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TCS expects post-pandemic digitization cycle to continue

Bnamericas Published: Thursday, September 15, 2022
TCS expects post-pandemic digitization cycle to continue

The demand for digital transformation and the modernization of business processes through cloud computing has entered a post-pandemic cycle involving more strategic and structural projects.

This cycle is set to last at least until 2025, according to Tushar Parikh, Brazil head of Tata Consultancy Services (TCS) and leader of TCS LatAm’s banking and financial services consulting (BFSI) division.

“My perspective is that by 2025 there will still be a lot of demand for cloud and digital transformation. Many customers will still go for business modernization, moving from legacy to new technologies. By 2025 we expect the same level of demand in digital technologies,” Parikh (pictured) told BNamericas.

The company, specialized in corporate ICT services and integration, is part of Indian conglomerate Tata. It has been operating in Latin America for 20 years, advancing projects for the financial sector as its core business proposition.

TCS' regional customer base surpasses 600 clients, including local and multinational companies, according to Parikh. “We are working with 8 of the 10 largest clients in the financial sector, banks and insurance companies in Latin America.”

Asked about expected demand in the second half of the decade, Parikh said new technologies and products will emerge and others mature, although the search for cloud and current formats should not disappear completely.

As example, Parikh cited the evolution of technologies related to electronic payments, open finance and new data architectures, such as edge computing or even the metaverse. In 2020, old mainframes were still omnipresent, he said. 

The company started operations in Latin America in 2002, in Uruguay. According to Parikh the country remains an important nearshore center for the provision of services to clients based in other markets.

After Uruguay, the company expanded to Brazil, Mexico, Chile, among others. Currently, TCS is present in nine countries in the region, with a headcount of around 25,000 professionals, Parikh said. Brazil and Mexico are the main markets.

“In Mexico, where we have more than 10,000 employees, we work hard on the nearshore concept, leveraging its proximity and economic ties to the US.”

POST-PANDEMIC CYCLE

Like other companies in the sector, TCS suffered a sudden business stoppage when the pandemic broke out. Business resumed quickly, however, driven by the need for companies to adapt to the digital environment in the face of mobility restrictions.

“The first year of the pandemic, our growth was flat. Like TCS, other companies in the sector saw impacts during the business downturn. But from the second year [2021] on, demand increased due to digital transformation. We started accelerating again and returned to pre-pandemic levels,” Parikh said.

Excluding 2020, the company has been growing consistently at double-digit annual rates in its main markets in the region, according to Parikh.

Globally, TCS reported revenues for its fiscal quarter ended June 30 of US$6.78bn, up 10.2% year-over-year, led by Latin America.

Among major markets, North America grew by 19.1%, continental Europe by 12.1%, and the UK by 12.6%. In emerging markets, India grew 20.8%, Asia-Pacific 6.2%, Latin America 21.6%, and the Middle East & Africa 3.2%.

There are potential hurdles ahead, however. 

In a recent report, Goldman Sachs predicted a slowdown in dollar revenue growth in the face of impending macroeconomic stress for leading Indian IT groups such as TCS and Infosys.

"We believe a slowdown in discretionary IT services spend around the growth and transformation agenda will be quite material and something not yet completely reflected in the double-digit revenue growth forecast for the industry for FY24," according to a Goldman Sachs report.

But Parikh remains upbeat, especially about business in regions with considerable room for digitization, such as Latin America. "We never know how the next cycle will exactly be like. But there will always be offers."

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