People Consider Us Conservative But History Shows Otherwise: TCS CEO Rajesh Gopinathan
India’s largest software services provider said it won’t shy away from acquisitions if opportunities emerge during the virtual business freeze caused by the coronavirus pandemic.
Any form of vendor consolidation or other things are on the table, Rajesh Gopinathan, managing director and chief executive officer at Tata Consultancy Services Ltd., said in an interview to BloombergQuint. “People think of us as conservative but if you go back in history, it was in the middle of the GFC crisis that we made our largest acquisition,” he said, referring to the buyout of Citigroup Global Services in 2008. “We have the strength of our balancesheet to be able to participate in any emerging opportunities.”
TCS is on the lookout even when it has guided for contraction in revenue in the ongoing financial year as clients globally cut spending amid worldwide business restrictions and lockdowns to contain the Covid-19 outbreak.
The IT firm expects normalcy to return only by the third quarter ending Dec. 31, and estimates the lockdown’s impact to be similar to the subprime mortgage crisis when its sales fell 5.8 percent and 7 percent in two successive quarters.
“The demand environment is very, very weak and primarily it is coming from uncertainty in terms of what the near-term scenario is likely to look at,” said Gopinathan. “Almost nobody has a good anchor to plan on.”
TCS is banking on customer engagement to garner market share even as demand for software services is expected to fall off a cliff in the next two quarters.
The Tata Group company managed to bag $8.9 billion of new orders in the January-March and hopes this backlog to drive revenue.
“Some of them are programmes where there is significant amount of transformation and development work upfront which is in our hands and as we have greater capacity or will try to see whether we can accelerate that,” Gopinathan said. Some of them have a greater dependency on downstream activities which is expected to get delayed, he said.
TCS transformed its offshoring model to borderless workspace, allowing 90 percent of its employees to work from home, he said.
The IT company, according to Gopinathan, has ability to withstand shocks. “We don’t have to be in a panic if the situation doesn’t come through. Also, we are not incrementally adding any capacity other than what we have already committed,” he said. If demand turns out to be much weaker than expected, the company will not add further capacity, Gopinathan said.
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