Transamerica has entered into a multi-year partnership with more than $2 billion of revenues to TCS, which is expected to be completed by the second quarter 2018. In an interview with ET Now, Rajesh Gopinathan , CEO and NG Subramaniam , COO, TCS, explain the big boost to BFSI space this deal will give and how the deal flows and announcements of late have been truly transformative.
All the brokerage reports, brokerage reports are sayig everything is great with TCS result but the BFSI vertical is slow. Is that the headline from TCS this quarter?
Rajesh Gopinathan: The most important thing that we want to talk about is the new deal that we have signed in the US with Transamerica and it is in the BFSI space — in insurance. It is the largest deal that TCS has ever signed. We are very excited about it. It is strategically very important. We are going to be bringing on more than 10 million policies on to our bank's platform which increases the total count there by more than 60%. It is a truly transformative point for us. We are extremely excited about the whole deal, both for its volume and its strategic importance for us and our ability to stitch together our core capabilities in digital in enhanced technology stack.
What is the size of this deal and how exactly will the deal flow move?
Rajesh Gopinathan: This deal is significantly larger than the one that we announced earlier with Nielsen. We are not giving the specific number but it is very large. It's the largest that we have ever done and it is a fairly complex profile. It has a big transformative component at beginning and then it has a long operations segment. It will showcase the best of TCS and our capabilities on digital.
It will also showcase our capabilities from our product perspective. In fact, I should ask NGS to talk about it a lot more because he is truly the architect on the product side and the entire team that has been very focussed. It is the net result of 10 years of very-very focussed investment and our ability to envision and to imagine what a transformative future looks like to believe in that and then to lead this industry in this transformative journey. NGS probably you could add to that.
NG Subramaniam : Deals like this happen when the whole of TCS comes together. The core of the expertise is the TCS banks policy administration, investment administration platforms and we have successfully been doing this policy administration business in the UK under Diligenta. Over 17 million policies were being administered there. The knowledge and the experience that we have gained, we are taking it to other markets. It is a big milestone for us, ensuring that such capabilities are brought to United States which is a very huge market.
We are very happy that the first customer in this field that we got in the US is such a solid customer. Over 10 million policies are to be administered and a variety of policies and products that will cater to some of the exacting requirements of the US market. We are extremely proud and extremely happy that we are partnering with the Transamerica on this opportunity.
I want to move beyond the deal and talk about the big picture. What is your assessment so far for 2018 in terms of IT outsourcing and the kind of conversations or the kind of initial conversations you have had with your clients for this year in terms of budgets?
Rajesh Gopinathan: The big picture is in the last three months, the kind of deal flow that we have seen and the kind of announcements that we have seen is truly transformative. The underlying element is that digital is not about long hair and pretty pictures. Digital is about making it work for customers and TCS has a unique blend. We have the ability to take digital technologies, train that in our core, create that capability, marry that with our breadth of technology expertise, combine that and then offer solutions which are significantly large and add to the growth and transformative agenda of the customer.
If you think about the last three months, we announced this transformative deal with Rolls Royce which is by far the largest deal in the digital space and truly transformative leveraging our IOT platform, leveraging our intellectual property, leveraging investments that we have done and combining that with our technology as well as engineering expertise.
Earlier we had announced a similar kind of platform deal in the UK. We announced the Nielsen relationship and enhancement of that partnership to take them to the next level of growth as they expand in the online space. We are leading them in that transformation journey.
The recent announcement with Marks & Spencers where we are looking at a complete transformation — the total technology plus business process offering.
So far from seeing technology deals becoming smaller in size, we are actually seeing an expansion in deals. Of course, it is limited to people who have their breadth of capability and who have combination of both digital as well as domain and contextual knowledge but we have that unique capability and we are able to actually stitch together absolutely industry leading deals of very large size and we are truly excited about it.
Looking at the future, this is a defining quarter for us. It completely sets us aside. We are in different space and these underlying, the differentiation that we have been talking about and so we are really excited about it. Beyond that quarter on quarter whether this segment is up or down, that is quite immaterial in this larger context and we have been also demonstrated the ability to systematically go after individual segments consistently invest into it, have a very clear vision about what we are and what we can do and to make that count and deliver on the promises that we see in front of us. So truly we are very excited about where we are today.
I have a followup question. The great part in your results is the digital growth. It is an outstanding growth of 14% but this is much higher than your historical average of about 6% to 7%. What is the new normal for your digital business — the growth that you have reported with your Q3 numbers or the historical growth rate of 5% to 6%?
NG Subramaniam : Digital will continue to grow faster as enterprises and organisations are enhancing their own internal capabilities and starting to look at larger transformation in leveraging technologies like blockchain, IOT, cloud, agility and so on.
We believe that deal sizes will become larger and larger and the transformation capabilities and the level of customer experience mean that we will participate in more and more end-to-end digital engagements.
If you look at our Q3 numbers today, except the BFSI segment, all the other verticals, geographies, everything has grown significantly. And even BFSI has grown though it is limited to North America and Canada. In North America, it is more seasonal and some of the things related to furloughs and things like that but overall we remain confident that BFSI will pick up.
The answer which I was looking for is to understand that what is going to be average digital growth? Should we consider the Q3 digital growth as a one-off or could that really be the new reality for your digital business because the percentage variants between Q1 and Q2 and Q2 and Q3 for your digital business is very large?
Rajesh Gopinathan: I could only pick up parts of your question but I think you are asking whether this would be the new norm on digital? If that is the case, I would say that this increasing size in digital and the ability to stitch it together would definitely be the norm going forward and how it plays out, of course we will have variations to it on a period to period to basis but in terms of its transformative power and our ability to lead that transformation, we are quite confident about it.
The concerns for TCS are now getting reduced. Two years ago, you had LATAM, you had volatility in your India business. There were problems in Japan. But now it is only a marginal slowdown in your BFSI vertical. Retail business is also growing. Digital business is also growing. So, can I say that double digit growth for TCS is coming soon?
NG Subramaniam : Absolutely. We remain focussed towards growth and some of the large deals that we have signed and we have announced should do well to facilitate getting there in terms of achieving a double-digit growth for TCS. Clearly, if you look back three-four quarters, we had several soft elements like LATAM, Japan, Diligenta. A lot of the softness has been overcome and the sole point right now is that the some softness that we see in the North American financial institutions and last quarter I also explained why that is so, some of these institutions are investing heavily internally in building their own digital capabilities in adopting Agile and collaborative work places and workforces transformation.
They are achieving this self-sufficiency and combined with the second wave of digital adoption and the large deals that we have signed across verticals – in retail, banking, financial services and insurance or the platform deals — should augur well for our growth and we hope to be getting back on track to achieve this double digit growth and so wish us well.