TCS rejigs delivery model, tells clients to embrace automation in projects

Firm has tasked teams to reinvent delivery mechanism, pare team strength, use AI and even cannibalise its own revenues to retain clients

Tata Consultancy Services (TCS) has reached out to more than 800 clients, offering to reduce people in projects and embrace automation in delivering solutions and services, and disrupting its traditional outsourcing model it built over decades.

India’s largest technology services firm has tasked its teams to reinvent how they deliver services: Reduce team strength, use artificial intelligence and newer software tools, and even cannibalise its own revenues, so that it retains clients and grows business.

“If I have 50 people doing a job and I see in an automation possibility a more efficient way of doing that, I must do that, even though it means that I am cannibalising my revenues,” said N Ganapathy Subramaniam, chief operating officer at TCS, in an interview. “If I do not do that, somebody will do it. At least from 50, I will bring it down to 10 people. If I am not disrupting my own (model) then, I will lose even them.”

The rethinking of its delivery model on the part of TCS is reflective of the market that is witnessing shifts. Clients are spending less on traditional outsourcing, asking vendors to do more work at lower costs, and shifting their budgets to newer areas such as digital and cloud. At the same time, with technology shifts such as automation, artificial intelligence is making traditional application development and maintenance less relevant.

“We have been telling all client partners that productivity improvement is one thing, (but) given the pace at which we are continuously improving, do not stop at productivity improvement. You got to go and look at new ways of doing things. If that new way means you have to imbibe automation, artificial intelligence, some other new solutions and if that is the right thing for the client, you have to do it even if it means a drop in revenues,” says Subramaniam.

Not all clients have bought into this idea. “Some immediately jumped on it, some said we would go slow, would do a proof of concept (PoC) or pilot. Some people are cautious, some are optimistic,” he said.
 

Analysts say even though its peers are dealing with digital transformation in similar ways, TCS has kicked off the journey with a comprehensive approach and made focused investments in creating intellectual properties. 

Peter Bendor-Samuel, chief executive officer, Everest Group, a global IT research firm, says “TCS has developed some clear road maps, products and services to help clients.” 

Subramaniam pointed out TCS was strongly focusing on creating the right agenda for “strategic automation architecture”, knowing the complexity of operations in a business. 

“They are early in identifying this trend and hence not every company is taking them up on this offer. However, we anticipate that IT modernisation is going to be one of the major growth drivers of the industry for the next 2-3 years. I do not see trend driving new logo clients but more about how to ignite growth with existing clients,” says Bendor-Samuel. 

“This story is far from all positive as we can see that IT modernisation creates efficacies in existing work, which has already been outsourced and hence revenue compression in that work. However, if you don’t help your clients with this, others will, and that will put the relationship at risk. Other Indian firms are also addressing this area in a variety of ways. However, TCS stands out it in the comprehensive way it is tackling this opportunity, by changing its organisation,” he said. 

This transformation in the service delivery model means less employees to work on projects. TCS claims it can reduce up to 80 per cent of the employees in some projects as a result of automation or artificial intelligence-led delivery. The company, however, said it would not let go any of these employees and rather put them on some roles to use their domain expertise better. 

Subramaniam substantiates this by saying the company’s digital growth is proportionate to higher utilisation and not otherwise.

“We are not letting go of anybody. We are saying there is no legacy people, it is only (legacy) technologies. The contextual knowledge they have built is very valuable and important. Technology skills can be acquired very quickly, whereas knowledge of the customers and knowledge of the domain, the data flow, the ecosystem is very hard to build. If I am disrupting and removing certain people and creating capacity, that capacity is better utilised. We are doing this.”