Why TCS ?????????????? in 2016

Tata Consultancy services, a regular fixture among BW Business World’s Most Respected Companies for years, commands a reputation that comes from not just being a Tata brand.

The original torchbearer of India’s software sector dating back to the late 1960s, TCS has its finger in every pie in the sector and continues to grow vigorously. In a world where size matters, TCS has what it takes — annual revenue of Rs 94,648 crore and profit of Rs 21,696 crore in the year ended March 2015.

For a company with a workforce strength of 3,35,000, it’s not easy to ensure its care and affection towards employees without strong systems in place. It surprised many when in April it made employees a one-time bonus offer, probably one of the biggest in the Indian corporate sector. TCS set aside a one-time employee reward of Rs 2,628 crore with each employee getting a week’s salary for every year completed, to mark 10 years of listing. It was refreshing in times when software developers are plagued by high rates of attrition.

Rated at the top in unprompted responses by senior managers surveyed, TCS was followed by Infosys, Google India, Reliance Industries and Tata Steel in the category. Yet, in the formatted questionnaire survey, managers preferred Google India and Infosys over TCS.

Even though TCS scored high on many of the eight parameters, it was Google that topped the list on parameters including technological prowess, global competitiveness, people practices and talent management, quality of products and services, and ethics and transparency.

Yet, in the year ended 31st March 2015, the company posted 16 per cent growth in revenue and about 14 per cent jump in profit before extraordinary items, even though no company has been able to avoid global slowdown, especially those with large export earnings. As the focus of global economy moves to Asia-Pacific, the company too increased its earnings from the region by 50 per cent in FY2014-15.

For a company that gets more than half its revenue from North America and Europe, sustaining growth in earnings from the two regions under distress remains a challenge. Yet, over the years it has grown rapidly as investors stayed firmly with it. With the largest market capitalisation of Rs 4,70,400 crore among listed companies in India, it is way ahead of the next name on the list — Reliance Industries’ market cap is Rs 3,08, 450 crore. Competitor Infosys is almost half of TCS at Rs 2,50, 000 crore.

Dipesh Mehta, analyst with SBI Caps Securities, predicts the company’s revenue would grow 14.7 per cent in the current fiscal ending March 2016, and almost 12 per cent in the following financial year.

Traditionally, its key earning segments include banking and financial services, retail and distribution and manufacturing. Yet, the software giant is making rapid strides in life sciences, travel and hospitality, and media and entertainment.

So how does the company ensure it continues to grow at the pace its growing now?

“Today we live in a world where the default is digital. Therefore, everything is on its way to evolving into a digital platform,’’ the company said in response to BW queries. “The next big thing is digital consumer economy, as every business is getting connected to the consumer in real time. The Internet of Things will make an impact and shrink time frames. The total economic activity that will be generated through digital will run into trillions of dollars in the next five years and technology would be the core of it.”

TCS said the opportunity is in billions of dollars. Its basic strategy is about staying close to customers, understanding their business challenges, helping them to address the issues and making investments needed to remain relevant to customers. Opportunity will arise from different components based on the combination of digital forces such as big data analytics, cloud, customer experience, analytics or new composite technologies like the Internet of Things, hyper-localisation and 3D printing.

“It has gained significant prominence on the back of its ability to sustain industry-leading growth underpinned by its full-services capability across a broad set of verticals, strong penetration in key large markets and deep customer engagement,’’ says Rajiv Mehta, assistant vice-president for research at brokerage firm IIFL.

The company invests in its employees, giving them exposure to different markets across the globe so they can realise their potential. It is investing in training more than 1,00,000 professionals this year in relevant technologies. At the end of the second quarter of FY2015, 30,000 had already been trained. Its long anticipated absorption of CMC too started taking shape from October.

“We try to keep our workforce motivated with the kind of work we do, by creating a good work culture and by compensating well. We even rotate people from one engagement to another, from country to country, and one technology to another,’’ TCS said in a response to a BW query. “We conduct activities to take care of stress levels (of employees). TCS has a long pipeline of leaders who are now running individual business units of between $500 million and a few billion dollars. Our structure of smaller, agile business units run by empowered managers creates numerous opportunities across the organisation.’’

Among the world’s top 10 technology companies, TCS sees faith in its ‘power of certainty’ formula to get new IT services, consulting and business solutions clients as well as to retain existing ones.

In corporate social responsibility, the company is guided by its founder Jamsetji Tata’s words that, “in a free enterprise, the community is not just another stakeholder in our business, but it is in fact, the very purpose of its existence.’’ It has clear commitment to environment, climate change and follows the ‘reduce, reuse and recycle’ philosophy for all kinds of inevitable wastes.

Listening to all its stakeholders is key in making investment decisions by TCS.

“We listen to customers, the technology ecosystem and technology analysts,’’ the company said. “Based on all inputs, we make investments. And if we miss one bet, we should be agile enough to be able to quickly get onto that and then run faster to catch up.’’

Yet, the challenge lies ahead with global economic growth still being fragile and that shall test the company’s mettle. Its internal systems, procedures and fundamental strengths shall come to the fore during difficult times.