tcs: TCS could become the largest IT company in the world: Rajesh Gopinathan

Is this cycle different from previous cycles? Is this bigger and is it going to be of a longer duration?
In many ways it is similar and in many ways different. The Y2K cycle was more of an Indian industry phenomenon because it allowed us entry into large enterprises and it gave us that very solid beachhead into the global IT industry. However, if you compare the present cycle to the business cycle that happened in the turn of the century and into the 2005 time frame, that is a better example.

It involved the architecture of corporate technology systems. It also involved unleashing of IT and the digitalisation of consumer to enterprise and enterprise to enterprise engagement and that changed the way value creation happened. It was followed then by the natural extension into the mobile space and now what we are seeing is the extension to the cloud space where the boundary of the enterprise itself is going to become diffused.

We like to call it the emergence or the boundary-less enterprise and that will change the way industry structure itself operates by bringing in a friction-less collaboration on a horizontal level across multiple companies and multiple industries. So rather than thinking of it as distinct ways, these are all incremental ways that add on to each other with significant surges coming from individual technology innovations. As long as you stay on top of each of the waves, you will do very well.

With each cycle, TCS has emerged as a winner. Your market share has gone up, your margins have gone higher. In the last cycle, TCS margins were about 20%. Now the margins are north of 25-25.5% and that has been the advantage of this new cloud cycle. What is the secret sauce that led to this market share gain?
We definitely will emerge stronger because in each of the cycles that we are entering, the cycle in a different stage of evolution of our own journey. Today we are much more deeply entrenched with our client ecosystem. Both our reach and our capabilities are a lot more heterogeneous and a lot more holistic than what it has been ever in the past. Our ability to both shape the evolution of this technology journey and the cycle as well as our ability to stay relevant to our customers across all spaces of these transformation, is continuously increasing. We expect to continue to gain strength and stay even more relevant to our customers through this space also.

I completely understand that there is a strong tailwind in the sector. But the fact that you have reached big in terms of scale and size, is it largely because of market share gain?
If you go back over the last five years or even two years you would see that the technology industry globally has expanded even when the GDP did not expand or it contracted less than the overall economic contraction that the pandemic brought about.

This industry is expanding ahead of the overall economic activity and within the industry, we are gaining market share. So both the tailwinds are helping us – expansion of the pie as well as increasing market share. Competitiveness shifts to people who can bring in holistic solutions and who can invest across the cycle with large corporate clients and that is our sweet spot.

TCS has about 6 lakh employees and that makes you one of the largest employers in India. With this large base, there is going to be a challenge in terms of managing scale, skill and size. How do you do that?
Anytime a new boundary of scale is broken, there is always scepticism. There are questions whether it has reached a point where it is too big. Think of supply chain based companies. Nobody thought that global supply chains could be run in product companies and it is true for CPG companies. Nobody thought that brands could be globally relevant; could be tuned locally and leveraged globally.

Each of these global scale operations broke new ground and broke new boundaries. We believe that in the space of talent, we have that unique positioning where we are pushing the boundary of what scale means and the bigger thing is that there is opportunity. How do you organise yourself most effectively and efficiently tap into the opportunity which is no different than what has been done in the past with branding CPG or supply chains for logistics driven companies. We are approaching it very systematically. The focus s to structure ourselves to be able to manage this scale and to leverage the scale to our advantage, both of which I believe we are doing quite well.

What is your definition of scale? Would you judge TCS benchmarks on market cap which is important for shareholders; on employees, which is about how many people you have employed or pure market share in terms of relative and peer comparison?
It is all of it. Earlier, in 2001-2002, when TCS was less than a billion dollar company, we went about trying to define what would make us relevant. At that time the mission was that we should be in the global top 10 and we defined it across all dimensions. We said we should be global top 10 by revenue, global top 10 by employees, by market cap, by our reach across markets. Similarly, today also, our aspiration is to maintain and stay at a scaling level across all dimensions of our operations –both physical as well as performance and financial.

Could TCS become the largest IT company in the world?
Absolutely. In many ways, we already are. If you take our largest segment which is BFSI, we are by far the number one technology service company in the world. From a talent perspective, we are very close to being between us and number one. Probably it varies from period to period. By market cap, we have traded those places a couple of times during the year. We are inthe league of the top one, two, three across most dimensions and the challenge and the opportunity is to make sure that we stay and build on that lead and continue to do well.

How exactly has the war between Russia and Ukraine impacted business? Do you see any Brexit like impact on the business because of the war?
While Brexit obviously created headwinds for us and made the environment a lot more challenging, net-net we were able to navigate that with significant growth and significant value addition. Our growth and our UK market in fact peaked post the Brexit scenario. Today we are by far the number one service provider in UK.

I see periods of volatility as a natural phenomena which we should be prepared to face in any market that we operate in, But each period of volatility is also a period of opportunity and if we position ourselves right and stay close to our customers, take the long view and list with them and help them through their crisis and make sure that we have the capability to participate in the up cycle when it comes, we will do well. That has been our history and I am quite confident that we have the right philosophy and that investment mindset and the capability to be able to continue to do that in every period of volatility.

TCS has attrition but the attrition rate is not the highest in the industry. It is just north of 10%. TCS in a sense has invested in a lot of talent development. You decided not to do layoffs or cost cutting when there was acrisis because of Brexit or when Covid happened. Walk us through that?
I think the biggest reason that we enjoy such high employee loyalty and retention is that we are true to our word that we believe our biggest asset is our people and that there are no legacy people, only legacy technologies.We have proven it again and again that by continuing to train our people, continuing to provide the first right of refusal for new opportunities to our existing people, we have been able to systematically and in a sustainable way, manage the multiple transitions that our industry sees and the pace of change that characterises our industry. SO, this is the magic sauce for TCS. Everything else is a byproduct of our ability to retain and grow our talent base and to remain continuously invested in it.

The IT sector in the last couple of years has expanded despite a higher base. Ideally it should have been contracted. When do you think that law of averages would kick in?
Today we are $25 billion in size, there are many companies in the world which are $50 billion, $100 billion in size. So there is no reason why we should not aspire to be double, triple, quadruple times where we are today.

The question is how should we go about it? The opportunity is unbounded both on the demand side and on the supply side. We are sitting in a sweet spot. I think our aspiration by no means should be constrained by where we are today. We should be aspiring to set new standards and we are far away from where the current standard itself is. There’s a huge headroom to still go forward.