Slow and steady: TCS mantra to hit digital biz revenue goal

“If you ask me whether we will do a USD 100 million digital, the answer is no; USD 100 million budget will be there but it will be multiple deals,” he told CNBC-TV18, adding “…few million dollars, double digit million dollars all those kind of things are happening.”

Rajesh Gopinath, Chief Financial Officer, TCS said the digital business was different from the traditional outsourcing business model, which is the mainstay of Indian IT companies.

“These (digital) are projects rather than large scale outsourcing kind of relationships, he told CNBC-TV18 in an interview.

“These kind of projects typically are high-touch (requiring heavy sales and servicing efforts); their margin profile partially because of the project nature and partially because of our own efficiency factors will be low,” Gopinath said, adding it was true of any new technology.

“As the technology starts permeating, the project sizes will also start increasing; so the best way that we can characterise it is digital is today where technology was in 2005 and 2006,” he said.

Gopinath said the digital deals would take a while to become profitable, though revenues would expand much faster after the initial teething troubles.

“Revenue productivity will be lower because the deal size itself is lower so you need so much more of selling activity behind it; but once it gets in, the recurring revenue stream should fairly expand rapidly,” he said. (Written for the web by Ritika Dange)