Growth back to double digits, TCS sets eyes on global consulting business

IT players have preferred to enter consulting through acquisition, but TCS will build this organically

After FY2020 forced IT major Tata Consultancy Services (TCS), to focus on operations as it helped navigate clients through the Covid uncertainty, the company is getting back to its strategic agenda of preparing the company to focus on the next few years' growth plan. One of the key agenda goals that it is focusing on is to break into the global consulting space.

Rajesh Gopinathan, CEO and MD in a select media roundtable said that with the company back to double-digit growth, it is now time to take next big steps, which involves focus on growth and transformation and become an integral part of the clients upstream contract.

“The overall opportunity, what we call as ‘growth and transformation’ is huge, and we are still early stage participants there. We are investing in it across the value chain, whether in developing capabilities by harnessing contextual knowledge, by innovation, experimenting and investing into new opportunities,” said Gopinathan.

Gopinathan is also of the view that upstream work that is generally led by traditional consultant service providers also needs to change. He believes that traditionally consultants have used a cookie-cutter type approach to solve problems. “We have consistently applied this approach to ourselves too, an organic inside-out transformation model that takes the company along the transformation, rather than trying to change in a disruptive way,” added Gopinathan.

Traditionally, IT services firms have focused on downstream work/contracts, that focuses on execution. Upstream work which deals with strategy and roadmap has been led by consultants such as McKinsey & Company, BCG and others. This is where Accenture has had an upper hand.

The other point to remember here is that Indian players whoever has wanted to have a consultant led strategy has tried to acquire these capabilities. For instance, Wipro recently acquired Capco, a British consulting firm, for $1.45 billion. Infosys too in the past have acquired firms with consulting expertise. TCS however has rarely acquired a company, its strategy has always been to develop capabilities in-house.

Analysts tracking the company and the sector are of the opinion that this should be the next agenda for IT companies as they have the desired scale and investments made. “Earlier TCS and some of the larger players would stay away from pilot projects, and would fight it out at the RFP level. But clients prefer to work with someone who has been there from the start. But clients are now struggling with the business and technology side, especially during the pandemic. This is a huge opportunity for players like TCS, who know how things are executed in a company,” said an analyst on condition of anonymity.

“From a strategy point TCS is on the right path, the question is how do they execute this. More important, at the scale TCS is, it cannot just rely on just downstream work. The pandemic would now have made possible to have such discussions with clients, especially when IT players have shown their capabilities in operations. If you look at pure play consultants even they are gearing up their technology presence,” said Pareekh Jain, founder and lead analyst, EIIRTrend.

As TCS engages with customers, they have seen more and more acceptance of this evolutionary, continuous transformation inside out organic model, and this is what makes him confident that TCS will be able to eat into the legacy consulting space.

“Over the last few years, we have created a number of capabilities; enterprise agile, contextual knowledge, which allows us to get collective knowledge and articulate to customers, machine first thinking, ML & data capability. We have also created a platform, where customers can come and collaborate with us, take a problem and rapidly come up with a solution, create prototype…upstream is about anticipating customer need, anticipating our understanding of where the customer is trying to see opportunity, how do we enhance that capability for customers. It is about shaping the future opportunity with clients with appropriate technology,” explained N G Subramaniam, COO, TCS.

With Covid making businesses realise that business is embedded in technology, taking this discussion to clients is becoming easier. “Our approach will be very different from the legacy approach, it is more integrated and holistic and we are aiming to be part of the transformational agenda and participate in the full value chain from conception to execution,” added Gopinathan.

TCS has already worked on such integrated deals such as the setting up of the first digital bank in Israel, and working with State Street on their retirement services, among others.