tcs: TCS has managed to evolve and grow with minimum disruption in the industry: outgoing CEO Rajesh Gopinathan

The UK market is currently the most vibrant while Europe and America are where the most uncertainties exist, said Rajesh Gopinathan, outgoing CEO of TCS in an interview with ET’s Romita Majumdar & Surabhi Agarwal.

Speaking about his reaction to the reasons being attributed for his quitting, he said “TCS is the second largest listed IT firm in the world, this is a public role. So whatever you do will get scrutinised.”

He said he has given an explanation for his quitting and beyond that “people are free to imagine” anything. He said that there may be “some angst” about the new operating model, which is understandable and expected as TCS is a large company and the model is new.

The new CEO may want to tweak it as per his understanding, he added. Gopinathan, who has been with TCS for 22 years, said that if another company has grown faster in one year, that can’t take away years of outperformance and steady growth that TCS has shown over the past so many years.

Edited excerpts:

There is a lot of uncertainty on technology spending. How do you expect this financial year to pan out?

If you look at different markets, the UK has been the most vibrant. Both cost takeout and transformation deals are happening and people are trying to position themselves for the future. So we do work with JLR significantly going onto the electric side. Utilities are going through a lot of transformation and really pushing the consumer choice agenda and the same applies to railways. So the UK has been accelerating through the year.

Europe has been one which has been slowing, even this quarter was sequentially slower than last quarter. One incremental positive that has happened this quarter is that in Europe, dealmaking seems to have improved, and the pipeline has been continuously growing. But the US is the one where the near-term uncertainties are maximum. We expected conservatism to change for the better this year but that has not happened. It is not just banking.

Banking took a hit in the middle of the quarter, but other industries have also stayed muted. Our commentary last time was based on our own assessment, that companies seemed to be in a good shape. And whatever is the transformation agenda seems to be on track. And also what clients have told us that we don’t see a major problem, but they are just being a bit too cautious in the cycle. So that requires watching. New projects usually start around mid-January or February onwards. That has not happened or is happening much slower than expected.

Also read | TCS Q4 Results: Profit jumps 15% YoY to Rs 11,392 crore; dividend declared at Rs 24/share

After you decided to quit, there was a lot said about why you’re leaving. One of the criticisms was that TCS’s growth was slowing, some people attributed it to the restructuring that you undertook which was leading to internal strife. What is your reaction to such concerns?

I have absolutely no reaction to it. TCS is the second largest listed company. This is a public role. So whatever you do will get scrutinised. When you spring a surprise on people, everybody will have their point of view and you will get the full spectrum of views. I’m not surprised because everyone tries to rationalise it in their own way.

Someone will rationalise it, saying that he got bored or say that he was not doing well. Others will accept what I say, but I’m not going to be able to satisfy everyone. And the whole idea of stepping away is that I don’t want to do that. It is nobody’s business other than mine. Whatever I had to say about it, I’ve said it.

In this job, you can’t just do something (without explaining) because it is a public company. So I owed it to explain, and put out my point of view. Now the whole world is free to imagine whatever it wants to imagine. And I’m out of it.

Is it true that the restructuring has made senior leaders unhappy? Do you think that there would have been a need to tweak the structure or make it work better?

Gopinathan: Absolutely. We are just a few quarters into it, right? It is radical and has not been tried out in the industry before. We’re classifying customer journeys. So it was quite new. And it is normal that as we actually get down to executing it, we will fine tune it. That would have normally happened. So absolutely. We have not gone into this with a playbook but with a rationale. So it creates its own level of angst. And it takes time for people to understand. I believe that what we heard from customers was quite positive. The team was coming along (well) and it’s still work in progress. Now it is Krithi’s job to do that (tweaking).

Do you feel that TCS is slowing down as a company and why?

Can we grow faster? Maybe. Could it have been lower? Maybe. It’s fine. We’ve grown, and done whatever we have done. I think over an extended period of time, our business model has been constantly evolving. But we have managed to do that with the minimum disruption in the industry. It has not been a flood and famine situation.

It’s not that you have hugely problematic years, and then you’ve got hugely outperforming years. We are continuously doing well. We have always taken our own path, right. And at every point in time, there has been skepticism. But the fun in this job is that you’ve got the steering wheel, you choose the direction and speed to drive.

Everybody else will sit there and comment about what you should have done. It’s okay, that is part and parcel of the game. And most importantly, our business model is very resilient. It is capital light, and organic is important to us. We have never taken an impairment. We don’t write off something, everytime a CEO changes, and then say that we want to do something different. We are constantly changing, but the thread of continuity has been very high.

That gives visibility to people. It gives certainty to people as they do things. And these are all part and parcel of our philosophy. So, you know everybody’s welcome to their opinion, but we are doing what we believe in executing on it to the best.

You had mentioned when we spoke in December that FY 24 will be the year for margin recovery. How far has that outlook changed now?

Gopinathan: The vision is still the same and some of the structural elements are still (there). There is definitely headroom to improve utilisation and efficiency. The way things were happening, it’s not just utilisation at an aggregate level, but at a micro level also, delivery had become challenged.

So typically a project that will require five people might have been ending up taking six or seven, because we were in a high attrition situation. Onboarding was taking time. When contingent labor becomes much larger, our own ability to retrain or to use that knowledge internally is limited.

So all of that also plays out into the way these things work. So the margin recovery will depend on how volatile the demand is. If it stays volatile then we will look at capturing the demand first and then fix the efficiencies. If it is stable then we can progress on the planned (margin) strategy. The recovery path will continue.

Also read | Exclusive | 2023 will be to repair margins which will improve but not by leaps and bounds: TCS CEO Rajesh Gopinathan

Have you thought about your plans beyond this role?

I really meant what I said earlier. So, by mid-June the planned transitions will be completed. There will be six to eight weeks of travelling. Krithi and I will be meeting customers in India and abroad as well as our on-site leadership teams. Then I’m going to take a long break and come back sometime in mid-July. At that time, I don’t expect to be needed as much, although I will be available. That will be the time to sit back and think. There are multiple, conceptual ideas that are floating in my head and I will see what makes sense.