TCS to build its own tech, develop in-house talent
TCS will build both technologies and talent rather than buy it from outside.
Tata Consultancy Services Ltd (TCS), India’s largest software services company, maintains that it is the company’s DNA to build technologies and groom leaders to take up senior roles, even if implementing this strategy means the company has to sacrifice some growth in the short-term. “I don’t know if insular would be the right word but definitely we believe in building talent and technologies in house,” chief executive officer Rajesh Gopinathan said in an interview on Wednesday.
“As an organisation if I don’t offer you the space to grow the capability that you don’t have, then it is just a transactional buy and sell relationship. It (the decision to build talent) is very core to our DNA,” said Gopinathan.
A Mint analysis found that TCS’s senior leadership team (vice presidents and above) comprised largely of executives who had put in a few decades at the company.
“People ask me why our attrition is low. Our attrition is low because of this. Because my promise to you (my employee) is that I will give you the space to be who you are not today. And If I don’t give that space, then why will people stay with me?”
“I agree, it is a risk,” conceded Gopinathan, when asked if the company runs the risk of slow growth as building both technology and talent takes time.
“We are betting on our people that this culture is the more robust and resilient culture which will allow us to go over
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multiple cycles of technology. Otherwise, I am merely a financial investment engine,” said Gopinathan, who took over as CEO in February after N Chandrasekaran was appointed chairman of Tata Sons Ltd, the Tata group holding company.
For now, this risk has already started manifesting in lower growth at the Mumbai-based company. TCS managed 6.2% dollar revenue growth to end with $17.6 billion in revenue in the year ended March 2017, slower than the 7.1% in the previous yearr, and less than half the 15% growth reported in 2014-15.
Globally, firms across industries are cutting their spending on legacy work such as application maintenance, and ploughing the savings on newer projects into areas such as data analytics and cyber security solutions.
This means that information technology (IT) vendors like TCS now have to deploy tools like automation and date analytics platforms to help their clients run their businesses more efficiently.
TCS’s build-everything approach contrasts with Accenture Plc’s strategy of buying companies and hiring executives as they make themselves futureready by investing in newer technologies. Other Indian IT firms like Infosys Ltd and Wipro Ltd too have been relying on buying companies and hiring people.
Accenture spent $1.7 billion to buy 37 companies last year, with these acquisitions helping the company improve its dollar revenue growth to 6% (from 3.5% in 2015-16) to end with $34.9 billion in revenue for the year ended August 2017.
TCS last invested $50 million in stitching together a joint venture partnership with Mitsubishi Corp in Japan in 2014.
“To ensure we have the most relevant talent at the most senior levels, we promoted 600 new MDs in fiscal year 2017 and hired more than 300 MDs from outside Accenture,” Accenture CEO Pierre Nanterme told analysts in a post-earnings call on September 28.