Indian IT companies tackling growth rates but ready to take advantage of changes: N Chandrasekaran

BENGALURU: Slowing revenue growth is an inevitable consequence of transformation in the technology industry but Tata Consultancy Services is well poised to take advantage of the changes for the future, the chief executive officer of India’s largest software services company said.

TCS has built strong relationships with customers across a range of industries and has been early off the blocks in providing solutions that deploy cutting-edge technologies, and this will stand in good stead, N Chandrasekaran told ET in an interview.

“You can come back and ask: You were at 15 per cent (revenue growth rate), why are you 5 per cent less now?” he said in a video chat from his office in Mumbai.

TCS open to buying companies
“The point that you have to understand is, when a fundamental transformation is happening, there are soft spots. We have to take it in and move on,” he said.

Chandrasekaran’s comments are a clear acknowledgement of the new reality of Indian information technology companies which are seeing growth rates slide as they and their customers grapple with the challenges brought on by advancements in areas such as cloud computing, automation as well as the pervasiveness of data analytics and internet-connected devices.

At 1 per cent, second-quarter revenue at TCS grew at its slowest rate in over a decade. Rival Infosys has reduced its annual revenue guidance for 2016-17 twice already, and the software industry grouping Nasscom is expected to lower its forecast for software export growth, leading to concerns about the way ahead for an industry which is a major foreign exchange earner and employs an estimated four million staff.

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“This digital transformation is real,” said Chandrasekaran, who has been at the helm of the Mumbai-based company since 2009. “(But) there is no truth that tech spending would come down. Tech spending is fundamental in this digital transformation for companies.”

Pricing in such an environment by software services companies, he said, is not indisciplined although some companies losing market share drop prices.



Despite the transformation and the competitive environment, TCS, he said, is confident of maintaining its operating margin in the stated range of 26-28 per cent.

TCS is open to buying companies if the right opportunity comes along and money is not a constraint, he said. He cited digital and technology-led solutions as areas of interest but not anything related to hardware.

“Our positioning is very clear. Primarily, we are a solutions company which also produces software in areas that make sense,” he said.