Our Footprint in Q4 was Good, Momentum to Continue in FY17
In an interview with Nikunj Dalmia of ET NOW, TCS chief executive officer N Chandrasekaran said that he is very happy with the momentum and the footprint in the fourth quarter. He also said that digital is at an inflection point and TCS has made the right investments. Edited excerpts:
Q4 was very unusual for TCS. How much of that is because of business momentum and how much is due to a diluted Q3? I can say it with certainty that all of Q4 is due to business momentum. There is nothing due to diluted Q3 because those revenues that went away could not be recovered. You can look at the overall numbers and TCS beats the Street. For me, the data points or volume growth, 3.2x, coming off a very bad Q3 and seasonally weak Q4, looks very-very good.
To me, the sense about this quarter is the footprint is good. I feel the momentum is good and I feel very confident. But we need to wait because the exits this year are lower than the exits last year. We would watch and are going to deliver numbers for the next two quarters.
What is your outlook for FY17? I say the exit rate is lower compared to last year’s but the headwinds are out of the way. So given that we feel positive, we see a good momentum in digital where we have entered into transformation deals. We have made significant investments in talent development, digital learning platforms, design studios, executive briefing centres. We have invested in creating the intellectual property in horizontal platforms, industry related platforms, Ignio which is an automation product. We have invested in very strong alliance networks and a good startup ecosystem. Given all this, I think we are well-placed but you should give us some time. What will be the business impact of Epic System case? I would not like to comment on the case because it is sub judice. With respect to the business impact, we do not see anything adverse. I think we see good momentum.
How do you plan to handle the case? We have very strong track record and we have demonstrated time and again the commitment that we have for higher values or ethics, integrity or in terms of the respect we have for intellectual property of our own, of third parties, of our partners and also our track record that we have built over decades. In this case, we have not violated any intellectual property. So I do not see any issue.
How to judge the current environment for the IT sector because each firm is giving a different indication? IT companies have grown to be large companies today and they all have different portfolios, different mixes, different market exposures and each of them is at a particular point in time coming from different growth cycles. So without getting into specifics, I think you got to read those commentaries in the context of those companies. There may be some common messages which you can try to take and analysts try to do that.
Coming back to TCS, 15% coming from digital and digital growing at 50%. That is the J-curve which you are get- ting because of the digital business. Digital, I think, is at an inflection point. We see tremendous opportunities and we have made the right investments. We have the necessary capability and the capacity and the tools and intellectual property to be able to very actively participate in that market as it develops.
Even though digital is a $2.5-billion business for TCS, it is still at inflection point? Yes.
So you expect that business and deal momentum will be pretty much all around? Yes.
Is there a J-curve which will come in your company when the digital business takes over the IT business? Our investment cycle on digital will be very strong so we will continue to invest because we are building capabilities, we are building new intellectual property line. It involves a lot of investments and that is why say that give us a band and do not micromanage the band with us in your questioning. We will have to make calls on investment, which we will do. We should not want be very worried about this.
The US and the European businesses have staged a phenomenal growth. Do you expect FY17 to be no different than FY16? It has been so for the past several years, so let us see.
Has Q4 ended on a note which is slightly higher than your expectations? From financial point of view, I am happy because we have to deliver. From the footprint point of view, I am a lot more happier. The