Tata Consultancy Services (TCS) is hopeful its $8 billion portfolio of deals would function as a buffer against any crisis in the coming quarters, according to chief operating officer N Ganapathy Subramaniam, despite concerns arising from the European energy crisis and American inflation. Subramaniam claimed in an interview with ET’s Romita Majumdar, Sai Ishwarbharath, and Aashish Aryan that moonlighting, which he called “unethical,” might cause the IT business to collapse and harm client confidentiality and confidence. edited snippets.
Your second quarter performance has exceeded expectations. Do you feel the effects of the global recession and inflation?
Europe is attempting to alleviate its reliance on energy and overcome the energy crisis. Because they are generating their nuclear energy, the US and France are both in good shape. However, inflation poses a significant risk. Despite numerous economic signs, consumers continue to spend money. The majority of our clients have informed us that they do not wish to shift costs onto clients. Customers are telling us they won’t reduce their spending on any ongoing projects. Short-term projects (between three and six months) that result in cost savings or enhance the customer experience are acceptable, but longer-term transformation programs, etc., will undergo a vetting process.
Are customers preparing for any potential crises over the upcoming quarters?
We consider this. For the past few quarters, we have had an order book worth around $8 billion. Therefore, when a crisis occurs, we will always have at least a quarter or two before we can respond and decide how to modify it. We also serve several markets and have a varied portfolio. We didn’t expect the UK to perform well for us, but it did. Therefore, even in the challenging environment in which they must operate, firms will need to optimize to some extent. We will have to wait and see if we will need to cut back on expenses. However, none of these things are present in the North American market, where consumers are far more optimistic. That is not in line with the recessionary trend. Businesses, airlines, hotels, and other businesses are prospering. You must consider it within the backdrop of a pandemic, during which time individuals were unable to go out or make purchases. We pay attention to what our clients have to say, and the majority of them have assured us that the programs they are now implementing will continue and won’t be canceled.
Your profit margins have risen. How can you raise it to the desired 26-28% band?
There are numerous items. One is this entire attrition and the backfilling expenditures (hiring new personnel, putting them through training), which I believe will be greatly reduced. Attrition is first ceasing. The substantial backfilling expenditures that we have seen for the past two to three quarters, in my opinion, will significantly decline. Then, last year we employed a lot of individuals, and this year they are all contributing positively. Therefore, utilization is now low, but I believe that since we have a strong bench, it should increase.
We used to work with 90% even when there were trainees. It’s currently around 83%. The support of the currency is essential to the whole process. I wish the currency could find some stability. Growth in the economy is undoubtedly crucial, and part of that growth will be required to pay for the anticipated increase in margins. The last thing we have is our standard operational excellence and productivity improvements. To maximize the margins, we rely on all of these major factors.