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Abhinav Singh
Abhinav Singh

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Testing transition

With the IT industry facing headwinds, the new leaders at TCS face several challenges

54rajeshgopinathannew Moving up the ladder: Rajesh Gopinathan will take charge as TCS’s new CEO | PTI

Leadership change is a significant event for any company, and it is a considerably bigger challenge for one as successful as Tata Consultancy Services, India’s largest software exporter with more than 3.7 lakh employees. Its new CEO, Rajesh Gopinathan, is expected to stick to the strategy of his predecessor, N. Chandrasekaran. But he needs to prove himself by matching Chandrasekaran’s performance legacy. Also, with the appointment of Chandrasekaran’s elder brother N.G. Subramaniam as the new chief operating officer, TCS is now following the CEO-COO model.

“At times, the CEO-COO model does not work,” said Amit Chandra, research analyst (IT) at HDFC Securities. “The greatest challenge for the two leaders would be to increase the revenue stream of TCS from new, fast-growing digital businesses like analytics and Internet of Things. All these years, TCS has focused heavily on legacy and conventional businesses such as application development and maintenance. Around 80 per cent of its business comes from here. But these businesses are not growing fast, unlike the new digital businesses. TCS will need to transition towards these [digital businesses] to grow fast.”

According to him, TCS may face challenges because of the Trump factor, as much of the company’s business comes from the US. “With Donald Trump coming to power, there could be some challenges for TCS and other Indian software services companies. Many such companies may move to nearshore locations to service their US clients, or there could be some local hiring in some pockets of the US. One needs to wait and watch,” he said.

Kris Lakshmikanth, head of the recruitment firm Head Hunters Ltd, said TCS was very good in labour-cost arbitrage and had better margins than Infosys. “The greatest challenge for TCS will be from Accenture, which has made huge investments in the new digital stream,” he said. “Gopinathan is a finance person and has not much direct client exposure. With this challenging business environment, he will need to really prove himself. Though Chandrasekaran also had an operations background, he had the advantage of having spent significant time in the US, which gave him exposure to many clients…. Both the new leaders will need to take more risks and get more client exposure abroad.”

Sarabjit Kour Nangra, vice president of research (IT) at Mumbai-based Angel Broking, said Gopinathan’s experience would help him fit into his new role. “Chandrasekaran had excellent leadership qualities, managed his milestones well and his execution got good results. Gopinathan will need to match that,” she said.

Experts also feel that TCS will need to perform really well to overcome the challenges faced by the industry. “The big question is whether the new management at TCS would drive up its performance, particularly when the industry is facing headwinds. It is a question that cannot be answered with certainty. This is also driven by the fact that there is not enough evidence of Gopinathan leading from the front to deliver exemplary performance,” said Alok Shende of Mumbai-based Ascentius Consulting.

Another expert who wished to remain anonymous pointed out that both the new leaders at TCS were Chandrasekaran loyalists, and that he would be able to control the company through them. According to this expert, a person who had experience in interacting with the clients would have been a more suitable candidate than the two new leaders.

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