TCS' Strategy As Rivals Lure Talent With BMW Bikes, 3-Day Week

Tata Consultancy Services Ltd.'s chief executive officer says the company can navigate its way through any immediate disruptions to the global economy and tap into long-term demand for its services as its seeks to reach $50 billion in sales by the end of the decade.

TCS, the largest player in India's $227 billion tech services industry, must deal with a host of challenges, from Covid outbreaks in China that are disrupting supply chains to the war in Ukraine as it upends the geopolitics of Europe. The company also provides tech services and support to thousands of companies in the U.S. and beyond that are adopting hybrid labor strategies, with employees working both from home and the office.

"The long-term demand environment is very strong," TCS Chief Executive Officer Rajesh Gopinathan told Bloomberg News in an interview at headquarters in Mumbai. "We're leaning forward, we're betting on growth."

Gopinathan, a soft-spoken TCS veteran who joined the company two decades ago and often wears blue formal shirts, is known to be good with numbers and fostering client relationships.

India's outsourcing industry was built on helping companies replacing their own pricey technology workers with lower cost -- and typically higher skilled -- specialists from the likes of TCS, Infosys Ltd. and Wipro Ltd. But easy growth from labor arbitrage has largely disappeared, forcing Gopinathan and his peers to move into more sophisticated offerings, such as cybersecurity, cloud computing and artificial intelligence.

TCS last month revamped its internal structure with specialized groups as part of a wider move to win business from startups as well as large global enterprises. That overhaul, Gopinathan said, was executed in less than a month.

"We are extremely agile in the way we reorganize," he said. "We are more micro-focused on the customer sets that we have and the opportunities we have."

TCS is Asia's top outsourcer and a cornerstone of Tata Group, the Indian conglomerate with dozens of companies in everything from salt to automobiles. The tech services company closed out its fiscal year ending in March with revenue of more than $25 billion.

Rising labor costs are a challenge. Last week, TCS reported a 7.4% increase in fourth-quarter profit to 99.3 billion rupees ($1.3 billion), short of analyst estimates, as expenses to hire and retain talent cut into margins.

Startups are beginning to compete with giants like TCS for the programmers and developers needed to run their businesses. Some of the newcomers are luring talent with the likes of BMW motorcycles or three-day work week -- something the much-larger outsourcers have resisted.

TCS employs nearly 600,000 people and aims to hire more than 40,000 graduates in the fiscal year through March 2023. Gopinathan calls the current scramble for employees "transitory" and argues that, ultimately, nobody will be able to pay more for talent than TCS because it enjoys the highest structural margins.

"If you look at this industry, we enjoy the benefit of occupying the high point on the profitability side; everybody else is benchmarked below us," he said. "So, no, I don't see a threat to our position."

Gopinathan, chief financial officer before his promotion, said he does get questions about why TCS is determined to hire and expand, given the apparent challenges in the global economy.

"I'm getting a lot of debate that everybody else is saying the outlook is bad --how come you are positive? We are reacting to what's there" he said.

"That is not to say that we are living in a bubble," he added. "We are betting on that growth knowing that even if we turn out to be wrong, we will then step back and reset."