I spent a rather useful day and a half with TCS in Paris earlier this week. It was their annual European Analyst briefing and TCS had gathered many of their European country market chiefs and a goodly selection of clients to spread the word.
TCS Europe head AS Lakshminaryanan led a session on service operating models, which rather got me thinking about one of TCS’ biggest challenges this decade. At the end of last year TCS employed a tad under 187k people. This was ‘only’ 25% higher than at the end of 2009, precisely in line with its calendar year headline revenue growth (Note: so much for ‘breaking linearity’!). TCS needs to grow headcount by 'only' 20% compound p.a. to break through the quarter-million employee mark during 2012, half-million in 2016, and the ‘magic million’ in 2020. By the way, at that pace, TCS would become an $11b turnover business by 2012, $23b in 2016, and $47b in 2020!
You can argue the many factors that would mitigate TCS achieving 20% annual growth for every one of the next 9 years (though I would not entirely discount the possibility!). But I would say that 250k employees was pretty much a ‘given’, and 500k employees quite probable in or soon after the middle of the decade.
How on earth do you ‘manage’ that many people? And can you do it and sustain high-twenties operating margins?
TCS, like its peers, has always had to pioneer new organisational models, by virtue of its India-centric, international (though not yet truly global) operating model, and its stellar growth. Over the past couple of years most of the India-based majors have undertaken fundamental reorganisations to split their businesses into more manageable (usually vertically-based) units. This is probably the path they will continue to pursue, gradually making the vertical units more ‘granular’ as they exceed critical mass. The players seem able to continually refine the mechanisms for optimising the (mainly India-based) delivery workforce across business units, and yet still somehow manage to achieve ‘cultural consistency’ so that everyone knows who they ultimately ‘belong’ to.
But at what point will the model break down? Not at 250k employees, I am sure. Is it 500k? A million? Don’t know. But I do know that this is exercising the minds of top management of all the players. It’s something I expect to explore further in later research.