BENGALERU: CDS delivered strong double-digit revenue growth in the first quarter – 15.5% in constant currency. In exclusive interaction with YOUCEO and DG Rajesh Gopinathan said the growth gives the company comfort to undertake long-term structural changes, including a major initiative to position TCS as a growth and transformation partner for global customers, not just a business partner. cost optimization. Excerpts:
You had a mid-teen growth rate in the June term. It looks good. But the stock market seems to expect more…
Internally, we are quite satisfied. Anything in double digits is structurally sound. Retention is high, people are happy, there are opportunities to grow internally and we are able to continuously add to the bottom of the pyramid, hire newcomers and they also see visibility for growth. That’s what I mean by structurally sound. If you start to drop below 10%, your overall pyramid structure is challenged and impacts your ability to maintain your talent by offering promotions, fulfilling their aspirations.
If your growth rate is above 10-11%, you can also maintain a long-term strategy, allowing other aspects of the strategic agenda to come into play. From a market perspective, growth is the most important element. The market does not necessarily have a 5-8 year view, and rightly so. We have to manage both sides of stakeholders.
Structural change, can you explain it?
The general perception in India and in the media is that we offer cost optimization. It’s a very valuable aspect of what we offer customers – overall if someone talks about cost optimization it’s almost inevitable that they’ll get a very high ranking for TCS saying they’re guys at who we need to talk to before making our decision. But, at all times, customers also have, what we call, a growth and transformation agenda. The transformation can be a transformation of the cost structure, or it can be the transformation of their own business, entering new segments, accessing new capabilities, etc. And what we’ve been trying to do over the last five years is to make sure that we’re balancing our offering – building for “growth and transformation” the same capability, thinking and positioning that we have on cost optimization. So imagine we were originally a single-engine aircraft, now we want to be a twin-engine aircraft.
Do you see your customers worrying about the recession?
Overall, the momentum remains quite strong. Discussing recession-related concerns is a priority for leaders around the world. If senior managers talk about it, they don’t indicate that they are thinking about cutting budgets. But this is also expected because the budget cycle will start in three months. Thus, the impact on the budgets will not be known until later this year. For us, it won’t be picked up until next year because they’ll go through the budget cycles and they’ll start talking about it next year.
With technology playing such a huge role in the transformation, assuming there was a recession, would the tech budget cuts be less severe than before?
Yes and no. Let me put it this way, the acceptance of technology as a driver of critical change is very high and whatever doubts existed, during the pandemic it has all been shattered. Thus, the technological agenda is at the center of the concerns of the CEO, CXO levels. This will help on a relative basis when they reduce technology budgets. But technology will also be impacted.
If you look at the last two recessions, the financial crisis and the pandemic, the immediate reaction was to turn off the tap because it happened suddenly. After turning off the tap and bringing the cash burn situation down to a manageable level, more rational decision-making kicked in and we bounced back nicely. Now we have a unique situation. We have inflation, and generally, whenever there is such inflation and there is a threat of recession, wages are the first to bear the brunt of it. But the wage increases are still there, the rate increases (for contracts) are there, everything is moving because there is this additional support that has been injected into the economy. So we’re eating in there right now. Once that cushion is gone, the rubber will start to really hit the road.
How do you forecast attrition levels?
In 2020 when the pandemic happened, we stood up and said we were going to honor all the recruiting we did. But many in the industry have not followed this strategy. Thousands of people have been laid off. In 2021, when the peak in demand began to occur, the hole that had been created on the supply side in 2020 began to be felt.
However, this side of demand is starting to dry up very quickly. The freshmen hired by our industry last year are reaching the point where they will become productive. Thus, the drivers on the supply and demand side are under control. When you get through September and beyond, we will be in a very different environment.