How TCS plans to increase its share of digital business
In a leafy TCS campus, near the international airport in Mumbai, lies a newly built executive briefing centre, a prosaic name for its actually high-tech salesroom for potential customers. With motion-sensing walls, robotic shopping carts and 3D-printed knee replacements, the three-storied centre is TCS’ latest move to grab a bigger share of digital tech spends. By being able to showcase its solutions, most of which are being used by at least one customer, TCS believes that it can win larger mandates as deal sizes in digital grow to more than $100 million and cloud-based platforms displace the old ways of doing business. “Being digital involves demonstration. All you see here physically is just visualization of our digital solutions. All of them actually work on the cloud,” N Chandrasekaran, CEO of Tata Consultancy Services, told ET at a tour of the centre. Placing the executive briefing centre, the first of its kind for the company, is also a strategic decision. “This is the first one. Mumbai is our corporate headquarters.. we bring a lot of clients here. It is possible we could make more such centres,” said Chandrasekaran. TCS unveiled the briefing centre for analysts last week during its analyst day. The company also broke down the composition of its digital revenue, currently at about $2 billion, for analysts at the event. For example, more than half of the company’s customers already use some of its digital services. Banking and financial services contributes only 12% to the company’s digital revenue, despite accounting for about 41% of the total revenue. The retail sector punches above its weight in adopting new technologies — about 19% of TCS’ digital revenue comes in from that sector, compared to about 14% of total revenue. Part of the reason for strong showing in retail as a proportion of digital revenue is that the sector has to reorient all its systems — customer-facing, back-end and large supply chains — to compete in and capitalise on ecommerce. “Deals are getting larger. Some of the deals we are seeing are worth $100 million in revenue. It involves infrastructure, analytics, design, cloud, platforms. All this requires large teams and an integrated strategy to stitch it all together,” Chandrasekaran explained. The company is also focusing on doubling down its bet on platform. Ignio, which allows automation of infrastructure services, and Optumera, which helps retail companies manage inventory to better compete against ecommerce companies, already have significant clients. TCS is focused on developing solutions around Blockchain, the technology backbone that powers the crypto-currency Bitcoin. It is building two platforms around blockchain. TCS said some client banks are already piloting its Hyperledger blockchain platform. Analysts’ reports, put out after analyst day and tour of the centre, support TCS’ bullish outlook on its digital services. “With a track-record of growing its large accounts and 52% of clients already on-board for digital services, we are confident of TCS’s ability to deliver sustainable growth in Digital Services,” Urmil Shah, analyst with IDBI Capital, said in a note. Analysts also expect digital to help the company accelerate growth, which has disappointed the market over the last year. “We return from the investor day with greater confidence about the company’s digital and automation strategy. We remain convinced that growth will re-accelerate from current levels in FY17 and beyond despite TCS’ large scale,” Sagar Rastogi, analyst with Ambit Capital , said in a note. Rastogi expects the company to post 11% and 13% dollar-denominated growth in FY17 and FY18, respectively.