TCS is a steady business, new CEO K Krithivasan will see a smooth transition, say industry experts

According to a note by Kotak Institutional Equities, Krithivasan is well qualified for the role. “He handles a large BFSI portfolio of $11 billion, has grown the business consistently, involved in many strategic decisions and was among front-runners for the CEO role.”

“He’s had a lot of success with large deals, productisation, and delighting customers. I think the board was looking for someone who was a practitioner,” Ray Wang, founder and principal analyst at Constellation Research, said.

Why Krithivasan?

This isn’t the first time Krithivasan is being considered for the CEO role at TCS, where he has spent his entire career of 34 years. In fact, he was one of the top contenders along with Gopinathan in 2017 too, when a successor was being chosen for the then CEO N Chandrasekaran.

“Normally, a new CEO appointment leads to the exit of disappointed front-runners. While exits are possible, it must be pointed out that Krithivasan was a clear front-runner in case Rajesh ever wished to step down,” the Kotak note by Kawaljeet Saluja, head of research, said.

His career trajectory at TCS has many parallels with that of Chandrasekaran, who is now the Tata Group chairman. Krithivasan, like Chandrasekaran, holds a bachelor’s degree in mechanical engineering from the Coimbatore Institute of Technology.

At TCS, just like Chandrasekaran, he learned the business and operations of the company ground-up, having worked in delivery, pre-sales, sales etc.

According to sources, over the years, Krithivasan has built a reputation for being great at execution. While Gopinathan is an intellectual, a brilliant thinker and strategic leader, Krithivasan can execute any blueprint, they said.

Within the company, Krithivasan is also known for being straightforward and understated but having high empathy as a leader. He has the ability to take his team along and build a consensus — a critical quality for a leader, especially in the services business, sources said.

“Krithi has a very strong track record leading the BFSI business and has 34 years in TCS. He will be a very solid presence to take things forward for the firm. He bleeds TCS, and knows the firm from top to bottom, with deep respect from his peers and staff, said Phil Fersht, Founder and Chief Analyst of HFS Research.

“While Rajesh will be missed, I am certain there will not be any issues with Krithi’s leadership — he is very much a part of the culture and this spells continuity as opposed to any disruption for TCS,” Fersht added.

Chirajeet Sengupta, Partner, global technology services, at consulting firm Everest Group, said that TCS has a very strong leadership bench and Krithivasan is a very credible leader.

“What will be interesting to see is how he shapes TCS in his own vision or whether he simply continues what Rajesh and team have been doing. But overall, we are very bullish on Krithi's appointment. He’s well-liked, well-respected, and well-known by clients. He's been in the trenches. He's been with clients for pretty much his entire career,” noted Sengupta. “Rajesh was the CFO becoming a CEO, whereas Krithi has been a business unit leader. I think that is an important distinction to make when you think of somebody becoming the CEO of an organisation.”

Read: TCS CEO-designate Krithivasan rules out a 'great' organisational or strategic reboot

A note by Motilal Oswal said that given Krithivasan’s leadership of the unified BFSI vertical since 2017, “he is unlikely to face external questions on client relationships that Mr Gopinathan faced as CFO of TCS in 2017”.

Gopinathan’s journey

All the analysts Moneycontrol spoke to had a consensus on one thing, that TCS is a well-oiled machine and will not be impacted by this sudden change. It was the same when Gopinathan took over the reins from Chandrasekaran in 2017.

Though Gopinathan’s tenure wasn’t as exciting as the turnaround story of Salil Parekh at Infosys, he continued to drive steady growth and bring in large deals.

“The six years of Gopinathan’s tenure have been good. TCS added over $10 billion in revenue during this period,” said Pareekh Jain, Founder and CEO, EIIRTrend. “Especially in this phase of growth, where the macro environment has been tough, they are winning large deals; they have achieved speed and scale both. TCS has been the bellwether of the industry.”

“Comparing Infosys and TCS will be difficult. Infosys was a turnaround story and TCS was a continuity story. TCS was already doing well, Gopinathan had to build on that and double the scale. But whatever role he was in, he performed well, and dealt with two crises during his tenure,” Jain added.

Read: How TCS grew under Rajesh Gopinathan’s leadership

Fersht concurred, adding that Gopinathan kept the ship sailing during the worst of the pandemic and oversaw some exciting deals for the firm, especially recent wins such as the Phoenix Group and Boeing.

Everest’s Sengupta said that he has to give credit to Gopinathan for steering TCS through a very turbulent period. “He's clearly created a lot of shareholder value. And particularly during difficult times, steering a company like TCS in the turbulence of Covid,” he said.

He pointed out that Gopinathan had restructured the company, a move that has given mixed results so far. While the intention was to ensure that clients of all sizes got the right amount of attention, navigating TCS at that scale became more complicated, and there has been a complicated transition to the new organisational structure, Sengupta added.

Fersht noted that the company was successfully restructured to “to blend consulting, technology, data and business services to address clients' broader needs head-on with a portfolio approach”.

Read: A day of mixed feelings: Gopinathan, on resigning from TCS

According to Fersht, Gopinathan resisted making acquisitions and remained focused on growing TCS organically, through strategic client acquisitions and aggressive recruiting, rather than taking the firm in new radical directions. “TCS has a strong identity and persona that gives many clients trust in engaging with them, and that has only been strengthened under Rajesh’s stewardship. He leaves the firm in amazing shape and ready for the choppy waters that are coming this year,” he said.

According to HDFC Securities’ Deputy Vice-President Amit Chandra, Gopinathan’s business strategies have been quite good. “He revived the Europe business quite well and gained a lot of market share initially from Capgemini in 2017-18 and prior to Covid,” Chandra told Moneycontrol.

Chandra, however, added that though growth has been steady, it has not been extraordinary. “In the last six years, TCS grew at an 8 percent CAGR, Infosys at 9 percent, Wipro at 6 percent and Tech Mahindra at 7 percent. Performance-wise TCS has mostly been in line with the industry growth, which was about 8 percent. It has not been something extraordinary,” he said.

Motilal Oswal said that while TCS’ growth has trailed peers such as Infosys recently, the company has handled external pressures, including a transition to digital delivery and the impact of the Covid pandemic, relatively well despite its size.

Sudden exit

In an interview with Moneycontrol in January, Gopinathan recalled his experience attending at least 40 earnings calls since 2013, first as the chief financial officer and then as the CEO and MD.

“I don’t know where 10 years have flown by, quarter after quarter. One thing that remains predictable is the intensity of each quarter. I keep joking that between a disaster quarter and a great quarter, the level of tolerance is 50 bps. So, it’s amazing how much we track on a narrow basis. But overall it has been great and no surprises is the best thing,” he said.

In a WhatsApp message sent to equity analysts shortly after the announcement, TCS Investor Relations head Kedar Shirali said Gopinathan had implied he was tired of the treadmill. The message read: “Rajesh told me that last quarter he realized that he had been doing the same thing for 40 quarters, getting on to the conference call bridge every 13 weeks and getting grilled by you. And that he’d been asking himself when’s a good time to find something new to do. After discussing with Chandra, he decided that this was the best time to pull the trigger.”