11 Oct 2018 21:23 IST

TCS: At 50 and counting

India’s largest software services firm with an impeccable record is poised for its next growth phase

Tata Consultancy Services (TCS) completed 50 years in business recently and, in the process, achieved many ‘firsts’. It is India’s largest software services company and the largest Indian company, with a market capitalisation of over ₹8 lakh crore. It was also the first to cross the $100-billion market cap threshold.

Today, TCS stands tall as one of the two biggest companies in the country, along with Mukesh Ambani-run Reliance Industries. Globally, there are no more than 65-70 companies at this level of market capitalisation. Apple Inc is the world’s largest company, with a market cap of close to $1 trillion (roughly 10 times bigger than TCS). What TCS has achieved is by no means a meagre feat. TCS’ market cap is, in fact, more than the gross domestic product of many countries.

How has TCS achieved this? The answers are bound to inspire young managers and new start-ups that are coming up across the country.

Qualified workforce

We keep hearing that India is poor at manufacturing, that it has a dismal export track record with regard to ‘quality products’, and is not competitive in the global market. This is attributed to the lack of an adequately skilled labour force to absorb from universities — it is said that colleges do not produce manufacturing industry-ready skilled people.

But what ‘software industry-ready’ skilled workforce did India have in the mid 1970s and 1980s? None. TCS and other large companies nurtured and trained from scratch a bland workforce that is now software conversant. As they spotted an opportunity in the global software arena, TCS and other industry leaders slowly but steadily developed a ‘quality conscious’ labour force that would be ready to take on the challenges.

Unfortunately, India was never associated with quality products, and this perception continues to be the biggest challenge in the manufacturing sector. Our products do not hold a candle to those made by the Japanese or the Germans. By contrast, instilling quality consciousness, which is the soul of software services, in the hearts and minds of the IT workforce, has been the single largest achievement of players such as TCS.

As the IT industry reached critical mass, courses such as Bachelor of Computer Applications (BCA) and MCA were developed by colleges and universities. Six Sigma Black Belt Certification was introduced, and the entire workforce and academic institutions were sensitised on the importance of quality and conforming to requirements.

From nothing, TCS created a movement that has been responsible for scaling up the ‘direct’ workforce in the Indian software industry to around 45 lakh. The indirect employment generated can be considered around three times that, as a thumb rule. This is an amazing contribution to the country. Although other players eventually joined this movement, the credit should largely go to TCS.

Leadership success

FC Kohli, widely considered the father of the Indian software industry, spearheaded the country’s software journey, and provided the foundation for TCS to reach where it is today. Kohli was at the helm of TCS for a 22-year period, from 1974 to 1996. During this journey, he nurtured a number of young leaders who subsequently moved to other Indian companies, jointly creating the so-called IT revolution.

In those days, India did not have anything called an ‘IT industry’. The concept was new and there were very few players. Kohli and TCS, along with Infosys and Wipro at a later stage, created a business model that delivered software services to international clients, precisely meeting and conforming to their requirements, and exponentially ‘scaling up’ operations in the sector.

India eventually became a trusted and dependent global software hub, serving virtually all the key global clients across industries and markets. The leadership pipeline in TCS has been amazing — Subramaniam Ramadorai and N Chandrasekharan followed FC Kohli. Although there were changes in leadership, the company’s ‘heart and soul’ was kept intact as it continued to scale.

The milestones

The people who were nurtured within TCS and the work culture that was put in place over the last five decades are important factors in its success. Although the compensation isn’t the best in the industry, the culture and motivation levels have been quite unmatched, and this is reflected in the low attrition levels as compared to industry benchmarks. In all, the employees and middle management make up for an important component of an organisation’s success.

It is extremely challenging to sustainably and successfully run companies over long periods of time; 50 years is a milestone, for sure! Take, for example, Infosys, which recently celebrated its 25th birthday. It has seen a lot of ups and downs. Branded as one of the most successful start-ups in the country, it reached great heights but, over the past decade, has been marred by a number of debatably avoidable controversies, leadership crisis, a high attrition rate, and boardroom battles.

At one point, Infosys was even considered to be more competitive and promising than TCS, but today many of these issues have impacted its progress. Its market cap is less than 40 per cent that of TCS. Infosys is a great company with tall leaders; this statement is not intended to undermine it.

Challenges ahead

The industry landscape has already moved from mere coding to the core technology space, comprising artificial intelligence, social media, machine learning and data analytics. TCS needs to reinvent and transform itself, and re-skill its large workforce to continue being globally competitive. Till now, TCS has stayed relevant but the challenge is to stand out, which will be a tall task, given its size.

TCS is the cash cow for the Tata Group. Although the Group has a portfolio of close to a hundred companies, TCS is the largest in the portfolio. It is the largest contributor in terms of revenue and profits. Especially now, with the other major Tata Group companies facing enormous challenges, the well-being and sustainability of TCS is vital for the Group’s survival.

Within the global IT and technology industry, TCS is still not in the top five; if it manages to pull off a major acquisition, one that is bold, well-articulated, carefully planned and, more than anything, seamlessly executed, it has the potential to become one of the largest global technology players.

After all, over time, the Tata Group has become wiser about how ‘not to do’ an acquisition, given the outcome of its forays into the Corus and Jaguar Land Rover (JLR) ventures!