Variable Pay Cut After Some Units Failed To Meet Targets, Says New TCS CEO

I will give a bit of history to this. I joined TCS in 2000-01, and that was the time we were rolling from the post-Y2K period. There was a sense of despondency in the market, saying that the Indian tech industry is dead and it’s going to roll over and pass away. People in the industry never quite believed that. We had Chandra, who said we need to get on the next wave, which is e-business. Those days we had less than $100 million revenue from the e-business. We set a target for $0.5 billion which was big for us. We went about by systematically building it. Today we have a new technology in the offering. It’s digital and different but digital is as different as e-business was in 2000. Does it demand new skills? Obviously it demands new skills. Will we need to work hard? Of course we’ll need to work hard. The point is if you believe that you ever get to a stage where you don’t need to do that, that’s the time you die. In this industry, change is the only constant. We have the ability to do that, we have a history of doing that, and we’ll continue doing it. It won’t stop now, it’ll continue. Ten years later it will be something else and we’ll be changing ourselves for that. The point is that technology is the single biggest demand driver all over the world in every single industry. If you sit through any of the commentary here, essentially, every industry is getting technologically leveraged. There’s huge demand. We’re sitting on 4,00,000 highly skilled people, we’re sitting on a highly trainable workforce, we have deep customer relations, each of them wanting more technology. I am super excited about the whole journey.

Think about it this way. It is not a challenge for the Indian I.T. industry, it is a challenge for the I.T. industry. The reason being that U.S. tech unemployment is practically zero. It’s a hugely supply constrained market. It’s not that there is a tonne of talent out there and you can just go and hire. It’s not just about shifting it, you’ve to develop that supply base there. You’ve got to look at how do you engage with colleges. What we’ve realised is that it is not just at the engineering level, because any output from engineering is sucked out by the industry. We are now engaging at a high school level. We have a very active stem education program running because we are trying to actually encourage people in. There is a big fallacy in the assumption that the expat person in a local geography actually earns less than the local. It’s not the way it is. This is because the local talent pool is a much more verticalised pyramid as you don’t have such a big pool of people at the entry level compared to as in India where the sheer pool of entry level is such that the pyramid is much more flat. On a like to like basis, as you compare it, its a lot costlier to send an expat to the U.S. than to actually hire from there. You need entry-level engineers and that’s where the short supply is. If we build on that supply, the whole economics of it will work through. So the short term challenge is how do you deal with this supply constraint. There’s a local supply constraint and now there is potentially a supply constraint coming (from the U.S.). That needs to be solved. We are re-looking at how we are using local talent. We are engaging a lot more through the ecosystem trying to develop that supply base. We are looking at delivery models and what we can do about that. It’s more of a holistic approach to it. It’s not going to be a simple answer and it’s not just about Indian I.T, it is going to be about the whole industry. It’s a very mobile talent pool and the impact will be felt by everyone. It’s going to be an area which will have to be carefully watched as to watch the specifics are.

Fifty percent of my business comes from a market where if the currency becomes stronger good news for us. I report in rupees, so that doesn’t really impact it. So a strong U.S. dollar optically gives different numbers but economically it is not a bad thing for companies like us which are participating in that market. The volatility of the currencies, especially the way the rupee and others are behaving, that leads to further challenges. Euro is a concern, yen too is a smaller concern. The whole Brexit and pound reaction too. The dollar is the least of our concerns. Its the other currencies and that basket and how the rupee is dealing with it.

It’s a component of how the company is structured. We have a structure of individual business units. The business units have a lot of flexibility in their own decision making and managing them. Variable pay reflects individual unit performance rather than a single company wide performance.

No. It varied by the unit.

No. That’s not true.

That would not be appropriate.

Variable pay reflects the actual quarter performance rather than the outlook. The commentary on the outlook versus actual quarter is different. You see how the year has panned out. It has panned out softer than what we had thought. So obviously the targets that various units had were not met. We were nowhere near where we thought we would be at the beginning of the year.

I can reiterate that among all industries, technology demand will be the best. There is no other industry which will fare better than ours. Where the rest of it goes, I don’t know. Relatively, the technology industry will be far ahead of everybody else.

Still figuring it out. I didn’t have a chance to sit back and think about it. It has not yet sunk in. It has been a rollercoaster ride.