The weight of running a $11 billion enterprise with over 2.60 lakh people on its rolls sits lightly on N. Chandrasekaran, CEO and Managing Director, Tata Consultancy Services. Maybe the stamina comes from his passion for marathon running — he has run in Mumbai, New York, Prague, Stockholm, Vienna, Chicago and Berlin. He’s completed 25 years in the company and over the last four, been its face. In this interview with The Hindu, Mr Chandrasekaran, also Chairman of industry body NASSCOM, points out that Indian IT industry may be talking billions but it is still only scratching the surface of a $1.5 trillion market. Excerpts:
You recently spoke of emerging technologies that are changing the business scenario. Can you elaborate?
If you look at the last 30-40 years, technology, in general, took several years to mature and get adopted. This has been the case whether it was mainframes, client servers or ERPs. Now, the pace at which the technologies are hitting the market and the pace at which they are getting adopted are completely different.
Look at the speed in which the tablet was adopted over the last three or four years and that too, at the height of an economic crisis. The tablet was originally envisaged as a consumer device but it is equally getting adopted by enterprises.
The combination of all these trends is so powerful that new business models for every company are evolving. Second, there is a phenomenon of the ‘consumerisation of the enterprise’ and ‘enterprisation of the consumer’. The first is so because a device like the tablet is equally powerful in the enterprise world. I call it the phenomena of reducing the gap between Sunday night and Monday morning. Sunday night you use a certain user interface, a certain way of doing things and you don’t want to go to office and start looking at old devices. Similarly, enterprisation of the consumer is happening. Everyone used to think that analytics was only for enterprises. Everything about the individual is analysed now.
The third thing is that every process and every industry is getting re-imagined in the context of these technologies. The fourth is that at the end of the day, everything is about the consumer and insights. It is not about analytics of the past. It is real time, predictive and anticipative.
Would some of these new technologies, such as cloud, erode your traditional business model?
I don’t think so. Even if somebody delivers an application over the cloud, who will build it? What is an application? It is nothing but a system. Somebody still has to build the application even if you deliver it over the cloud.
When the client-server came, people used to say that applications would be redeveloped in client-server, so if you were in mainframes, that business would go away. As long as you invest and adapt to change, it is no problem. We have a very healthy business model because we have plenty of more things to do than what we are actually doing today. Today, we don’t address everything — neither from a market nor geographic or industry perspective.
Technology spend will continue to grow, what will change, however, is what that technology actually is, like it is changing now. But as long as we are close enough to understand how it will be redefined, we will continue to be relevant.
Talking about technology spend, do you believe it is agnostic to business and economic cycles?
Agnostic is too strong a word! Technology has shifted from the back-end slowly towards the front-end. Now the role of technology is more important as it designs the whole business model. Take the retail business — every business must have a dot-com site. Therefore, technology has a completely different role today, as it has come into the business side. While I won’t say its agnostic, there might be a lot of things that technology can bring to the table but you can’t do it if there is no money to spend. There is a linkage in terms of what is the level of spending, but you cannot couple it. Actually, technology spend is higher now as people are trying to drive efficiency.
With newer technology, has the market for traditional outsourcing become too small for four or five large players to have an equal chance to play?
At the end of the day if you look at it, what is our size? We can talk in billions, but the market is worth $1.5 trillion. There is a lot of head-room. If you compete on the same deals, there is not a lot of space. It depends on how you differentiate and where you focus. Today, not everything is outsourcing, there is IP work, both technical and domain. There is plenty of opportunity.
On the other hand, there will always be a certain narrow market where five players will focus on and in that section, four players have to lose. Where the opportunity truly lies is in creating new things.
We all give out jargon like cloud, big data and so on. But how many truly insight-driven platforms are there? We are only scratching the surface in this whole new gamut!
This label that Indian IT companies don’t create cutting-edge technology and are usually in the back-end, why does this refuse to go away?
It is a pretty unfair statement. Anyway, somebody has to take responsibility to change the perception. At the end of the day, positioning and branding is something one has to work on. If we have to scale a business to the level that we have scaled and partner the top companies in the world and deliver the growth rate that we are delivering, it cannot be without adding value. The point is that this is a two-way street. People like us have a responsibility to communicate better and the people who label us as such have more research to do. It is more of an issue of positioning and marketing rather than one which has any substance to it.
Why is it that companies like TCS are not investing more in developing other markets such as the Asia-Pacific or the African continent?
You can only sell where there is market. If you look at the IT spend globally, TCS’s pie in terms of revenue matches very closely. You take hundred dollars as the overall market and divide it between the world. The same 100 dollar pie for TCS, it will be the same.
We have invested in building the emerging markets for a long time and we have the biggest presence in India. But there is only so much market. What is wrong in selling where the market is? Our distribution is pretty good.
Also, the logic about spreading your revenue distribution so as to avoid certain economies when they go into the doldrums is just plain wrong. How can you say you work for an American company when it truly has operations worldwide? We work for global companies and they might invest tomorrow in Africa, therefore my revenue from Africa goes up!
We work for top customers in every segment around the globe and our business will grow where they grow.
Ten years ago, what was TCS’s ability to invest? When you aren’t even a billion dollar company, how much can you invest? If you pitch to a company whose IT spend is a billion dollars, how much work will they give you? Therefore, size matters. Today our ability to invest is high. This becomes more important when you realise certain markets such as Japan and China which require staying power.
What has been your experience with China and Chinese competition?
China is a difficult market and we are learning it. It is too large a country; you can’t open an office in one area and expect to work. Furthermore, to learn how to work in China itself takes a few years. Second, in China most of the buyers are either the government or state-owned companies. The market also has a lot of smart players who operate at a price point which is very difficult for us to do. At present we work with a few banks and multinationals in their Chinese operations, which is not very large. The question, therefore, is how long can we grow only with multinationals. We have to learn to work with their government, which is taking time.
Working with the Chinese government is not straightforward; it takes time to build trust. Another problem is that if they are only looking for solutions, then you end up building only a discretionary spend-based business. The problem with that is that your growth will always suffer, because you finish your project and have to fight again for one more. To some extent, it’s the problem we face in India as well. After you finish a project, you have to start trying to win one all over again as the whole process is not relationship-based.
What would be your biggest challenge going forward?
There is no one single factor. I think in any business, especially in ours, the main thing is that the pace of change will be huge. We cannot afford to be blind-sided.
You have to listen to the market and make certain bets — and yes, sometimes be willing to fail. Non-linear revenues must come in, I believe. While the current business model still has room, the growth of non-linear revenue will signify that the industry has changed its business model.
Overall I see three levels of challenges. Level three is our own problems, things we don’t do well, we don’t retain people well and so on.
Level two challenges are what you don’t have control but still have to solve them. These can be visa regulation changes or some new tax. These things, I really can’t do anything about because I don’t know how it will change in the future. Basically a sort of environmental challenge, out of which talent acquisition also is one.
The first level of challenge is the strategic challenges that face us. I think the problem is that while we worry about the first and second level, not too many people focus on the third.