Clarity in Trade Talks Expected to Boost IT Spending, Says TCS Chief
BENGALURU: Tata Consultancy Services (TCS) is currently facing a challenging landscape characterized by delays in client decision-making and a cautious approach to discretionary spending, particularly for projects with longer return cycles. In a recent interview, TCS CEO K. Krithivasan expressed optimism that international revenue could surpass FY25 levels in FY26, contingent on anticipated clarity from ongoing trade discussions expected by late July or early August.
Challenges in Client Decision-Making
TCS has observed a shift in client behavior regarding discretionary spending since the March quarter. The company anticipates a recovery in discretionary demand, primarily driven by tariff-related clarity. Krithivasan noted that projects with immediate or shorter-term returns on investment (ROI) are continuing, while those perceived as long-term are either being expedited or scaled down for quicker consumption. Programs with extended ROI timelines are facing delays or deferrals. The CEO remains hopeful that as trade discussions conclude and consumer confidence improves in the U.S., clients will begin to increase their spending.
Impact of Key Vertical Performance
The decline in revenue across key verticals and geographies has been sharper than expected, with the wind-down of the BSNL deal contributing significantly to this trend. TCS reported that approximately 90% of the BSNL sites are now carrying commercial traffic, marking a natural and successful conclusion to the project. This transition impacted the company’s quarter-on-quarter growth by about 2.8%. While the international market experienced a slight decline of 0.3%, the overall revenue drop was anticipated. Krithivasan highlighted that there are no specific client-related issues; rather, projects are being delayed or descoped across various industries.
AI’s Role in Enhancing Efficiency
TCS’s Chief Operating Officer emphasized the importance of artificial intelligence (AI) in driving efficiency at the project level. However, the benefits of AI-led improvements in coding tasks are limited if they are confined to IT projects alone. Even with a 20-30% increase in coding efficiency, the overall value gain from project conception to implementation may only reach 5-10%. To achieve significant productivity gains and enhance customer satisfaction, TCS is focusing on end-to-end value creation across all project phases. Clients are increasingly aware of AI-driven productivity enhancements, leading to discussions about incorporating these gains into commercial models.
Employee Placement and Project Allocation
Amidst these challenges, employees at TCS have reported difficulties in securing projects that match their skills, with some assignments taking longer to find than before. There are also reports of the company withholding salaries for employees who have been benched for extended periods. Krithivasan stated that while HR supports project placements, associates are expected to take responsibility for their career paths. The company aims to minimize bench time and invests heavily in upskilling its workforce. Project assignments are primarily driven by client needs rather than personal preferences, ensuring that employees are deployed based on their training and skill alignment.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
Follow Us on Twitter, Instagram, Facebook, & LinkedIn
