Recovery genuine and here to stay but pace hard to gauge

Written by Rachana Khanzode | Updated: Oct 27 2010, 05:03am hrs
Tata Consultancy Services (TCS) has reported a much higher profit as compared to its peers in the second quarter. Although there are concerns that this may not be sustainable in the ensuing quarters, the firm feels that the demand recovery is genuine and here to stay. In an interaction with FEs Rachana Khanzode, the companys MD & CEO, N Chandrasekaran said the firm is looking at acquisitions to fill in gaps and grow faster in geographies like Germany, China, Japan and France. Excerpts:

What led to the 11.2% growth in yout volume

Every customer, across verticals and geographies, is looking at efficiency and growth. Now the demand is coming from areas such as setting up ERP systems, shared services, consolidation of infrastructure and virtualisation and varies from company to company and industry to industry. Clients are bored of holding on to a cautious approach on the back of macro economic conditions. But such conditions are here to stay for the next few quarters or at least for a couple of years. So every one is perceiving growth with different agendas from market expansion, product development to getting customer information for retail clients and so on.

Do you feel the recovery could take a hit if theres a double-dip recession

Even if macro-economic conditions are tough and there are concerns of double dip, the impact of such overspending cannot be the same as what happened last time. Because then it (economic downturn) was so sudden and nobody had expected it. The clients then withdrew and we fell off the cliff. But this time, clients are keeping in mind the current macro-economic conditions and spending accordingly. Everyone wants to come out of the crisis and assume that there could be shocks and if there are any, they are prepared. So I feel that whatever recovery is happening it is genuine and will continue. But we cannot judge the pace at which it will happen.

So, can we say the large deals in the $500 million range are back

There is always an era of large scale transformational efficiency deals and also the mid-size $50-100 million deals. And we think it is good to have a mix. We dont want to have only large deals. The point is we need to have deals. Also, vendor consolidation is happening but that is not the sole reason that we are getting so many deals.

What are the major concerns at the moment

Currency, employee attrition, any protectionist measures and macro-economic shocks are four major concerns at the moment. We are keeping a watch every week, if not on a day-to-day basis. With respect to attrition, when there is a market demand, such high attrition is bound to happen as it puts pressure in the system. We want to control it and train employees to retain them. But we cannot expect earlier attrition rates of 10%. So, any downward dip of 1-2% (in attrition) from 14%, at this time would be great. With respect to the environment in the US, we have to keep a watch and it is very difficult to comment on what is being discussed at the moment. We will have to see what it gets translated to on the ground. And what gets translated, we hope is not very difficult to implement on our existing business model. Because it is not just a business model to us but to US companies also and mutually beneficial.

Do you have any acquisition plans

We are looking at acquisitions but it is very difficult to find the right fit. It has to be strategic one because with this kind of work, companies are bound to see some dip. But post aquisition, it has to bring a net growth to the company. There are many gaps we would like to fill and go faster in Germany, China, Japan and France. We want to built better capabilities in healthcare. But the model has to make sense.