BackWe have to definitely look at attrition now: TCS CEO Chandrasekaran
In an interview a day after TCS announced results, Chandrasekaran said the one-time bonus it announced WAS not a measure to tackle attrition
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Mumbai: N. Chandrasekaran, chief executive officer and managing director of Tata Consultancy Services Ltd (TCS), said that despite missing analyst estimates in the March quarter, India’s largest software services exporter will beat the 12-14% revenue growth forecast of lobby group Nasscom in 2015-16. TCS shares fell 4.2% on Friday to ₹ 2,476.20 after the company reported muted earnings on Thursday. In an interview, Chandrasekaran said cross-currency fluctuations will continue to trouble the company and the uncertainty at its UK-based Diligenta unit and energy and telecom sectors is likely to persist. However, it was business as usual in the deals space, he said. Edited excerpts:
It has been 10 years since your company’s initial public offering (IPO). How has the journey been so far, and what are the broad technology shifts you have seen?
It has been very good overall. Our financial performance has been solid and customer growth has been phenomenal. The company’s capability has grown dramatically. We have become a globalized company and the fabric has become a lot more global today in every dimension. We are lucky that the industry, too, has been growing dramatically. The importance of technology has dramatically changed today. First we saw the World Wide Web. Then the whole ERP (enterprise resource planning) era where businesses could depend on processes and technology to become lean and automate their operations. The sales force and supply chains got automated. Then online became a big thing. We then called it anytime, anywhere. Only now we realize it was not so. Today, we have the insights economy. I call it so because everything is personal, power of consumer and power of insights to know an individual. The power to gain insight is far more valued than any other asset you have.
You missed analysts’ estimates for the third straight quarter. Are the US and UK markets not delivering?
We have talked about three headwinds—in Diligenta (a life and pensions business process outsourcing provider in the UK and a TCS unit), energy and telecom. We had muted growth before but in these three cases, there was a fall. That kind of pulled us down. If you remove Diligenta, telecom and energy from the equation, the 1.6% growth (in constant currency terms) would have been 2.7%. Apart from this, there’s nothing to read in the market and nothing to read in the UK, the US or anything.
We have said that Diligenta will continue de-grow (fall in revenue) for sometime. We are not achieving growth in revenue and we are not able to predict what will happen in telecom at this stage.
It’s a long-cycle business for Diligenta where we have to close more deals. We have (a) very strong platform but we have to make it count by winning deals.
Speaking about deals, what’s the sense you are getting as far as information technology (IT) budgets are concerned for this year?
Based on the customer segment in which we operate, IT budgets have been marginally up. I’m not going to make a broad-based commentary because it’s not a uniform thing.
Are deal sizes getting smaller?
The size of the deal is not a problem. In fact, adding four customers in the $100 million band as we did in the March quarter is something that has never happened.
Cross-currency, nevertheless, remained a major hurdle.
It is. The last two quarters have been a nightmare. It has a huge depreciation in a basket of currencies in pounds, euros, Japanese and Latin American currencies. For us, about 52% of revenue growth comes from the US dollar and about 7-8% is from India. So close to 40% comes from that set of currencies, and all of them are weak against both the US dollar and the Indian rupee.
But you do hedge currencies.
We made (a) ₹ 666 crore gain in this quarter through hedging. We have not lost on hedging but when revenue gets hit, the top-line gets affected too.
Digital has done well for your company again. This is the first quarter in which you have broken up revenue from the cloud ($125 million). Is this the first step towards breaking up your company’s digital revenue?
Yeah. We are working on it. We have also built a platform as a service (PaaS) for IoT (Internet of Things). So if you look at digital, there are many moving parts. There are some parts which are slowly becoming mainstream. Take, for example, the adoption of mobile technology and Big Data in terms of services. So the spend on digital will increase significantly. It has consistently increased. This year has been bigger than last year, and the current financial year will be bigger. So our investment should be solid and ahead of the curve.
Your India business has been more or less flat.
Well, flat from a quarter-on-quarter perspective. But considering how we started in the beginning of the year, it has done much better because I was very negative till last quarter. So the opportunity is clearly there.
Historically, your attrition rates have been among the lowest in the industry but for the last few quarters, your attrition rate has been going up—over 14% this time.
Attrition has gone up. Every quarter has been inching up. We are all at the high point. I think now we have to definitely look at that. In fact, we have given our projections for employee headcount.
Will the special bonus you are doling out to mark the 10th anniversary of the IPO help in stemming attrition?
This one-time reward should not be seen as something we did for attrition. This is not true. We have done very well. Market cap has zoomed, actually, and we have rewarded the staff.
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