How do you react to the December quarter being termed as the poorest Q3 performance in several years?
We have to see context also… we know that for a long period now, we have been going through a phase where there is market uncertainty, less intent to spend on behalf of clients. If you had a previous few quarters which were super and then suddenly this drops, then you can say this is a bad performance. So, see (the last quarter) in the context of how the overall growth environment is. Taking it in isolation and saying that this is a worse performance (may not be right).
You have given a positive commentary, so what are the expectations from 2025?
Our positivity comes from the order book. We had, as much as you say, one of the worst toplines, but one of the best tower TCV (Total Contract Value — an indicator of deal sizes) for a Q3. And our TCV has been good across sectors and across industry segments as well as geographies. Our pipeline continues to remain strong. We also saw for the first time, the deal cycle also come down, and we see really signs of good discretionary programs coming back on track. All these things give us a sense that maybe things are turning around.
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With the Trump administration coming in, some of the dynamics related to tech companies seem to be changing. Do you expect major changes in the way business is done?So we, at least from whatever we know as of now, we don’t expect any major change in the way business is carried out. I have a feeling that there’ll be more focus on doing business easier. It would create more opportunities and probably open up more discretionary spend is our going-in position.
Is the worst over for the industry?
We believe that next year is likely to be better than this year.
This quarter, the headcount dropped by over 5,000. TCS has said that headcount is not directly correlated to growth. Should we read it as early signs of productivity because of AI and that graph where growth directly linked to revenue is changing?
We should not correlate it on a quarter-on-quarter basis to start with. Till generative AI becomes mainstream in software engineering, there will be some correlation in terms of how many people you would deploy in programmes and overall revenue. We hired more people in Q1 and Q2. In Q3, we thought there are going to be seasonalities, so there was a certain amount of optimisation done and improved utilisation. At the same time, in the next year, we are going to hire from campus more than a regular year.
But at the same time, I do not want to also dispute the other point. Headcount and revenue may not follow the same slope as more and more productivity comes in through generative AI. Maybe, for the given revenue, how much of headcount you may add may not be in the same proportion. So, this slope could be maybe slightly flatter than the revenue slope. But I do not think we have reached a space to say that, because of generative AI, that linearity is broken. Progressively, there will be more productivity coming in, so that linearity could be disrupted. But again, our underlying assumption is there will be more work that will be done. So, the net demand requirement will not fall and will continue to rise.
How do you see competition from global capability centres (GCCs) and your smaller rivals in the wake of GenAI leading to doing similar work?
Everyone has a space, first of all. Two is we’ve been working with GCCs for a long time. Almost all the GCCs, they are our customers globally. We will enhance our relationship, strengthen the engagement with them in the India market as well. While there could be some part of the business, they could compete, some, where we can collaborate. At this time, I still believe the size of the pie is so big, there is less need to read about the competition eating away, because there is so much work that needs to be done. There is so much opportunity. I’m not worried about this in the short term.
With a focus on regional markets, what is the India strategy?
India is a very, very important market, and we see as India grows, there’s a lot of opportunity, both in terms of delivering and ensuring the technology upgrade both in the government sector and private sector. So, we have increased our customer outreach and engagement with the large and medium-sized enterprises here. Some of them we approach through our traditional overseas model of bespoke engagements, some of them we approach through our platform play. So, it will be a combination, but we are very, very bullish on India. And we believe that this could be significant in our overall revenue mix.
