S Mahalingam, chief financial officer at India’s largest software exporter, Tata Consultancy Services, who is retiring next month after a tenure of 10 years in that position and over four decades with the company, talks to Shruti Ambavat on the company’s global footprint, India’s growing attractiveness and clients’ increasing discretionary spending. Edited excerpts:
If you compare the volume growth of this year to last year’s 3.2%, with the same set of problems of furloughs (mandatory time off work without pay), the dip is quite significant. Your comments.
Furloughs is nothing new and has been happening since 10 years in the US, traditionally in the manufacturing and hi-tech sectors. In October, we were expecting the normal trend of temporary shutdowns. But by November, we analysed that some companies that have traditionally not gone for furloughs are going for it. The base in 2013 is higher than 2012. That is why I am not particularly worried about Q3. We had said at the beginning of the year that growth will be front-ended and will be reduced compared with last year. Furloughs will not continue for the next quarter because that is the budgeting quarter for our clients. We are no longer in a situation where the customer says he wants a certain number of people.
This quarter has seen a 2.4% decline in growth from Continental Europe. What could be the reasons behind this?
For us, Europe will bounce back in calendar year 2013, since the deal pipeline is strong. The regions we are in typically are the Netherlands, Nordic region, Germany and Switzerland, which are strong economies. We are also increasing business in France. So, we are not in the troubled areas. We have some presence in Italy and Portugal, but not big enough.
How significant is discretionary spending as part of new deals for TCS?
There are two things in terms of projects for us. One is running the organisation and the second is changing it. While running a company, clients look for mission critical projects. We are still getting many projects in this form where core systems need to be built and maintained. Our existing customers who have done a fair amount of outsourcing on running the company, might find that there are some newer areas to the company might need change. Last one is technology like digital enterprise, analytics and mobility, that clients are keen to implement.
What is your outlook on the telecom sector?