TCS to keep up pace of investments
The Economic Times — April 23, 2008

India’s top software company, Tata Consultancy Services (TCS), has closed six large deals in the last quarter of the previous fiscal, two of which were in $250-million range, giving it the “confidence” to continue with its ongoing investments, a senior executive said on Tuesday.

“We had the option of going slow on our investments and protecting our margins but we decided against it as we believe long-term growth will be good,” chief operating officer N Chandrasekaran told ET, a day after India’s largest software exporter announced a lower-than-expected fourth quarter earnings. It announced a 5.6% sequential fall in its fourth quarter net profit to Rs 1,256 crore. TCS stock price fell 10.6% to Rs 887.05 on the BSE on Tuesday.

TCS intends to maintain the same pace of investment despite the uncertainty in some of the assured ramp-ups from financial services clients that led to a sequential fall in its fourth quarter profits. These were related to specific client issues, said Mr Chandrasekaran.

Of the six deals it won in the fourth quarter, one was from banking and one from insurance, while the other two were from utilities and manufacturing. Referring to the challenges it faced during the fourth quarter, Mr Chandrasekaran said that TCS undertook ‘transitioning’ some large projects for free. This decision was based on the size of the project and the potential business from the client. The ‘free transitioning’ has been factored into the overall pricing of the project, he added.

Last year, TCS was able to get a 7% increase in pricing, although the trend was flat in the fourth quarter. Without the 11% rise in the rupee against the dollar during the fiscal, Mr Chandrasekaran estimates, TCS would have clocked Rs 2,000 crore more in revenues, giving it a growth comparable to the last fiscal year. Growth rates of the top five IT companies have dipped from the 45% growth they recorded in 2007.

TCS’s newly-appointed global HR head Ajoyendra Mukherjee said the company would maintain its current manpower mix between global development centres, regional development centres and nearshore centres.

The global centres, which account for a bulk of the company’s manpower, are mostly located in India. But as the company is becoming more global, it has added smaller centres in overseas locations such as Brazil and China, called regional development centres which cater to non-English language requirements.

The nearshore centres are located in developed economies of the US, the UK, Europe and Japan. Its largest nearshore centre is in the UK, which it acquired through the Pearl Group deal in 2005.