TCS' CFO: Mastering Global Innovation
S. Mahalingam talks with BusinessWeek's Steve Hamm about growth strategies and the benefits of global operations.
By Maryann Jones Thompson, Sand Hill Group
Jun. 10, 2007
With more than $4 billion in revenue and 89,000 employees in 32 countries, Tata Consultancy Services is a global technology force to be reckoned with.
In fact, TCS launched its own financial software division in May, making it one of the Indian services companies that is now both a service provider and an ISV.
S. Mahalingam, TCS' executive VP, CFO and head of Global Finance, joined the company in 1970 just two years after it was founded. During more than three decades of service, Mahalingam has been a contributor to not only the growth of TCS but to the establishment of the entire Indian IT industry.
Mahalingam joined BusinessWeek senior writer Steve Hamm on stage at Software 2007 to discuss how TCS is working to maintain its growth, differentiate its offerings and leverage innovation globally.
The "T" Question
Talent is the key to India's success and also its biggest challenge. Mahalingam says TCS is attacking wage inflation and employee retention on several fronts.
Steve Hamm: "The story of India is the story of 500,000 engineering graduates per year yet we hear about wage inflation, turnover, morale problems. TCS has one of the lowest turnover rates in India. How do you deal with it and how can software executives deal with it?"
S. Mahalingam: "You are probably asking the wrong person. I've stayed 36 years in one company…
We focus on the career that you build in a person. There are two things that we do. One is competency building and the regular updating of skills. It could be through rotation of assignments, it could be through training and then taking that person through the technology stream.
The other thing is that we are a global organization. We have a lot of people in various countries. We hire locally but there is also a requirement that employees travel from one place to another. That kind of global experience is another attractive proposition for many people.
There are points when a person decides to make a choice, perhaps in the first two to three years. They are look at their career aspirations and they might leave the company. But if we can cross that hump, and go beyond that period to say seven or eight years, we do find that people want to stay with the organization. At that point, if they do leave, they will become an executive in another organization."
SH: "What about wage inflation? Sometimes the rate hits 12 to 15 percent annually, on average. That figure seems significant, especially when labor arbitrage is one of the advantages that you seek."
Mahalingam: "There are 500,000 engineers but then we go through the employable number of persons and they might not have the skills that we value. So that takes the figure down to 250,000 or 300,000. And what is happening now is that it isn't just the computer industry that is attracting people. It is all the other industries which are doing well in India at this time. The competition for talent is intensifying and that leads to the wage spiral that is taking place.
We think that the 12-15 percent increases we are going through at this time will last a few more years but not beyond that. [If it does continue beyond that], the wage inflation coupled with the rupee appreciation will come to a point that the margins will get eroded significantly.
Companies such as ours also try and see how we can have additional productivity improvement to pay for additional wage expenses. We use a lot of incentive systems which put us in a better position to handle it."
In fact, TCS launched its own financial software division in May, making it one of the Indian services companies that is now both a service provider and an ISV.
S. Mahalingam, TCS' executive VP, CFO and head of Global Finance, joined the company in 1970 just two years after it was founded. During more than three decades of service, Mahalingam has been a contributor to not only the growth of TCS but to the establishment of the entire Indian IT industry.
Mahalingam joined BusinessWeek senior writer Steve Hamm on stage at Software 2007 to discuss how TCS is working to maintain its growth, differentiate its offerings and leverage innovation globally.
The "T" Question
Talent is the key to India's success and also its biggest challenge. Mahalingam says TCS is attacking wage inflation and employee retention on several fronts.
Steve Hamm: "The story of India is the story of 500,000 engineering graduates per year yet we hear about wage inflation, turnover, morale problems. TCS has one of the lowest turnover rates in India. How do you deal with it and how can software executives deal with it?"
S. Mahalingam: "You are probably asking the wrong person. I've stayed 36 years in one company…
We focus on the career that you build in a person. There are two things that we do. One is competency building and the regular updating of skills. It could be through rotation of assignments, it could be through training and then taking that person through the technology stream.
The other thing is that we are a global organization. We have a lot of people in various countries. We hire locally but there is also a requirement that employees travel from one place to another. That kind of global experience is another attractive proposition for many people.
There are points when a person decides to make a choice, perhaps in the first two to three years. They are look at their career aspirations and they might leave the company. But if we can cross that hump, and go beyond that period to say seven or eight years, we do find that people want to stay with the organization. At that point, if they do leave, they will become an executive in another organization."
SH: "What about wage inflation? Sometimes the rate hits 12 to 15 percent annually, on average. That figure seems significant, especially when labor arbitrage is one of the advantages that you seek."
Mahalingam: "There are 500,000 engineers but then we go through the employable number of persons and they might not have the skills that we value. So that takes the figure down to 250,000 or 300,000. And what is happening now is that it isn't just the computer industry that is attracting people. It is all the other industries which are doing well in India at this time. The competition for talent is intensifying and that leads to the wage spiral that is taking place.
We think that the 12-15 percent increases we are going through at this time will last a few more years but not beyond that. [If it does continue beyond that], the wage inflation coupled with the rupee appreciation will come to a point that the margins will get eroded significantly.
Companies such as ours also try and see how we can have additional productivity improvement to pay for additional wage expenses. We use a lot of incentive systems which put us in a better position to handle it."
