Tata posts strong revenue and profit growth

Tata reported growth across all markets, including emerging markets

Tata Consultancy Services reported strong revenue and profit increases in the quarter ended June 30, citing growth across all markets, including emerging markets.

The company, which is India's largest outsourcer, however warned that uncertainties are likely to persist in a number of markets including the Middle East, Europe, Japan, and the U.S.

"We have not, however, seen an impact on business momentum and the deal pipeline is pretty strong," said N. Chandrasekaran, TCS' CEO and managing director, at a press conference in Mumbai on Thursday, that was also webcast.

TCS reported that its revenue for the quarter was US$2.4 billion up by 34.4 percent from the same quarter last year, according to international reporting standards. Net profit grew by 30.6 percent to $532 million, despite a wage increase of between 13 percent to 14 percent in the quarter.

Discretionary spending on IT by customers has gone up, Chandrasekaran said. Although some countries have tightened on the issue of visas, the company said that had not impacted its business.

Customers are interested in increasing outsourcing to India service providers, and TCS invested ahead of the demand in creating domain expertise and intellectual property, focusing on industry verticals, and also setting up service delivery in multiple locations worldwide, said Sudin Apte, principal analyst and CEO of Offshore Insights, a research and advisory firm.

The outsourcing business is also changing. Outsourcing decisions are now being taken by clients at the level of influential steering committees that include, apart from the CIO and CFO, business leaders who are concerned about the business results of investments in technology, he said.

TCS is trying to meet the changing customer requirements and is, for example, upgrading its sales staff so that they are in a position to discuss with customers more than the technology specifications of a project, according to Apte. The company, however, needs to move faster in this direction, he added.

Like other Indian outsourcers, TCS is likely to face higher staff costs and attrition as the business picks up. In the quarter, TCS added 3,576 staff to take the total at the end of the quarter to 202,190. It plans to hire 60,000 staff in this fiscal year.

Competitor Infosys said earlier this week that it was getting into products to reduce its dependence on a services business model which is built around charging for the number of people deployed on a client's project. Infosys, TCS, and other top Indian outsourcers have been trying to build up their revenue from value-added businesses such as business transformation and consulting contracts.

TCS is currently working on some projects that are priced based on business outcomes to a customer, rather than on the number of staff deployed on the work, Chandrasekaran said.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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