How TCS transitioned, while Infosys battled a stormy year
To make TCS more agile, Subramaniam has made changes by bringing ‘business finance’ and ‘business HR’ into the business units, rather than BUs reporting to them.
March 2017- A storm was raging in Bengaluru. It was tearing the $10-billion Infosys inside out because cofounder NR Narayana Murthy was at war with its board led by nonexecutive chairman R Seshasayee. It hogged the headlines, television airtime and WhatsApp groups.
But for calm and serenity, one could have travelled to Hyderabad, where Natarajan Chandrasekaran, new Tata Sons chairman, was presiding over a change of guard at $17.5-billion Tata Consultancy Services (TCS), the country’s largest IT services company, headquartered in Mumbai.
Hyderabad was hosting TCS Blitz 2017, the annual leadership summit of more than 500 top managers in the company.
One of the highlights was the quiet changeover from Chandrasekaran to the chief executive-chief operating officer combination of Rajesh Gopinathan and NG Subramaniam.
The City of Nawabs was also a departure from the normal practice of holding Blitz in Goa or Dubai, eliciting some muffled groans and jokes about how Gopinathan, formerly CFO, was exposing his costcutting bent of mind. But there was more at play in the leadership change than the light-hearted banter revealed.
Blitz 2017, in the words of a TCS senior manager, “is an important event for the TCS psyche, for it involves all the leaders.” In March 2017, it was also the stage of a subtle but momentous shift at TCS.
Chandrasekaran, 54, departed from giving any business or organisational spiel, having relinquished his CEO position a little over a month after becoming the group chairman. He merely reiterated his mantra of how digital is changing business and left the actual focus to Gopinathan and Subramaniam.
In his typically understated manner, Chandra would later tell TCS shareholders in the annual report, “The new team will continue to drive an organisational culture that embraces change, believes in growing talent and invests ahead of time, anticipating future needs of our customers.”
He was referring to Gopinathan, Subramaniam and chief financial officer (CFO) V Ramakrishnan, along with a strong team of senior business leaders, notably the heads of TCS’ industry and service unit heads.
“As our business transitions into a new and exciting phase of growth and innovation, the future of your company could not be in better hands than under a dynamic new executive leadership team,” he would say.
CEO-COO COMBINE
When Chandrasekaran became Tata Sons chairman, many anticipated one of the ICU heads, each of whom runs multibillion dollar divisions, to succeed him.
To that extent, Gopinathan, a shy and reserved person, was a surprise.
Gopinathan is seen by colleagues as a student of the business model TCS epitomises — aimed to generate efficiencies for enterprise clients to whom they pass on the benefits. Age is on Gopinathan’s (46) side, complemented by Subramaniam’s vital knowledge of the company.
The COO first gained renown at TCS in the late 1980s for writing out richly detailed proposals for client bids. This sometimes entailed him working continuously in office for two or three days, getting on to calls with as many as 15 TCS managers in different parts of the world.
Subramaniam’s meticulousness and work ethic helped create detailed specs and a roadmap for customers to entrust their organisation to TCS, when India was barely on the map for global customers.
He won a marquee project in the late 1980s, from the erstwhile SegainterSettle.
That client engagement spawned two future leaders — him and S Mahalingam, who was CFO in the S Ramadorai and Chandrasekaran eras.
By the turn of the century, Subramaniam had taken his game to a new level, helping TCS win a neat slice of one of the largest multi-vendor deals ever for IT companies from India — the €1.8 billion ABN-Amro deal in 2005. (TCS won €200 million of it and Infosys, €108 million, with IBM taking a lion’s share.)
A NEW LEAF
One can understand how far the company has come since that deal and how decentralised it is by the TCS practice of empowering the 10-15 industry service unit (ISU) heads — whom the top management rarely questions, even on $200-million deals.
The focus for the top management now is digital. “Digital is one diverse, yet interoperable, constantly evolving family of technologies enabling continuous availability of data, systems, applications, and business processes,” Subramaniam told shareholders in the 2016-17 annual report.
“Such an architecture allows enterprises to completely reimagine different aspects of their businesses.”
The COO drives technology and the CEO drives efficiencies. Between the two, the strategy is to expand critical client engagements to the digital realm. By May last year, the two had met over 75 customers internationally. A senior executive throws some light, saying, “There will now be lesser number of people (in TCS) to do the same quantum of work.”
The logic is, money TCS saves a customer through productivity measures will come back through new projects or deals. Subramaniam has emphasised passing on the efficiencies to customers, while internally, Gopinathan demands gross margins over 25%.
This is a lot of pressure for the sales folks in a tight market. Five years ago, clients may have expected returns on investment (RoI) in digital and IT support to be distributed over three or five years; that’s changed now.
For the chief information officer (CIO) of a large multinational client company to justify his investments in digital to the board, RoI are expected to be frontloaded by companies such as Tata Consultancy Services. This means TCS co-investing with clients and showing up to 60% efficiencies in year 1, before RoI normalises to 10% in the following years.
To make TCS more agile, Subramaniam has made changes by bringing ‘business finance’ and ‘business HR’ into the business units, rather than BUs reporting to them. This will help unit heads take faster day-to-day decisions, which is critical for an organisation that employs nearly four lakh — a large digital workforce — and needs to focus on client needs.
CONTINUING THE LEGACY
By many accounts, Chandrasekaran is one of the Tata group’s best salespersons. “He brings warmth to a customer equation but makes his point in a very different way, putting his innate diligence in the shade,” reveals a former colleague. The more deals Chandra won, the better he got, according to a client advisor.
In the years when he became CEO of Tata Consultancy Services, and overseas, he could write specs on the back of a paper napkin during a dinner meeting and then get his team in India to come back with a roadmap for the client by the following day.
The recent $2.25-billion Nielsen renewal was originally a billion-dollar deal won under him. “Chandra became talismanic,” reminisces the senior executive.
His rise and contribution are more in the vein of Nandan Nilekani, who also began his career as a professional before becoming a first-generation entrepreneur with Infosys. Both came to compete with the likes of Wipro and HCL in the growth years for Indian IT.
When the sales teams needed an Azim Premji or Shiv Nadar (chairmen of their respective companies) to come on site for large deals, Chandrasekaran won on sheer tenacity and teamwork. This, then, is what the two-man new guard has to take forward.
Subramaniam will prove crucial as Gopinathan matures, even as the next level leadership pipeline is ready and proven. As one senior manager quips, the CEO and COO can switch roles internally, playing good cop-bad cop depending on the situation.
March 2017- A storm was raging in Bengaluru. It was tearing the $10-billion Infosys inside out because cofounder NR Narayana Murthy was at war with its board led by nonexecutive chairman R Seshasayee. It hogged the headlines, television airtime and WhatsApp groups.
But for calm and serenity, one could have travelled to Hyderabad, where Natarajan Chandrasekaran, new Tata Sons chairman, was presiding over a change of guard at $17.5-billion Tata Consultancy Services (TCS), the country’s largest IT services company, headquartered in Mumbai.
Hyderabad was hosting TCS Blitz 2017, the annual leadership summit of more than 500 top managers in the company.
One of the highlights was the quiet changeover from Chandrasekaran to the chief executive-chief operating officer combination of Rajesh Gopinathan and NG Subramaniam.
The City of Nawabs was also a departure from the normal practice of holding Blitz in Goa or Dubai, eliciting some muffled groans and jokes about how Gopinathan, formerly CFO, was exposing his costcutting bent of mind. But there was more at play in the leadership change than the light-hearted banter revealed.
Blitz 2017, in the words of a TCS senior manager, “is an important event for the TCS psyche, for it involves all the leaders.” In March 2017, it was also the stage of a subtle but momentous shift at TCS.
Chandrasekaran, 54, departed from giving any business or organisational spiel, having relinquished his CEO position a little over a month after becoming the group chairman. He merely reiterated his mantra of how digital is changing business and left the actual focus to Gopinathan and Subramaniam.
In his typically understated manner, Chandra would later tell TCS shareholders in the annual report, “The new team will continue to drive an organisational culture that embraces change, believes in growing talent and invests ahead of time, anticipating future needs of our customers.”
He was referring to Gopinathan, Subramaniam and chief financial officer (CFO) V Ramakrishnan, along with a strong team of senior business leaders, notably the heads of TCS’ industry and service unit heads.
“As our business transitions into a new and exciting phase of growth and innovation, the future of your company could not be in better hands than under a dynamic new executive leadership team,” he would say.
CEO-COO COMBINE
When Chandrasekaran became Tata Sons chairman, many anticipated one of the ICU heads, each of whom runs multibillion dollar divisions, to succeed him.
To that extent, Gopinathan, a shy and reserved person, was a surprise.
Gopinathan is seen by colleagues as a student of the business model TCS epitomises — aimed to generate efficiencies for enterprise clients to whom they pass on the benefits. Age is on Gopinathan’s (46) side, complemented by Subramaniam’s vital knowledge of the company.
The COO first gained renown at TCS in the late 1980s for writing out richly detailed proposals for client bids. This sometimes entailed him working continuously in office for two or three days, getting on to calls with as many as 15 TCS managers in different parts of the world.
Subramaniam’s meticulousness and work ethic helped create detailed specs and a roadmap for customers to entrust their organisation to TCS, when India was barely on the map for global customers.
He won a marquee project in the late 1980s, from the erstwhile SegainterSettle.
That client engagement spawned two future leaders — him and S Mahalingam, who was CFO in the S Ramadorai and Chandrasekaran eras.
By the turn of the century, Subramaniam had taken his game to a new level, helping TCS win a neat slice of one of the largest multi-vendor deals ever for IT companies from India — the €1.8 billion ABN-Amro deal in 2005. (TCS won €200 million of it and Infosys, €108 million, with IBM taking a lion’s share.)
A NEW LEAF
One can understand how far the company has come since that deal and how decentralised it is by the TCS practice of empowering the 10-15 industry service unit (ISU) heads — whom the top management rarely questions, even on $200-million deals.
The focus for the top management now is digital. “Digital is one diverse, yet interoperable, constantly evolving family of technologies enabling continuous availability of data, systems, applications, and business processes,” Subramaniam told shareholders in the 2016-17 annual report.
“Such an architecture allows enterprises to completely reimagine different aspects of their businesses.”
The COO drives technology and the CEO drives efficiencies. Between the two, the strategy is to expand critical client engagements to the digital realm. By May last year, the two had met over 75 customers internationally. A senior executive throws some light, saying, “There will now be lesser number of people (in TCS) to do the same quantum of work.”
The logic is, money TCS saves a customer through productivity measures will come back through new projects or deals. Subramaniam has emphasised passing on the efficiencies to customers, while internally, Gopinathan demands gross margins over 25%.
This is a lot of pressure for the sales folks in a tight market. Five years ago, clients may have expected returns on investment (RoI) in digital and IT support to be distributed over three or five years; that’s changed now.
For the chief information officer (CIO) of a large multinational client company to justify his investments in digital to the board, RoI are expected to be frontloaded by companies such as Tata Consultancy Services. This means TCS co-investing with clients and showing up to 60% efficiencies in year 1, before RoI normalises to 10% in the following years.
To make TCS more agile, Subramaniam has made changes by bringing ‘business finance’ and ‘business HR’ into the business units, rather than BUs reporting to them. This will help unit heads take faster day-to-day decisions, which is critical for an organisation that employs nearly four lakh — a large digital workforce — and needs to focus on client needs.
CONTINUING THE LEGACY
By many accounts, Chandrasekaran is one of the Tata group’s best salespersons. “He brings warmth to a customer equation but makes his point in a very different way, putting his innate diligence in the shade,” reveals a former colleague. The more deals Chandra won, the better he got, according to a client advisor.
In the years when he became CEO of Tata Consultancy Services, and overseas, he could write specs on the back of a paper napkin during a dinner meeting and then get his team in India to come back with a roadmap for the client by the following day.
The recent $2.25-billion Nielsen renewal was originally a billion-dollar deal won under him. “Chandra became talismanic,” reminisces the senior executive.
His rise and contribution are more in the vein of Nandan Nilekani, who also began his career as a professional before becoming a first-generation entrepreneur with Infosys. Both came to compete with the likes of Wipro and HCL in the growth years for Indian IT.
When the sales teams needed an Azim Premji or Shiv Nadar (chairmen of their respective companies) to come on site for large deals, Chandrasekaran won on sheer tenacity and teamwork. This, then, is what the two-man new guard has to take forward.
Subramaniam will prove crucial as Gopinathan matures, even as the next level leadership pipeline is ready and proven. As one senior manager quips, the CEO and COO can switch roles internally, playing good cop-bad cop depending on the situation.
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