India’s largest IT services exporter, Tata Consultancy Services (TCS), has been outperforming its peers consistently and the gap with its rivals is continuing to widen. For instance, in FY10, the revenue difference between TCS and Infosys was Rs 7,559 crore, but by the end of FY14 it stood at Rs 33,313 crore. Similarly, the difference in net profit between the two firms in FY10 was Rs 782 crore but at the end of FY14, it has reached to Rs 8,516 crore.
Though TCS always enjoyed a higher revenue base but it was Infosys which reported superior operating profit margins (OPM) setting a benchmark for the Indian IT industry. Even this index seems to be undergoing a change. From the second quarter of FY13, TCS has started to report higher margins. At the end of FY14, TCS reported an OPM of 29.1% while it was 25% for Infosys. TCS also has over 3 lakh employees now, which is roughly double that of Infosys which has 1.6 lakh employees on its rolls.
TCS has started FY15 also on a very strong note by recording a 5.5% sequential revenue growth in US dollar terms for the first quarter with volumes growing at 5.7%. Infosys on the other hand grew its revenues only by 2% in the first quarter, with volumes growing by 2.9%. TCS has already stated that it would beat the industry growth guidance of 13-15% in US dollar for the fiscal as projected by Nasscom, while Infosys has retained its revenue guidance at 7-9%.
Pradeep Mukherji, president, Avasant, an IT outsourcing advisory firm, told FE, “TCS is one of the most robust companies in terms of their depth in leadership, range of offerings and the extent of geographic reach. Their DNA is completely different.”
TCS’ revenue is more evenly spread out across the globe with North America dominating the pie at 53%. Most of its peers derive 60% of their revenues from the North American market. It generated 2.3% of its revenue from Latin America, having centres in places such as Brazil, Uruguay, Chile, Colombia, Peru and Argentina. The IT major has also made similar strides into a region like Africa.
Industry observers say that TCS chief executive office N Chandrasekaran who took over this role in October, 2009 has instilled a new dynamism to the company. “Chandrasekaran has certainly brought in new level aggression to TCS which we had not seen earlier,” said a senior industry executive, who did not want to be identified.
TCS is a cut above the rest in employee retention too despite its employee base crossing over 300,000 with people representing 118 nationalities. At the end of first quarter this fiscal, the attrition rate at TCS was 12% while it was 19.5% in the case of Infosys. Sanchit continued…