The global economic environment in calendar year 2012 continued to remain uncertainwith signs of concern and slow growth (1%-2%)1. Improving consumer confidenceand structural policy decisions in the developed markets are providing the requiredmomentum to kick-start the economy on to the path of recovery. In the emerging markets,strong consumer spending and upbeat investment sentiment continue to drive economic growth(5%-8%)1.
Across markets, technology and innovation are being seen as growth drivers. Investmentin innovation has emerged as a differentiator in the market place. Investment intechnology has been enabling companies to connect with customers and influence theirpurchase decisions on a real-time basis. As a result, spending on technology and relatedservices grew at a rate faster than the GDP growth. The worldwide spending on technologyand related services in 2012 was USD 1.9 trillion2, a growth of 4.8% over 2011.Spend on IT, BPO and software products, continued to have the majority share of 58% oftotal IT spend, standing at USD 1 trillion2. The global sourcing market reacheda volume of USD 124-130 billion in 2012 with a growth of 9% over 2011, which was twice thegrowth rate of the global IT spend.
While banking, financial services & insurance (BFSI) and manufacturing remained thelargest verticals in terms of total share in IT spending, emerging verticals such ashealthcare, retail, government and utilities were the drivers of incremental growth in2012.
The large North American IT market continues to expand at a faster pace (5%) than theeconomy. Investments by American corporations in innovation and digital technologies isdriving the growth in technology spend. IT spend in emerging markets like Asia-Pacificcontinues to grow at a faster pace than in mature geographies on account of investments bycorporations to bring their IT infrastructure on par with global standards.
Despite the changing and volatile economic environment, the global market offerssubstantial opportunities and TCS is fully geared to navigate through the changingtechnology demands and customer expectations.
TCS is an Information Technology (IT) services, consulting and business solutionscompany. The Company provides end-to-end technology and technology related services toglobal enterprises. TCS' domain knowledge and Source:1 IMF, 2NASSCOM Strategic Review 2013technology expertise helps global corporations tofocus on their core business, while TCS manages their investments in technology and helpstransform their business processes.
The breadth and depth of TCS' domain and technology expertise has been built over thelast 45 years through a unique combination of investments in people and new technologiessupported by long standing client relationships.
The Company has been registering steady all round growth in its customer base, presencein geographies, domain expertise and service offerings, which reflect in the steady upwardtrend in its financial outcome over the years. TCS has the distinction of being one of themost valuable companies in India and one of the top ten IT services companies in theworld.
TCS has strong domain expertise in banking, financial services & insurance, retailand consumer packaged goods, telecom, media and entertainment, manufacturing and 'other'verticals which include hi-tech, life sciences & healthcare, energy resources &utilities and travel transportation & hospitality.
TCS' full services portfolio consists of application development and maintenance,business process outsourcing, enterprise solutions & business intelligence, ITinfrastructure services, assurance services, engineering and industrial services, assetleveraged solutions and consulting. In addition, the Company has launched several newservice offerings in digital technologies - mobility, social computing, big data and cloudcomputing.
The Company's strategy for long-term profitable growth is based on continuously scalingits core IT services business, while investing in new customers, services, markets andindustries.
The Company's strategy of strengthening the current business and investing in thefuture revolves around (1) customer centricity, (2) full services portfolio, (3) globalnetwork delivery model (GNDM), (4) non-linear business models and (5) experiencecertainty.
3.1 Customer centricity
Building deep and long lasting customer relationships is the key to the Company'slong-term success. The Company has undertaken several initiatives to be customer centric,including creation of a domain-centric organisation structure and building deep domainknowledge and technology skills across industries.
The customer-centric approach has helped the Company to grow its customer baseconsistently. The customer metrics shown here reflect the success of the customer-centricstrategy.
Number of customers
TCS' key principles of customer centricity are (1) staying relevant to customers and(2) helping customers to define their future.
The uncertain economic environment, increasing competition, stricter regulatory &compliance framework and changing consumer behaviour are forcing businesses to adapt tochange and continuously look for ways to stay relevant to the market and customers.
TCS is helping enterprises to standardise, rationalise and transform their businessoperations to become operationally efficient and remain cost competitive in the marketplace. The Company is working closely with its customers, helping them to gain deeperinsights into their customers' needs and enabling them to realign their offeringsaccordingly.
3.1.2 Defining the future
Businesses are finding ways to keep re-inventing themselves for the future andinvesting in building capabilities to predict market dynamics and consumer behaviours.
TCS is working with its clients in a 'co-creation model' and helping them innovate newbusiness models, products & services in order to protect and grow their market base.
3.2 Full services portfolio
The Company has strategically invested in building multiple service offerings over thelast decade and made them function in a synchronised manner. This has helped the Companyto position itself as an integrated full service player in the IT services space. TCS'full services capability enables the customer to measure the efficiency and effectivenessof transformational engagements with the Company on the basis of business outcome.Leveraging this capability of TCS, global corporations are able to rely on a singleservice provider for assured delivery of large transformation programmes. In fiscal 2013,the Company has made significant progress in digital technologies and developed mobileapplications and consumer analytics on top of existing investments in core applicationsfor many customers.
3.3 Global Network Delivery Model (GNDM)
TCS' full services capability is supported by its strategy of investing in GNDM.This capability is widely recognised by leading industry analysts and observers as anindustry benchmark, offering 'one global service standard' to customers across the worldin a seamless manner.
GNDM supports customers' operations in various regions of the world and helpstheir business expansion plans in new and emerging markets. GNDM also provideshigher level of comfort to customers on account of
(a) proximity to client's location, (b) language capability, (c) similar time zone and(d) business continuity planning. For TCS, GNDM facilitates (a) leveraging of globaltalent,
(b) de-risking of delivery location concentration and
(c) entering new markets.
During last year, TCS further expanded its GNDM capability by opening four newdelivery centers in the USA, the UK and China, taking the total number of global deliverycenters (excluding India) to thirty two.
3.4 Non-linear business model
While the Company continues to make significant progress in the traditional IT servicesofferings, it has been pursuing non-linear growth opportunities, which contribute revenuegrowth without commensurate growth in headcount.
The contributors to the non-linear business model are:
Products: TCS' intellectual property (IP) based products in banking and financialservices, insurance, retail, life sciences and health care, public sector and in otherindustries is driving non-linear growth through license revenue and high-end domainconsulting. TCS' IP based products include TCS BaNCS(BFSI), Rewardz and mPOS (retail),hosted OSS/BSS (telecom), Clin e2e and Med Mantra (life science & healthcare) andSWIFT MRO (travel).
Platforms: TCS has built (a) vertical platforms in banking processes, life insuranceand pension policy administration, retail and manufacturing supply chain, (b) horizontalplatforms in analytics, finance & accounts (F&A) and payroll and (c) technologyplatforms like iON - a fully integrated IT-as-a-Service (ITaaS) model for small &medium businesses. TCS' platform based solutions and services optimises clients' spend ontechnology and processes.
Solutions: TCS has built several configurable solutions and pre-built components thathelp expedite the implementation of business transformation programmes and large complexprojects. The 'Technology Excellence
Group' of the Company focuses on predicting the future of technology and invests inbuilding various technology solutions. The Company has also built a number of industry andtechnology solutions in digital technologies like mobile and social media.
3.5 Experience certainty
'Experience certainty', TCS' brand promise to its customers, is based on the coreprinciples of 'results, leadership, and partnership'. TCS helps customers experiencecertainty by reliably delivering business results, providing leadership to drivetransformation and partnering for success. Experience certainty is part of our culture ofcommitment and is ingrained in the customer-centric behaviour of our associates.
Experience certainty is backed by a strong set of metrics that the Company monitors formeeting quality parameters of delivery and relationship. TCS' 'Delivery Excellence Group'continuously refines delivery processes and helps the Company to stay ahead of globalquality standards.
4. DIGITAL TECHNOLOGIES
Adoption of digital technologies is a top priority among all enterprises, acrossindustries and geographies. TCS has significantly invested in digital technologies -mobile, cloud, big data, analytics and social media. While, individually all of thesetechnologies are influencing the way business operates and interacts with consumers, theirreal power lies in the 'combination of digital forces'. A real time analysis of consumerbehaviour, delivered on a mobile device through cloud services has the biggest potentialto support business in taking right decisions in real-time.
TCS' digital innovation lab has built several digital applications and solutions formultiple industries, which are being implemented by customers in North America, Europe andAsia-Pacific. The 'customer collaboration center' in the Silicon Valley of the Company isa digital innovation lab, where customers from retail, telecom, banking, manufacturing andother industries are collaborating to shape the digital future of their business.
The Company envisions tremendous growth potential in digital technologies and iscommitted to continue investing in this area to drive long-term growth. The Company isalso making initial investments in new emerging technologies like production automationand high performance computing, which have great future potential.
TCS continues to invest in research framework which includes:
Invention: creation of TCS' IP based assets in the areas of domain andtechnology
Co-Innovation: creation of new ideas, concepts and intellectual property inactive partnership and collaboration with entities outside the company, using TCS'Co-Innovation Network (COIN)
Innovation: conversion of new ideas, concepts & intellectual properties intouseful outcomes for the Company's customers, business units and society.
TCS R&D continues to focus on improvement of quality and efficiency in servicedelivery. This year, a large number of software tools from R&D were released in themarket as eight distinctive suites under TCS' tool brand MasterCraft. These suitesof products automate IT service processes such as application design and development,software assurance, application support and maintenance, performance testing andmonitoring, test data management and enterprise data management.
Substantial R&D effort is also being spent on 'eTransform', an analytics-ledtoolset that transforms customers' IT infrastructure and drives efficiency. The 'ConnectedMarketing' platform has been enhanced to deliver social and digital analytics to themarketing function of TCS' customers. The product 'Optumera' addresses keyoperational optimisation challenges for a retailer.
The Company is working on currency risk models, robotic surveillance, machine learningapplications, crowd sourcing platform, energy management systems, nano-technologyincluding novel drug-delivery mechanisms & nano-fluids, human-centric large-scalesocial systems and computer vision. In the longer time horizon. Company's R&D isexploring ideas in meta-genomics related to malnutrition, tuberculosis and diabetes, aswell as genomics and disease markers.
TCS filed 425 patents during the year 2012-13 and was granted 9 patents. Cumulativepatents filed till date globally stands at 1,280, out of which so far 81 patents have beengranted to the Company. These 'IP' assets are managed comprehensively by an indigenouslydeveloped process and system.
6. HUMAN RESOURCES STRATEGY
The human resources strategy enabled the Company to attract, integrate, develop andretain the best talent required for driving business growth. The sustained strategic focusto enhance employee capability, improve efficiency and groom future leaders has helped TCSmaintain its benchmark status in the IT industry.
The Company hired and integrated 69,728 people into its workforce across the globe infiscal 2013. The Company employs 2,76,196 associates representing 118 nationalitiesdeployed across 55 countries. The 'workforce management strategy' was executed optimallyto fulfil business demand, deliver consistently high utilisation rates and keep manpowercosts within the desired range as per business plan.
Our mature HR processes enable us to be agile and responsive to the dynamic globalenvironment and stay relevant to the customers. Robust HR systems and sound execution ofstrategy ensure that the Company is able to manage the complexities associated with itsscale and geographic spread, while remaining compliant with the regulatory requirements inthe countries it operates.
The Company has created a performance driven environment where innovation isencouraged, performance is recognised and employees are motivated to realise theirpotential. Our relentless pursuit to connect with employees on a regular basis,communicate in an open and transparent manner, provide opportunities to learn and growwithin the organisation are yielding desired results as is evident from the high retentionrates and the motivation and engagement levels of our employees.
6.1 Talent acquisition
Opening headcount (As of April 1, 2012)
Closing headcount (As of March 31, 2013)
TCS remained the highest recruiter in the industry with a gross addition of 69,728employees out of which 59,276 were in India and the remaining 10,452 were outside India.The gross addition includes 1,368 people in-sourced from customer organisations globally.
The company kept its commitment and inducted all the trainees who were given offersduring campus placement to join the Company in fiscal 2013.
We continue to remain the employer of choice at the engineering campuses in India. TCSvisited 371 campuses in India, with 99.5% day one slots, and made 24,533 offers toengineering trainees and 269 offers to management trainees for fiscal 2014.
The Company has accelerated its effort to recruit from colleges in USA, Canada, China,Uruguay and Hungary. In the US, TCS recruited students from 40 universities and 7 businessschools.
6.2 Academic interface programme (AIP)
The Company continues to invest on AIP initiatives with the objective of developingfaculty for academic institutes, improve employability of students and develop curriculaas per industry requirements. As part of NASSCOM initiative of overall curriculumrevamping, TCS designed training modules for different engineering branches.
A total of 616 institutes in India and 288 institutes overseas benefitted through theCompany's AIP activities like workshops for faculty and students, faculty developmentprogrammes, research scholarships, awards, research alliances and project opportunitiesfor students. The Company supports 111 research scholars pursuing their PhD in 31institutes across India, through its research scholarship programme.
The top management of the Company engages in cross-pollination of ideas and discussionswith academicians from premier technical and management institutes through 'Sangam', anannual flagship event. In fiscal 2013 the event was held at Mumbai with 72 academiciansfrom India and abroad.
TCS won the 21st 'Global HR Excellence Awards 2013' in the category 'outstandingcontribution to the cause of education', for the second consecutive time.
'Campus Commune', the dedicated social engagement platform of TCS for various academicinterest groups has over 1,67,000 student members. This forum is used extensively fortalent spotting through various competitions like Codevita, Mobeel and Testimony. It isalso used as a platform to stay connected with prospective employees throughout theacademic life cycle of a student.
6.3 Learning and development
The Company continued to invest in enhancing its human capital through building skillsand competencies for its associates. We are bringing in a paradigm shift in the learningprocess which may be called the next-gen learning & development (L&D). Thelearning eco-system is being transformed by investing in interactive classrooms, videobased training and social media enabled social learning. 'Any Time - Any Where' learningis becoming a reality in TCS. 30,464 new hires from colleges were trained to be ITprofessionals through our elaborate initial learning programme.
We are expanding our training infrastructure capacity by building a state of the arttraining center in Thiruvananthapuram with a capacity to accommodate 15,000 trainees.
A total of 12,789 person years of effort was invested in fiscal 2013 on variouslearning activities. In addition, 47,167 certifications were acquired by our employees toenhance their proficiency in relevant areas of technology, domain and process.
6.4 Talent management, leadership development and talent retention
The performance and career management processes of TCS are fully globalised. Digitisedsystems have been enhanced and new 'Career Hub' has been launched streamlining the processof recording aspirations, identifying high potentials, mentoring and tracking careermovement of employees.
The culture of reward and recognition in TCS is aided by 'TCS Gems', the global rewardand recognition tool, with well-defined criteria and processes to enhance performance. Weparticipated in multiple compensation surveys in India and other geographies to ensurethat our compensation and total rewards strategy remains competitive.
A healthy leadership pipeline is maintained through the layered framework of'Leadership Development Programmes' (LDP), focusing on developing behavioural, businessand people competencies. Potential leaders are identified and are nurtured through LDPsand given challenging roles to build leadership capability. We have tied up with globallyrecognised coaching agencies to provide coaching intervention to our leaders.
The organisation culture of open communication is supported through a highly flexibleand transparent internal social networking platform. It empowers employees to articulatetheir feelings freely, exchange ideas and contribute to the organisational growth. Inaddition, regular connect with our employees helps to understand the pulse of theorganisation and take appropriate measures to keep the workforce engaged and motivated.
A number of non-work related employee engagement initiatives such as fun events,sports, cultural activities and volunteering for social causes were organised across theglobe under our employee engagement platform known as 'Maitree'. The culture ofvolunteering helps employee bonding within the organisation and reduces stress at work.Employees are also encouraged to involve their families in these activities.
Employee health and safety are of crucial importance. Fit4Life, health awarenesssessions, periodic medical check-ups, gymnasiums in offices and 24x7 'Employee AssistanceProgramme' are some of the important initiatives undertaken by the Company to encouragehealth consciousness. A number of events were organised throughout the year to enhance theawareness level of our employees towards road safety.
The employee engagement initiatives and various HR interventions have helped us controlattrition. We remain the industry benchmark for talent retention. The Company's attritionrate including BPO has come down to 10.60% in fiscal 2013, as compared to 12.20% in fiscal2012.
6.5 Talent diversity
The Company employed persons from 118 different nationalities. The number of non-Indiannationals was 21,282 as at March 31, 201 3 (1 7,329 as of March 31, 2012). Efforts aremade continuously to integrate differently-abled individuals into the workforce. Effortsare also made to increase recruitment of individuals belonging to disadvantaged sectionsof society.
TCS proactively creates an environment of inclusion to attract and retain women. Womenconstituted 32.40% of the Company's workforce as on March 31, 2013 (31.60% as on March 31,2012). Our progressive policies and customised programmes such as executive educationprogramme for women in mid-management, interactive forums and women discussion circlesaddress the aspirations and needs of our women employees.
Special initiatives were also taken to strengthen cultural orientation of employees andhelp drive "One TCS Culture" across the organisation. A learning module has beencreated specifically for managers to enable them to work with diverse teams.
The Company regularly monitors the changes in legislation pertaining to employment,labour and immigration laws across the globe to ensure total compliance, assisted byregular audits. The key areas where TCS needs to introduce new policies or modify theexisting policies to remain compliant are identified and acted upon.
7. OPPORTUNITIES & RISKS
The large size of the addressable global market, with relatively low current level ofpenetration suggests significant headroom for future growth. The Company has positioneditself well for the growth in business with an aligned strategy, structure andcapabilities.
The Company has deployed an 'Enterprise-wide Risk Management' (ERM) programme based onthe recommendations of the 'Committee of Sponsoring Organisations' (COSO) formed by theTreadway Commission. The risk reports prepared by the Chief Risk Officer are reviewed bythe board of directors at regular intervals.
The risk management process goes through a review annually in order to keep it alignedwith the changing global risks. The risk management process is completely digitised,accessible to all units of operation across the globe and the same is reviewed by thecorporate risk office on quarterly basis.
ERM programme involves risk identification, assessment and risk mitigation planning forstrategic, operational, financial and compliance related risks across various levels ofthe organisation.
The following table lists some of the key risks faced by the Company.
Impact on TCS
Global economic situation
The economic slowdown in the US and Europe has eased, but uncertainty remains. The US economy has started showing signs of stability; still uncertainties remain with respect to debt ceiling, which could lead to further economic challenges in US. Unemployment situation is still a worry in US and Europe. Possible sovereign default in Europe is also an area of concern.
Geography diversification: Faster growth in geographies other than US and UK/Europe
Increase emphasis on portfolio of offerings, higher value proposition and full service play
Europe is providing opportunities for growth, since many customers are looking at cost optimisation strategies through application of technology.
Some of the governments of the developed countries in North America and Europe are bringing in new regulations to make labour movement from India difficult. Tightening visa process, increasing rejections for visa and work permit applications, increasing minimum wage requirement may hamper growth prospect in major markets. Restrictions on foreign and preferential treatment to local organisations are on the increase.
Stepped up rigour in terms of manpower planning and deployment
Focus on GNDM model with local talent sourcing and increased leveraging of offshore delivery
Sensitising governments on restrictive regulations/ practices which prevent free flow of goods and services
Use of industry bodies for lobbying with the governments
Use of advocacy agencies in global markets to lobby for our commercial interests.
Continuous scanning of environment for early detection of emerging trend
Investing in emerging business models and taking pioneering role in adoption of technology
Investing in new IPR
Business model redundancy
Business models like cloud computing and other pay-for-use models are beginning to gain traction in most industries. This could result in demand compression for traditional IT services/ pricing pressures.
Culture of embracing new technology, path-breaking ideas and innovation.
Well laid out integration plans and close monitoring of the same
Integration risks in M&A
The Company's post-acquisition challenges include cultural, financial and technology integration risks which if not addressed adequately could result in failure to achieve the strategic objectives of the acquisition and the resultant synergy expectations.
Close monitoring and review of acquired entities and taking timely actions as required.
Scaling up the Company's delivery footprint in other geographies with large talent pools
Investing in improving the quality of recruits while strengthening our brand image in campuses and getting us the coveted 'Day One' placement slot during recruitment season
Recruiting science graduates to expand the available pool of fresh recruits
Subject matter experts with domain and technology expertise are the key to success of the Company. The Company could be impacted by the loss of such critical talent. Inability to attract sufficient number of software engineers, architects and IT specialists with critical skills in demand can impact the Company's ability to deliver.
Mature HR processes, competitive remuneration, growth opportunities and an empowering, engaging workplace to ensure high employee satisfaction and retention of Gen Y recruits who constitute the majority of our workforce
Strong training programmes, in classroom as well as e-learning mode has been put in place in order to keep the workforce up-to-date with technology and soft skills.
Currency hedging policies and practices in place
Hedging strategy monitored by risk management council through regular reviews
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