Big Shift at TCS

On a day when TCS announced a stable growth of 1.5% in revenues and 2.9% in profits, the attention was occupied by a different subject altogether. On the same day, the company made two major changes. The current TCS CEO moves on to take charges as the Chairman Tata Sons. Chandra will be replaced by CFO, Rajesh Gopinathan, who takes over as the next CEO of TCS. What are the big challenges for Rajesh as he steps into Chandra’s shoes?

Living in the post-Trump era… 

Chandra is, probably, exiting TCS at a time when the level of uncertainty in the short term is the highest. H1-B visa costs are likely to go up sharply and if Trump has his way then minimum wages for Indian onsite workers may have to be increased. Trump is keen to do away with the cost arbitrage that countries like India have enjoyed over the US in the department of costs. Then there is the additional threat of a penal tax on outsourcing. That basically means that US companies that hive off key jobs to India will have to pay a border tax in the US. At least, Trump has promised to make the border tax steep enough to dissuade outsourcing. If any of these threats are even partially implemented, then Indian IT companies are going to have a tough time. Rajesh will have to live with the immediate uncertainty of a Trump revenge series. For a large player like TCS, it could have significant implications for revenues.

Next phase of Indian IT… 

Rajesh Gopinathan may have to preside over the next big phase of Indian IT. The good news is that companies like TCS have already shifted nearly 17% of their revenue base to the digital space. That makes the business less vulnerable compared to other BFSI and telecom players. However, moves like higher visa fees and higher cost of on-shoring are not good news for the core business model of TCS. The next phase also implies that TCS will have to gradually move beyond client execution and move towards IP creation. That is what has differentiated US software companies and that will be the major challenge for TCS. The shift needs to start now! 

How will a CFO fit in?

If you look at the previous CEOs of TCS, they have predominantly come from engineering and operations background. Each of his predecessors; be it F C Kohli, Ramadorai or Chandra have left a deep and enduring imprint on the model of TCS. Rajesh surely has big shoes to fill. With his predominantly finance background, whether Rajesh can envisage and handle the challenges at a critical phase of Indian IT remains to be seen. If the immediately reaction of institutional investors and the markets is anything, there is a certain degree of skepticism. Proving himself, against all these odds, will be the biggest challenge for Rajesh Gopinathan in 2017! ©

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