Growth and leadership bring special problems: things start slowing for you before they do for others. The high revenue base notwithstanding, Tata Consultancy's dipping growth rates-just above industry average and well below its peers-indicate an urgent need for the company to reinvent itself. Some of this giant's lumbering pace could be attitudinal. It is often perceived as aggressive in its pricing but slow in its decision making. Not quite quick to adjust. However, that may change as soon as the company's long awaited IPO opens this July. Some of the reinvention will be forced on it by the mere fact of being public traded. This would include increased transparency and the tracking of metrics not otherwise seriously followed in a lot of companies. More importantly, it will bring on q-o-q pressure that can have a downside, but can also provide a certain push otherwise lacking.
Meanwhile, during the year, while application development and maintenance remained the traditional breadwinner, growth was driven by what TCS calls the “e-business practice,” which brought in Rs 1,963 crore (over a third of annual revenues). The practice, which was started in 1999 with just 10 people, deals with implementation of packaged application software and enterprise application integration and is the second-largest contributor to the top line. Also during the fiscal, a higher portion of revenues came from fixed price contracts-at 56% it is significantly better than Infosys' 35% contributing to higher gross profit margins. This despite the fact that the company's S&M (sales and marketing) expenses at 20% of revenues are among the highest in the Top5.
S Ramadorai
CEO
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S Mahalingam
Chief financial officer |
S Padmanabhan
Corporate V-P (OD) |
Phiroz Vandrewala
Executive V-P |
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During the year the company set in some structural changes. Tata Consultancy Services Asia Pacific (TCS APAC) was set up in Singapore with an investment of $6 mn and will function as the headquarters for the Asia Pacific region; on behalf of TCS, the Tata Group bought out Singapore Airlines' stake in the Aviation Software Development Consultancy for Rs 14 crore all-cash deal; and Tata Sons' stake in CMC was transferred to TCS. The company aims to turn itself into a two billion dollar company within the next two years, helped largely by its IPO. If it can move quickly to the new mindset and corporate culture, then a publicly-traded TCS should become a far more interesting company to watch.