TCS CEO Rajesh Gopinathan said players are looking at ways to find new business models where fintech firms can be part of the existing banking ecosystem.
Tata Consultancy Services, India’s largest software services outsourcing company, said that despite the continued softness in its retail and banking and financial services businesses, there is by and large a “return to optimism” that could play out positively for the company in the coming few quarters.
The company is also betting big on the high growth it saw in the second quarter in its digital business line. Digital business grew 19.7 percent in the quarter, a 5.9 percent increase from the previous quarter in constant currency terms and a 31 percent rise from the last year.
On Thursday, the Mumbai-based TCS reported results for the quarter ended September ahead of analysts’ estimates led by robust volumes.
“We have been meeting customers across markets, and the overall sense is that there is a return to optimism (in retail and BFS),” said Rajesh Gopinathan, CEO and Managing Director of TCS at a press conference in Mumbai.
The Indian IT industry has in the recent past, been impacted by the ongoing changes the retail and BFSI (banking, financial services and insurance) verticals, particularly in its largest market — the United States. Gopinathan offered positive commentary on both sectors.
While the slowdown in banking services has resulted from large banks (several of whom are customers of Indian IT players) adopting greater automation and newer technology, there has also been a fear that recent advancements in financial technology (fintech) will disrupt the traditional banking systems.
Gopinathan said that the industry may be past the era of looking at fintech as a “threat” and is instead looking at ways to find new business models where fintech companies can be part of the existing banking ecosystem. “We have increased or are stable in business with BFS clients,” he said on an analysts call later in the day.
On the insurance side, TCS also offered positive commentary on Diligenta, its unit which administers closed-book pensions and annuities for UK insurers such as Friends Life. This quarter, TCS said it had said it had won a 15-year deal with Scottish Widows, the life and pensions business of Lloyds Banking Group.
Gopinathan said there were 10 million clients on Diligenta already and TCS was scouting for deals outside of UK also for the unit.
The retail industry has been impacted by the rise of large e-commerce players such as Amazon, who are able to offer great discounts on consumer products by compensating direct sellers from their vast pool of funding. This has caused a slowdown in traditional retail chains such as Best Buy and Wal-Mart.
The TCS top boss said that the company is “cautiously optimistic” on retail as the traditional retailers figure out a roadmap to transform themselves using emerging technology as a connected set. “They are transforming themselves into not just offering the lowest priced gadget, but also act as a trusted adviser (to their customers) and help them make the best decisions for their home,” Gopinathan added.
Depending on the holiday season turnout next quarter, he said TCS was seeing significant amount of turnaround in the sector.
The company saw several client additions this quarter — it added 1 client in USD 100 million category; 6 clients each in USD 50 million, USD 20 million and USD 10 million bands; and 28 clients in USD 1 million categories.
The company said that its domestic business was weak this quarter, with government deals being a concern, but was positive about the business in the coming few quarters.“The TCS results on the back of a significant growth in its digital business is a reminder of the famous quote that 'the future is finally here, it's just not evenly distributed'. TCS, like the other major Indian IT companies, continued to persist in investing in the futuristic digital business and emerging technology solutions despite several macro-economic push backs and heightened uncertainty. After several missed expectations and bottoming out of share prices, the results do finally provide optimism that these investments are finally bearing fruit. It also demonstrates TCS' reducing dependence on its BFSI customers, another move in the right direction,” said Sanjoy Sen, Doctoral Research Scholar, Aston Business School, UK.