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Economy

Tata Consultancy Services' Natarajan Chandrasekaran takes the long view

MUMBAI -- Natarajan Chandrasekaran, the CEO and managing director of Mumbai-based Tata Consultancy Services, has a passion for long-distance running. His favorite pastime has taught him at least one valuable lesson that applies to his day job.

"One thing I've learned from running marathons is that everything is a long haul," Chandrasekaran said. "Nothing happens overnight."

Since he got into running in his mid-40s, Chandrasekaran, 53, has gradually improved his times and has traveled the world for marathons -- from New York to Tokyo. On his watch, the performance of India's largest information technology services company has also steadily improved despite global headwinds.

Chandrasekaran in 2009 succeeded Subramanian Ramadorai, who resigned after a 13-year term as CEO. The owner-managed company encourages leaders to serve for lengthy periods, allowing them to focus on long-term goals. Chandrasekaran is expected to remain at the helm at least until the end of October 2019.

TCS' market capitalization has surpassed $70 billion, making it India's most valuable company. This figure represents an approximately fourfold increase since the end of August 2008 -- just before the onset of the global financial crisis.

The company's consolidated net profit has largely continued to expand at a double-digit pace, barring a slip into the single digits in the year through March 2009. Consolidated revenue is up almost 300% from the fiscal year ended in March 2009; in the fiscal year ended this March, it topped 1 trillion rupees ($15 billion).

Mohit Jain, an analyst at Anand Rathi Institutional Equity Research, described Chandrasekaran as "one of the most effective CEOs in IT during the financial crisis."

TCS weathered the crisis so well, in part, because its new CEO immediately set about restructuring its global operations.

Chandrasekaran reorganized the business into numerous, smaller operational units. Each one has pursued sales growth in its own domain -- financial services, manufacturing, retail, consumer goods, telecommunications and media. These units manage their own costs and profits, and are required to cooperate with technical divisions in order to propose the best solutions to customers. "The core thing is customer-centricity," said a senior TCS executive.

With its reputation for management stability, TCS is increasingly drawing customers away from rivals such as Infosys, which has seen tepid growth amid internal strife. TCS' payroll has grown, too: It now employs a total of 350,000 people, up 150% from its headcount in 2009. And it maintains a relatively high utilization rate of 80% -- a measure of how much billable time its employees put in.

A TCS executive said Chandrasekaran was quick to initiate projects in new fields such as cloud computing. The company is keen to add value to its services through mobile apps, robotics and the internet of things as well.

In 2012, TCS built a specialized research and development base in Silicon Valley. Last year, the company unveiled an artificial intelligence platform with machine-learning capabilities. The software can handle numerous back-office tasks, such as accounting, helping clients reduce operational costs. TCS has started marketing the software in the U.S. and Europe.

Services related to new digital technologies now comprise 15% of TCS' total sales.

Still, the global IT competition is intense. And rising personnel costs are gradually eroding the profitability of TCS and other Indian service providers. This means the existing business model -- under which the companies achieved price competitiveness by hiring Indian engineers at low wages -- may be becoming obsolete.

TCS' digital strategy puts it on a collision course with big Western players such as IBM and Accenture. Its massive workforce could end up being a burden rather than an advantage. Chandrasekaran's success in crafting a new model could determine the future of India's entire IT services sector.

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