Rajesh Gopinathan, MD and CEO, TCS

Dataquest IT Person of the Year 2020: Rajesh Gopinathan, MD and CEO, TCS

Rajesh Gopinathan, MD and CEO, TCS has been recognised as the Dataquest IT Person of the Year 2020 for his contribution towards strengthening the IT industry

Rajesh Gopinathan is one of the youngest CEOs in the Tata Group and is seen as a personification of TCS’ commitment to a culture of customer focus and exceptional service quality. He was elevated to the CEO role in February 2017 after serving TCS as its Chief Financial Officer since 2013. His astute leadership saw TCS quickly adapt to the new normal not just helped the company weather the pandemic, but also step into its next wave of growth, with an improved services portfolio in the digital realm and endless opportunities for new innovations with clients.

Under his stewardship TCS embraced a new operating model that prioritised the health and wellbeing of its employees, while enabling it to continue supporting its customers not just in their mission-critical operations, but also in their growth and transformation journey. Its Vision 25×25 and pioneering work around talent clouds have reinforced Gopinathan’s credentials as a thought leader on the future of work, and a trend setter in the industry.

He has also been instrumental in crafting the second round of restructuring driving empowerment deeper inside TCS to help the company’s next wave of growth. The company’s agility, resilience and responsiveness during the crisis earned it tremendous goodwill from customers and enhanced its standing in the market. This enabled TCS become a USD 22.1-billion global giant by end of March 2021. With over 488,000 consultants, it also became one of the largest private sector employers globally, and was recognized as a Global Top Employer for the fifth consecutive year, with the highest retention rate.

Driven by Gopinathan, TCS achieved the USD100-billion market capitalization in April 2018, becoming the most valuable company in India. TCS was again recognised as the fastest growing brand in the IT industry in 2020. In 2021, the company’s brand value soared to USD14.9 billion, further consolidating its position among the top three most valuable IT services brands globally, according to the Brand Finance 2021 report.

A fiercely capable business leader, Gopinathan has quietly become one of the most powerful forces and an influential voice of the country’s IT services and digital technologies sector as well as a global influencer.

We are at the beginning of a generational shift in technology

An electrical and electronic engineer from NIT, Trichy and an IIM, Ahmedabad alumnus, Rajesh Gopinathan joined Tata Strategic Management Group in 1996 working on multiple assignments with Tata companies. He joined TCS in 2001 and was responsible for driving the company’s newly established e-business unit in the United States overseeing design, structure and implementation of the new organisational structure, operating model, and financial management of its individual operating units. Most recently, as the Managing Director and CEO of TCS, Gopinathan has led the restructuring in the company and redefined its services portfolio to enable faster growth in digital services, and align it to the growth and transformation imperatives of clients. Excerpts from the interview with him:

DQ: The first year of the pandemic had a silver lining for TCS as it emerged as one of the most valuable IT services brands in the world. How did the company manage to navigate the global crisis and emerge as a clear leader?

Rajesh Gopinathan: In many ways, the foundations that have been laid over the last two decades played an important role in how we dealt with the pandemic. I would like to highlight two primary success factors or drivers that allowed us to do well. One, the industry and TCS as its leader have always been very customer-centric. We have always redefined the approach of this industry, in terms of customer-centricity. That trust in relationship was critical in dealing with the pandemic because the clients never lost faith that we will be able to overcome it, and most importantly we will always keep their interest first and find solutions that work for all of us.

The other big aspect is the trust that we have built with our own employees, the close-knit community that we have created and the continuous focus on talent, and skilling. Each and every TCSer stood up and went far beyond what would have been expected of them in terms of dealing with the crisis. While we have talked a lot about SBWS and remote working, I think at the heart of it is the customers’ and the employees’ trust in us and the employees’ commitment, which helped us navigate. And while it looks quite straightforward, the size at which we are operating and the speed at which this happened is unimaginable anywhere else, or in any other industry. It was truly humbling and a matter of great pride for me to lead a team like this, through such crisis.

DQ: TCS seems to have benefitted from the long cycle of technology spending in its overseas markets, and the increase in spending from the financial sector in the US and European markets as the road to recovery begins. What do you expect in the FY 2021-22 in terms of global business?

Rajesh Gopinathan: We believe that we are at the beginning of another generational shift in technology. In the last 10-20 years, we went from client servers to web, from web to mobile, and from mobile to cloud. While we spoke of the cloud long time back, of the digital stack, the mobile adoption was what characterised the last five years. The next five years will be characterised by adoption of cloud because significant workloads at the enterprise level will shift to the cloud.

The cloud is a new architecture stack and it is both an opportunity as well as a challenge to fully leverage its capabilities. The cloud is also likely to have a larger impact beyond technology architecture since it gives a seamless fabric. The kind of collaboration that could possibly happen between enterprises could unleash many new business models. And that itself will trigger another round of innovation, which will be technology-led. As we look forward into the next five to 10 years, we are very encouraged by the trajectory that we see and very optimistic about the extent of technology leverage, and the ability to add value to customers. We are quite positive for the medium to long term.

DQ: The year 2020 saw an important inflection point in terms of adoption of digital technologies by individuals as well as enterprises. What does it translate into for TCS in the domestic market and for the industry in general?

Rajesh Gopinathan: In the domestic market, it’s a bit more complex. In some ways, our domestic market leapfrogged technology and is ahead of global markets, especially considering the size of our individual companies or enterprises. If you look at financial services and areas like payments, the Indian market is far ahead of where the international market is. Even a decade back, in terms of trade and settlement, our infrastructure was far ahead of the global infrastructure and the kind of straight-through settlements that we were able to do. That lead has been significantly consolidated and pushed forward in payments; the payments infrastructure that we currently have is absolutely second to none, especially when it comes to the consumer side, as well as interbank settlements. These are some pockets of significant technology leadership.

There are also many areas where technology has not yet penetrated, because the extent of competition in those industries was limited. Even in many parts of manufacturing, especially on the supply chain side, there is an opportunity for significant improvement. Also, as we push banking further down into the larger heartland of the country, there is a need to link the last node of financial inclusion all the way up to the core banking system. So, there is a huge opportunity of leveraging financial technology to move forward. I feel that the country is on the cusp of significant changes across industries and the government has always taken a leadership stance on that – multiple industries have transformed, we ourselves are quite proud of MCA and passport projects, and more recently with Aarogya Setu, and health and insurance.

There are opportunities across the whole gamut of governance that could get transformed. Education is another big area where we participate significantly, especially on the assessment side. Education delivery is another space that has lots of opportunities. So it’s a story of a glass half full, I think what we have, we can be quite proud of. But for our size and opportunity, I think there’s a lot more to be done. But we are starting from a good base. And we have the talent that is needed to get it done.

DQ: You mentioned SBWS (Secure Borderless Workspaces) and also touched upon cloud as the next big thing. A lot has also been talked about TCS’ Vision 25×25 and the talent clouds. Can you elaborate on this and also the SBWS, and your vision of the future of work?

Rajesh Gopinathan: Many a time there are ideas that keep gaining momentum and then there are some events that bring it to the forefront. SBWS and 25×25 are like those ideas. The technologies and components required for remote working have been available for some time. But we were not breaking free from our mindset of bringing people together into large cities, into large offices and saying everything needs to be done together. The pandemic has exposed us to the possibilities, the benefits of a more distributed work environment. And we believe that, once we have crossed this line, we will never go back to the earlier model. And 25×25 is an acknowledgment of what is possible and the vision on this roadmap. But it will have to be done in a more controlled and a more planned manner.

We went from being 100% at work to being almost 100% at home and 0% at work, but we are not going from here to 25×25 directly. We will have to find some intermediate paths to get there from our more traditional starting point. But it has great implications for the country because the talent in India was distributed across six cities. And unlike other large countries, which could compete with us, talent mobility in India is absolutely secured by the Constitution. Anybody can live and work anywhere. But our work practices have not fully leveraged that. This allows us to think of it as one single talent pool and to be able to distribute work seamlessly. But we will need to work together with the government to think through jurisdictional implications and its footprint on various regulatory aspects. Considering that India is now one single market in terms of goods and services, I believe our thought process is aligned to that common path. This will help reduce the load on the large cities because rather than everybody congregating into large cities, we will be able to push work to where people would love live and have a good lifestyle. So there are multiple benefits, for the industry from the talent accessibility perspective, as well as for the country from the development of infrastructure and holistic development perspective.

DQ: As on 31 March 2021, TCS has reportedly applied for 5,879 patents of which it has been granted 1,850 patents. What kind of research and innovation work is being done by the company, and how has it translated into success?

Rajesh Gopinathan: Our research interests are quite wide and diverse as they ought to be. Research should be left open-ended so that one can explore the art of what is possible. This was ingrained into the TCS’ DNA more than 50 years ago when TRDDC (Tata Research Development and Design Centre) was set up. It has been at the heart of a lot of innovation that has come from TCS on various aspects of our service delivery. We typically look at it along two dimensions and three horizons. One is pure research. We try to bring computational thinking and leverage computational technologies as a common underlying factor. But the research interests there are very wide; more than 10 years back we came up with water filtration technology Tata Swach. The nanotechnology that was used to disperse the active agent onto rice husk came out of the TCS labs. We have also done research in education – adult literacy.

These are kind of core foundational research, which could have applicability in many areas. And then we do industry-specific research that happens under the innovation labs. These are more vertical focused – future of banking and finance, payments as a transaction mechanism, drug discovery, space, or even in areas such as algorithmic retail like merchandising supply chain. These are more tightly linked to what we do in business. The horizons are also similar. Our immediate short-term horizons are to solve the problems of here and now. And then if we look long-term into the third horizon, we have a very open ended landscape of future problems.

This helps TCS in multiple ways. We have a very strong and growing products and platforms portfolio, which has been built through this foundation of research. We are not very acquisitive and products across all areas – automation, our banking product, or in healthcare – all of this has come out of TCS research. So, there is an immediate benefit there. But it also helps nurture innovative mindset inside the company. That is something we believe is very valuable and probably under-invested in the country. It is not that we are not innovative in the country, but we do not take our innovative spirit to the next level of securing it as an intellectual asset that can be patented and leveraged. One of the big things that we do through our research is to inculcate the process mindset and institutionalise this process.

DQ: Experts often point out that we in India look down upon failure and that mindset is a not very encouraging for people engaged in R&D. What can be done to change this at the corporate and policy level?

Rajesh Gopinathan: I’m more of the camp that says it’s a glass half full, half empty kind of thing. We shouldn’t be too harsh on ourselves. A lot of what we’ve done in the past is a reflection of the fact that we weren’t a very rich country; we were a resource-constrained country. The mindset of a resource-constrained society is different. They’re more short-term and more here-and-now oriented. The unfortunate fact is that intellectual assets require financial assets to nurture and create them. It is not just the intellect, one needs the financial muscle, and we are building on it. So, we shouldn’t look backwards on what we have not done in the past. It is more important to look forward. And a lot of what I said about what TCS is doing is a step in that direction – going after patents, inculcating that process, supporting over 200 computer science PhD programs in India through scholarships.

We recently conducted our annual programme TCS Innovista, where we invite innovative ideas from across the company. This year, we had more than 10,000 entries. Less than five years ago, we used to get just a couple of thousand. So being able to grow multifold and getting 10,000 people to participate when there are only around 25 prizes is a big thing, particularly when they know that 99% are not going to get anything other than the thrill of participating. So we need to find, nurture, and fund forums like that.

From a policy perspective, I think the government recognises the opportunity and that is why it has decided to create a National Research Foundation. It has set aside Rs 50,000 crore for setting it up in this budget. There’s an opportunity to bring together the multiple activities happening in our educational institutions, along with models that have been successful like the National Science Foundation of the US. I think that’s a space that is open for us right now. And I’m very happy to see that the last three budgets have mentioned it. So that money is available. Now we need to step up and use it.

DQ: You highlighted that TCS has been doing a lot of research that is used to develop different products and service offering. Is that the reason that unlike many companies that take the M&A route to acquire technology, TCS follows a conservative approach when it comes to acquisitions? Is organic growth part of a deliberate strategy?

Rajesh Gopinathan: Absolutely, it’s part of a deliberate strategy. But it’s not an exclusive strategy in the sense that it is not that we are saying we will only go organically. In fact, we have a good history of acquisitions, whether in services, like what we did in our BPO services – we acquired the backend processing of Citibank – or growing through acquisitions in Latin America, France, Japan and other geographies. So we do have a history, but we are not a prolific acquisition engine. So our strategy is primarily organic, supplemented with acquisitions, rather than being primarily acquisitive. And we believe that when we find a new opportunity we like to give it to one of our existing people to grow it into the new business. We find the closest match, put them up and then try to put all the resources of the company to help them grow. It takes a bit more takes more time, but it also helps us to build it right from the beginning, rather than make a patchwork. So, it is a very conscious deliberate strategy, but it’s not excluding the option.

DQ: Talking about the industry, what role do you see the IT sector playing in enabling India to become a USD5 trillion economy by 2024-25?

Rajesh Gopinathan: I think the sector has a big role to play. So, of course, the first step of it has been that we provided the window to the world on what India’s possibilities are. If you think about it, the largest oil exporter in the world exports USD300 billion and we export USD150 billion without digging any natural resource. We export intellectual capital and that is respected very well globally. So, our presence on the global stage in many ways has been defined by the IT industry over the last two decades.

As we look forward, the depth of talent available in the country will be a key part of ensuring that all the other industries that are stepping up, are able to leapfrog the technology transition, like I gave you the example of payments and banking. Similarly, we are seeing that it is unfolding in the telecom space and in the e-commerce space. The same opportunities are there in healthcare and supply chain for the manufacturing sector. These industries have the will to leverage this talent pool to instantly leapfrog on the technology journey compared to what other countries have done over the last two decades. And finally, as a company, our ability to use our domain knowledge, the knowledge that we gained working with industry leaders across multiple geographies, multiple markets and multiple industries, is something that is available for us to make impact both in the public sector as well as in the private sector. So, across all these dimensions, I think the IT industry is pretty much set in the path of progress for India, and will be strong player in driving this growth of the country.

DQ: The industry closed FY2020-21 with revenues of USD194 billion, including USD150 billion exports, USD45 billion domestic revenues, and USD99 billion IT services. Is the overall 2.3% growth good enough for the country, given that the new normal has been driving adoption of digital technologies?

Rajesh Gopinathan: As we become larger the export growth will be linked to both economic cycles, as well as the technology cycle that I spoke about. And we should seek to increase our market share in a growing pie. The global IT industry grows between 2% and 5% a year depending on where we are on the cycle over a multi-year duration. With the kind of growth we have enjoyed, we have only increased our market share. And I think there’s that opportunity to continuously increase market share for the next 10-15 years easily. It is not a given, but if we stay diligent and execute well, we should be able to increase our market share in the global market space.

From a more domestic perspective, I think we are likely to see much more accelerated usage as multiple industries open up. Today, bulk of the domestic industry has been driven by either financial services or the power sector that went through a fair amount of reforms, or insurance and retail. But as more and more companies come into the economy, and the relative competition increas0es, the role of technology leverage will become bigger. Today, technology has played a role in setting up these companies. But technology will also play a role in their competitive dynamics. Therefore, as the economy becomes wider, you will see a lot more leverage at play. So definitely 2% is just a blip. As the global markets and the economy stabilise and then start growing again, you will see that technology is at least a few percentage points ahead of that growth rate.

DQ: From the sector perspective, India seems to be lagging in software products at USD9 billion and hardware at USD16 billion, while engineering and R&D revenues dropped 0.2% to USD31 billion. Are we on the right strategic path, or do we need a course correction?

Rajesh Gopinathan: I think so because engineering is still a fairly untapped field. Our role in the value chain in core IT technology versus our role in the value chain in engineering is slightly different. In engineering, we do more project-related work so that explicitly on the new product development. So as the cycles of new product development are much more volatile to economic activity, whenever there is an economic upheaval, the first thing that gets axed is budget for product development. And a lot of what we do as a country in engineering is related to product development. Therefore, that volatility is natural. I think there is an opportunity to correct it by broad-basing ourselves across the value chain.

By Shubhendu Parth

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