres across the globe.
With a revenue run-rate of $8.6 billion (Rs39,156 crore) per annum and 186,000 employees, running TCS is not for the faint of heart. For instance, in the first nine months of the current fiscal year, the company added a gross 50,000 employees. A marathon enthusiast who has run in eight countries, including the half marathon in Mumbai on 16 January, the CEO will need all the stamina he can summon to sustain growth in revenue and, more importantly, in margins.
A day after announcing better-than-expected results, he spoke in an interview on Tuesday about the company�s December quarter results, the slow growth in the telecom vertical, the relatively poor performance in the India geography, the quest for acquisitions in Europe, some emerging verticals and challenges facing the company. Edited excerpts:
Last four-five quarters you have managed to consistently increase your margins. TCS has a small �quality of earnings� discount to one of your peers (Infosys), but the gap is being narrowed. What have you been doing right?
While I wouldn�t comment on what my competitors are doing, I believe we can do profitable growth. Size has certain advantages. The market opportunity is so large that we can continue to grow profitably. Last two years we have structured ourselves in a manner such that while individual units have the agility, and yet anything that brings efficiency is shared in a collaborative way. We have a strong qualification process; we have been disciplined in pricing and made investments ahead of the curve. All that has helped shore up the margins; but there are areas for even further improvement. For instance, in the Diligenta business, it has taken us five years. We have made the investments in the delivery platform, which is now robust and solid. As we add more policies, we will increase both the volume and the margins. We are focused on growth, but with the right discipline of margins. We have been able to demonstrate a price-productivity improvement. These improvements are structural, and not one-offs.
Publication : Mint
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