TCS is playing the innovation long game as digital use case thinking matures

Profile picture for user slauchlan By Stuart Lauchlan April 22, 2018
Summary:
TCS just made history as India's first $100 billion market cap company. Longer term, there's a focus on innovation as digital adoption thinking among users evolves.

TCS
By now of course we’re used to the big ticket systems integrators and services houses re-positioning away from the traditional outsourcing/ERP implementation businesses of the past towards being seen as digital powerhouses.

It was thus with Tata Consultancy Services when the Indian giant announced its latest quarterly numbers. But there were two things that stuck out - an emphasis on innovation investment that isn’t yet monetizable and a shifting definition of digital maturity.

Taking the latter first, CFO V Ramakrishnan points to an evolution in the nature of customer demand for digital services:

Digital is going away from being point solutions to being integrated solutions for growth and transformation. You found digital being used for customer experience, and in some cases, it being used for analytics and greater insight in some cases. So these were all individual use cases and point solutions where it was being applied over the last few years.

Now we are seeing the demand emerging much more for holistic solutions. People don’t want to just experiment with it. People want to be able to deal with what they’re calling the re-architecting of the core. And for that, it is not about can you do digital? It is about, ‘Can you provide an integrated solution across the full spectrum?’.

And that’s our sweet spot. Because we are leveraging both our technology expertise as well as our deep contextual knowledge of these client systems and processes and their own histories to be able to design solutions that are more applicable to them.

In that space, we think that we are far ahead of where the market is. And very clearly, ahead of the old pure-play digital-only shops that had emerged during the last few years. And that’s where we are able to participate in much larger engagement basis and which is what is driving some of this deal pipeline that I spoke about.

This evolution isn’t about a shift from TCS’s traditional “full services” model, he adds:

Our entry might be from any service line. But our offering set is always full services. So if we have entered only through a digital solution stack, we’ll participate and then try to expand across the entire spectrum. If we've entered through a more traditional service stack, we will expand into digital. But that is core to the TCS' strategy. And you'll see the impact of it in our client profiles, where you see our ability to migrate our clients across revenue band systematically quarter-on-quarter, year-on-year and that is predicated on this full service line capability and the ability to cross sell into our customer base.

But it does mean rethinking some traditional labels:

I think it would be misleading to categorize something as legacy, something as new. The opportunity is in providing business solutions. The opportunity is not in saying that I know this technology or I know that product. The opportunity is, Can you provide us business solution? ‘. And for that, you need to participate across the full spectrum. Now is that solution legacy or is that new world? That depends on whatever your categorization is.

Long game innovation

On the innovation point, CEO Rajesh Gopinathan that this sort of investment is critical for the playing the long game in a changing market. This past year has seen a deliberate focus on blockchain offerings for both financial and non-financial users across multiple vertical markets:

I think in blockchain, I think people have gone beyond proof of concepts and use cases. These are real projects, real implementation, that are happening. And we are participating in many of them. Some of the demand for such blockchain-type of solutions is increasing…blockchain will drive further opportunities and further growth for us.

Gopinathan points to the launch of TCS’s Quartz blockchain solution as a case in point:

TCS built an open-based banking API framework to help banks accelerate their digital transformation journeys. The AI offerings built up by our R&I teams in the areas of conversational systems and natural language processing was both deployed internally in TCS for employee engagement and is getting strong traction.

On a longer-term basis, there are other areas of interest, some more esoteric than others, such as genome interpretation for fossilization and help in material engineering and in behavioral sciences. Some of these might even make some money some day, he adds:

Some of our actual research programs eventually will get monetized…On an intellectual property area, many of our research and innovation programs eventually mature into market-facing solutions and monetize those production platforms that we spoke about on the Connected Universe One.

Some like Ignio, our cognitive automation software, is faring quite well as customers begin to take on more holistic approach to automation, shifting from robotic automation to intelligent automation. Ignio is context-aware; it's able to become productive within a fairly short period of deployment. And its self-learning capability gives it a distinct edge in this market and makes it a core competence of TCS with its evolving Machine First Delivery Model that many customers are now adopting.

From retail, our Optumera, the advanced digital automating suite, had two new large wins this year. Seven of the world's leading retailers are currently using Optumera. On the life sciences area, TCS’ Advanced Drug Development platform, which is transforming the clinical trial process for our pharma customers by harnessing the power of analytics to reduce human intervention, continued to have new wins.

My take

It’s a big day for TCS today (Monday 23 April) as it becomes the first Indian firm to hit a $100 billion market capitalization. Coming on the back of healthy quarterly numbers last week, the firm is making the digital shift work for it and that long game thinking looks to be paying off.