The country’s largest IT services provider Tata Consultancy Services’ (TCS’) third quarter numbers were below market expectations. However, its COO and Executive Director S Chandrasekaran defends the company’s performance, saying these are uncertain times. He spoke to Shivani Shinde on pricing issues, aspirational targets and future growth.
In the current scenario, do you still feel achieving a revenue of $10 billion by 2010 is a possibility?
I am quite sure, there is a fair way of articulating it. I do not want to come across as defensive but this year has been a huge surprise. Not only in normal business turn, but also in the loss in cross currency due to dollar movement. While our aspiration is there to reach the vision but we will not sweat over it. We will not lose sleep over the matter. If it takes some more time, it’s fine. We want to do it prudently and wont look at acquisitions just to reach that goal.
BFSI, manufacturing and hi-tech clearly are under pressure. Could you give us a sense of growth prospects in the coming quarters?
There are two sets of verticals. In some of the verticals there will be de-growth. We have pointed them out and we need to be prepared for this. And there is another set that will grow but will not be able to compensate the overall growth that the market expects. But the point is, rather than a de-growth we will still have a growth, at least for the immediate quarter precisely because of the fact that the uncertainty is unprecedented.
Pricing pressure clearly is a concern. How things would turn around over the next few quarters? Are there any cancellations?
During the same time last year we spoke about the problems with some specific clients and we also spoke of the sector. On cancellations, yes, we have cancellations. But these are not big project cancellations and are sporadic in nature.
Some small projects are getting cancelled, especially those belonging to the verticals of BFSI, manufacturing and Hitech. Having said that, our objective is fundamentally to be as disciplined as we can be so that we manage pricing. If you go sweeping up your volumes and sacrifice your pricing, it will hurt later.
At the end of the day we have to execute, deliver and keep the customer satisfied. Secondly, surprises are springing up everyday. There are many companies and sectors which are having problems. We have yet to see the floor. Under such circumstances, cancellations are bound to be there but you will also get positive surprises.
TCS has been hiring in large numbers. Is it not creating pressure on margins?
We have taken a conscious call on this and we have increased fresher hiring and squeezed the lateral hiring. Because we see an opportunity to expand there. Secondly, we will increase investment in the training cost and step-up the level of training activity and sometime in February we will take a serious call on how many people we want to recruit next year.
Do you plan to walk out on clients on pricing issues?
There is no generic answer to that. But TCS has had long relationship with many customers. However, with customers with whom we have a long relationship, I don’t think situation gets bad. Primarily because the dialogue is not just about pricing.
It may start with pricing but as long as we know what they want we can articulate a plan. As we have the knowhow, we have a deep knowledge of our clients and what their systems are, what opportunities are there to improve, etc. But the situation is difficult if we don’t know the customer.
You and S Ramadorai have been saying about opportunities even in the downturn — especially in the M&A sphere. Anything on that front?
There are opportunities out there but ramp ups are not happening as fast as was expected. We can clearly see the opportunity. But for these clients the surprises are still not over. They are still grappling with bigger problems. Hopefully, the IT budgets should be clearer by February.
But in terms of market, India continues to lack performance.
The Indian market is very volatile. Though we have won some big deals, we are concerned about this particular trend of the Indian market and are taking some measures.
Normally, this volatility will not have major impact on the overall TCS performance because all the major markets would grow. But now it will make a difference as the other markets have got impacted. We need to address it and we are doing that. Besides, Indian market is still not mature for outsourcing and hence there are no large outsourcing deals.
