Tata Consultancy Services spent two years focused on getting back to double-digit growth, facing down critics who said its strategy was too conservative. With double-digit growth assured in FY19, and momentum set up for FY20, TCS CEO Rajesh Gopinathan told ET’s Jochelle Mendonca & Raghu Krishnan that to be successful at the time of rapid technological change, the IT industry needs to learn from the consumer staple sector. Edited excerpts:With the double-digit growth, you said your strategy had been vindicated and you could look beyond the immediate year. Is this confidence about more than numbers?That’s exactly the point. You need to earn your right for that. We are at a point where the scepticism was clear and more importantly the scepticism had started internally also because we have a very large population and they also read the papers (of a slowdown).So it was very important for us to stay focused on the execution. We had to establish that this is just another cycle and we can reset our business. We have no illusions that this is going to stop here. The important thing is that when a technology shift happens, we have the ability to plan for it and execute. In a few years something else will change, but I don’t think we will face scepticism at that point in time because we have taken it on and systematically executed on it. So the value of it is not just what happens now. The value of it is the credibility that we will carry into the next cycle. And the next cycle will come — five years from now or seven years from now. We have earned the right to say that we are double-digit trajectory and it does not matter whether it is going to be 11.5% or 12% or 10.5%. That is not the point. Now we can take a longer-term view.What are you looking at in the medium and long term. Is it just about accelerating revenue growth?In our industry, medium term is three to five years and long term is longer than that. We don’t have anything to share with you right now. Accelerating growth is not the only thing right now. That is one dimension. Broadbasing our market is another dimension, improving the resilience is another dimension. What we have done is we have earned the right to step back and say how do we want to plan for the next three years, how to we want to plan for a slightly longer time frame.Do you think the rest of the IT sector can enter a period of double-digit growth, like you?Indian IT has gone through various phases. Now we need to step back and see what has technology done.Look at the consumer staple industry. Consumer staple is a perennial demand though the product itself changes. But companies structure themselves as platforms in which new products are created and distribution is key and their ability to develop new products and push it through the distribution chain is what differentiates them. And they maintain relevance. They have tapped into fundamental need, though the need keeps changing. And because they can sense it and because they have the ability to test it and finesse it, they have perennial relevance. I think technology is moving in that direction because technology has become an industrial staple. Technology is deeply permeated in the value change. The exact product will keep on morphing, its packaging will change, its consumption will change but technology will continue to be consumed. So as an industry we are shifting away from a one-off sale and then going back after the cycle changes to being a very persistent supplier and a staple part of the industrial value change.And the amazing thing, like consumer product, this is broad-based. It is a strong position to be in but that strength has to be consolidated and we have to behave that way and think from that perspective. The mindset is shifting. This will take years to play out but the change has started.You said one of things that pleased you about these results was that it ratified your strategy of not needing M&A…We don’t say that we don’t need M&A. We said we don’t need to use M&A as a band-aid. I would like to use M&A as a leverage to what we have, rather than as a band-aid to fix what we don’t have. What was the problem — digital is new, we don’t have digital so we will buy digital and that is not the way to do it because next time something happens you will have to buy again, then what is it that you actually have and why will a customer continue with you? That is a financial engineering mindset that we fundamentally pushed against. Digital is new, and we don’t have the skills, so we will learn the skills and apply it when it comes into the core. When it is a new geographical market we need to enter into, always we have used M&A because we don’t have the presence and contextual knowledge there. In my finance textbook, in the chapter on cash flow, there was a sentence — why is an MBA who knows DCF (discounted cash flow) like a child with a hammer? A child with a hammer thinks everything is a nail. You can’t use M&A for everything, It is a tool to be used where appropriate.
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