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It’s not often that top-ranked India-based IT services firm TCS grows faster than archrival Infosys, but that was certainly the case for the year just closed (to 31st March). TCS’ Q4 revenues exceeded $2.2b, a headline growth rate of 33% yoy and 4.7% qoq, while FY revenues reached $8.2b, up 29% yoy. These rates were substantially higher than those of Infosys (see Infosys looks for near-20% growth this year). Unlike Infosys, TCS does not ‘guide’ on future financial performance. However, management begrudgingly conceded that they expected the company will grow faster than industry association Nasscom’s projections of 16-18% industry growth – though this revelation was hardly akin to giving away state secrets!
TCS also enjoyed its best operating margins for quite some time, with Q4 at 28.0%, up 50bps yoy though a shade off Q3, and FY margins of 27.8%, over two points higher than the prior year. Infosys’ FY margins were a point down on the prior year, though at 29.4% still has the edge – just – on TCS.
With global headcount now pretty much at 200k FTEs, I asked TCS CEO, N. Chandrasekaran, at what point did he think they would need to fundamentally revamp their organisational structure (see How do you make a million march in step?). In a disarmingly frank response, he said that they had little idea how they would manage a 200k workforce when they still ‘only’ had 100k FTEs (a barrier they broke through in September 2007) but felt confident they would be able to manage growth. This was on the basis that the current organisation, in place two years, comprises 23 business units, each of which, Chandra posited, could become a $1b business in its own right!
Headline revenue growth in Europe finished at 20% for the year (FY10: -5%). This appeared to be mostly driven by the UK market where, by our estimates, FY revenues increased by 27% (at constant exchange rates) to c.£815m. This was almost twice as fast as Infosys UK, which we estimate grew by 14% to c.£440m.
Surprisingly, the only region where TCS appeared to go backwards was in Latin America, where FY headline revenues declined by 1% to just under $300m. Indeed by my estimates, headcount in Brazil, TCS’ largest Latam market, has been in continuous decline for quite some time – indeed, with fewer than 600 FTEs, TCS Brazil now has barely half the headcount of two years ago. TechMarketView Foundation Service clients can read more about the Brazilian IT services market in Brazil – Land of opp ortunity?.
