TCS: On The Digital Highway

One of the most consistent performers in the domestic IT space for some time now has been software major TCS, even in the face of global headwinds. To its good stead, TCS continues to remain one of the most profitable companies in the IT space, commanding margins in excess of 22 per cent, which is unique for a large business with revenues in excess of Rs 85,863 crore. With over 3.5 lakh employees worldwide, the company can derive immense growth for its legacy and upcoming businesses.

Needless to say, the company achieved top rank in BW’s Fastest Growing Companies list due to its inherent strengths in software services particularly in segments such as retail, healthcare and BFSI segments. Over the last four years, the company achieved a CAGR of 22.5 per cent in revenues and 20 per cent in net profits.

In an increasingly digital world, TCS is focusing on making the digital transformation easier for sectors it operates in. Within the retail segment, its Omni-channel, which is an anytime, anywhere channel, allows large retail companies to manage their inventory in over thousands of nodes to fulfil orders in less time.

Among its digital offerings, TCS has delivered products like Robo Advisory based on risk preference and product returns. For insurance companies, TCS has digital offerings that can evaluate drivers’ behaviour on braking and lane changes, which has enabled clients to better engage with customers and reduce their premiums. In another key area of compliance and data governance, TCS has delivered smart solutions for banks to be able to face a dynamic regulatory environment.

In health care, TCS has been embarking on accelerating drug discoveries. One of its clients has been, in fact, able to realise multi-million dollar savings by carrying extensive studies in just two years across thousands of patients. No surprise then, the company is among the top 10 global IT services providers.

If TCS today has been able to achieve rapid growth, it’s not only because the company has focused on growth areas but because it also has gone for de-risking its business model, diversifying across geographies, verticals and service lines.

At the same time, the company has been increasingly focusing on understanding its customers’ needs. This has enabled it to increase its revenue base from its existing clients. For example, the company added eight more clients that contribute over $100 million in revenues in fiscal 2016, and 37 new clients in the $10-million annual revenue bracket this year.

If digital is the new age growth area, TCS is leaving no stone unturned to remain ahead in digital technologies. Its digital revenues constitute 13 per cent of its total revenues, which grew 52 per cent in fiscal 2016.

To stay ahead in the digital race, employees have to be reskilled and retooled wherever possible. TCS has a digital learning platform that combines virtual, physical and experiential learning and courses on many different digital tools. Employees can not only learn what they want to at their pace, with this paltform over 3.4 lakh new competencies were added to nearly 1.2 lakh TCS employees.

Due to its increasing optimum utilisation of employees which enables it to derive more productivity, the company increased its operating cash flow substantially to over Rs 21,581 crore in FY16 from around Rs 6,977 crore in FY12, which is an incredible growth for a company this large with consolidated revenues in excess of Rs 1 lakh crore. If the rising IT spends expected around the range of 8-10 per cent is any indication, TCS could continue to lead and stay on the fast growth track.