Interview | TCS CEO explains why working from office is the right thing to do

K Krithivasan, Chief Executive Officer (CEO), Tata Consultancy Services (TCS) interacted with CNBC-TV18 Managing Editor Shereen Bhan at the Nasscom Technology & Leadership Forum on Tuesday. The TCS CEO shared insights on the business outlook for India's largest software services firm, the impact of generative artificial intelligence (AI) on the company and the wider IT sector, India's startup ecosystem, the debate around the work-from-office versus the work-from-home or hybrid model, and more.

We are continuing to be cautiously optimistic, more in the medium to long term. As we discussed before, there is so much technology modernisation that needs to happen. Everyone wants to leverage generative artificial intelligence (Gen-AI); there is so much work that needs to be done. We believe there is a lot of opportunity. But there could be medium-to-short-term disruptions because of the overall outlook for economies.

It's too difficult to call. I don't want to talk about the current quarter. Next year, I would say, would be better than this year.

Some of the industry verticals that are large for us, we believe, have bottomed out, and we are starting to see early green shoots. That's what gives us optimism that the coming year could be better than this year.

We've been quite optimistic about technology in the long term. The kind of value that technology can add is phenomenal. One of our CTOs used to say, like the famous Moore's Law, which is becoming applicable for the knowledge of today—the amount of value that we will be able to add with the same amount of workforce could double every 18 months. If you factor that in, that's the kind of outlook we all need to have. I don't want to give a number, whether it will be 10% or whatever, but the long-term outlook is very positive.

We don't even give short-term guidance. How am I going to give a long-term stock market prediction? I don't want to put a number.

I believe decoupling is too strong a word and a word we are using too early.

We have not decoupled. What's happening now is that many organisations have hired ahead of the curve during the pandemic. And as the demand stabilised and softened, we started using our existing workforce and trained them. We've been using the bench to fulfill the new requirements. To call it decoupling is too early, and to say that it is because of generative AI is not accurate.

Maybe. In most places, for generative AI, we are doing initial experimentation and proof of concepts so that it becomes mainstream. To say that that is causing the reduction in the workforce is not accurate.

We agree with him. What you're seeing in every technology is that there'll be some displacement and disruption, but eventually, we'll be able to do more work. When you have to do more work, you need more people to do it. Our going-in assumption or planning assumption doesn't factor in, we have to reduce the number of people, and we believe that we have to continue to hire the same number of people that we are doing now.

No, we don't; we are not planning like that. But we probably need to change the way we train people. And the kind of people we hire may also change. But we don't expect to reduce hiring.

If you look at the broad spectrum of any work, I am very close to software development, if I take that as an example, but you can extrapolate to many activities that we do. What generative AI is doing is increasing productivity in the middle, where the actual programming takes place. But where you are trying to gather the requirements, validate the requirements, do the design, or what is the critical thinking required or the planning process, or towards the end where you need to validate the output of the machine and create a better superior user experience, those areas will not go away very quickly.

What probably may get replaced or disrupted is where you get more productivity in the middle. What we believe is that we will need to continue to have critical thinking, the ability to do strategic planning and creativity, these are the things that will not go away, and they are probably going to need more numbers than what you have today.

So the kind of training that you do for your people, it's not that the fundamental training will go away, but the kind of training you do could be around critical thinking, strategic planning, or fostering more creativity, probably the areas you need to have more skill sets within the team.

When we met in Davos, I explained to you the way we look at how generative AI or any of these AI technologies will assist. There are three phases. We are looking at an initial set of programs, what we call assist, just helping a human do the job better.

The second is to augment and participate in the work that humans are doing. So the first could be a call centre where a question comes up about what is in this document, so summarise the document and answer the question. The second aspect will be helping the wealth advisor suggest better products. The third is transforming the products and services to create new opportunities. In the initial stages, you would see more assistant augments. And probably for you to see more programs or more work that gets into that transform space, it will take more time. It will still follow the curve, it's not going to happen overnight.

When we looked at it,  people were working remotely, and things were getting back to normal, but our associates continued to work from home. What we missed, first is the collaboration. At least within TCS, we value collaboration and camaraderie a lot, and that was missing.

While Zoom and Team are very efficient mediums, we overlook the importance of informal conversations—the chit-chat that happens in the office. The second thing we missed is that, in TCS, at least we keep saying the values are very important to us. How do we impart value to an associate who has not even come to the office once? In fact, in TCS, about 30 to 40% of the associates joined in the last two to three years, and in the first two years, they have not even come to work. If you don't even come to the office, what is the value that you stand for?

A third point is when we look back on our careers, organisation enables a lot of training and a lot of opportunities, but the most important learning came from seeing how the mentors and the seniors behaved in a given situation and getting to know what the best way is to handle a given client situation. It cannot be replaced by any amount of training and you get that only by observing continuously. What the rest of the team does is the maximum value we get. And by saying I will be flexible—I will do two days a week or whenever I like—you lose out a lot. And eventually, we believe in what TCS stands for what we all value and want to give to our customers. It is important for associates to be there every day.

We believe that's not the right way for an individual to develop their career.

Don't get me into trouble.

Almost 100% for customers. They are all keen on getting their workforce back to work, back to the office every day. It's very interesting, like, at the beginning of the pandemic, we all somehow got into group thinking very quickly and believed working from home was the right thing to do. But when things became normal, almost everybody now believes working from the office is the right thing to do. I have not come across any customer who said, why are you asking associates to come to office.

We have more than 200,000 women associates.

You have to look at what we are doing, and how many leaders are there at multiple other levels. As time goes by, you will see more and more of them. We have a very conscious program to encourage women to take leadership roles because we have to look at why this is not happening. In the early days, women used to take on roles that were easy for them to balance their work, and such roles also ended up not being considered for leadership positions. So today we are very actively encouraging them to take on roles that will put them on a high-growth career path. If you look at the next level and the subsequent level, the numbers are increasing year after year. So you would see a woman CEO sometime.

AI is a very interesting thing and it probably aligns very well with what Indian ingenuity and creativity can do.

Our people are the biggest advantage, we have so many people. If you look at AI as only improving productivity and reducing the compute hours required, that's only one aspect. But what we believe is that by using generative AI, you can create value across the spectrum in many places. With such a diverse set of experiences that Indians have and the exposure to the different ways of doing things that we have; we talked about creativity like we say that 'Indian jugaaḍ' right like that itself can become very valuable for us as we work with this technology.

We keep explaining this: discretionary spend took a small beating. But otherwise, the problem most of us faced was not because of a serious reduction in discretionary spending. It is because of the programs that were started a few years ago and were not yielding sufficient ROI that they were paused, which caused the reduction or lack of growth. We continue to win projects; we continue to see programs that are discretionary in nature and transformative in nature. It is in the same proportion as before, maybe the proportion is slightly lesser; probably if you used to have 50% discretionary per project, maybe it is at say 30 to 40%. But it's slowly increasing.

We have been collaborating with them for a very long time. We used to call them captive in those days. Now, you call them global capability centres (GCCs). One of the large banks, when they set up their GCC in India, they set it up out of our premises and we helped them. We lent our recruitment engine to them for the first set of people. Collaboration happens all the time with these GCCs. There is a natural collaboration; there is a piece of work; they cannot outsource, but they want to leverage their talent in India. I have been in banking for so long, almost every bank has GCC in India, and we continue to grow with all of them. We work with them in India, we work with their businesses in the US or any other part of the world.

We need to look at new areas where technology can be leveraged. Initially, we started with software engineering, then we branched out into the back office, then we branched out into infrastructure. Now the one area we talk about is: how do you branch out beyond the CIOS? Like even today, most of the Indian IT work is concentrated around the technology in the CIOS. But there's so much work that gets done beyond the CIOS today, there's a lot of budget available beyond the CIOS. Within TCS, we are quite focused on leveraging our domain capability, industry capability and talking to the other CXOs and trying to find out how we can give them a better solution and be more efficient. I think that's one immediate area where we are looking in terms of technology.

We actively look at M&As, but I believe our bar has always been high. We operate at a particular margin. When we acquire another organisation, our bar is that we should be able to use existing TCS talent and combine that with the capability we acquire, and there should be a multiplier effect. We will not do M&A, just to add some more revenue to our P&L. If there is no multiplier effect, we don't go for it. That's the reason you see a small number of M&As, and whatever M&As we have done, we've been very successful.

One result that you see is the number of all these billion-dollar valuation unicorns that you see in India, and it’s a number that's increasing, so that is important hope. With the kind of creativity people come in with, I'm completely bullish on the Indian startup scenario.

We constantly look at opportunities where we think that we can acquire some of these capabilities. But sometimes, to be careful, startups function very well in their cocoon. If you bring a large organisation, we should not kill their creativity. As we look at opportunities, we have a unit called Co-Innovation Network that constantly looks at startups not only in India but across the world. But we help them scale; by introducing them to our customers, we show them the problems that are possible. So that's our approach. I think that you can work very well with them rather than just acquiring them.

In TCS, at least in my view, we operate like a big, small company. When I joined TCS, about 35 years ago, Rajesh was sitting here, and we share the same mindset. Also, what we do is, make up a very small number of small units, like each client, who tries to behave as if they are one small independent entity. So, we ensure and encourage them to operate like that.

From a worry perspective, I don't look at, other than the global economy doing well. And I am sure that over a period it will all work well. I focus a lot on internally; my teams collaborating well, and are sharing and learning from one another.

They are, and we will continue to do that, so those are the topics we talk about. The values are something on which I focus a lot. If I am concerned about something, protecting its value is something that I am concerned about because it's not for any esoteric reason. I believe value gives us a competitive advantage.

You can say that. We want to ensure that we protect the value and DNA of TCS; that's something I think a lot about.

Reasonable.

Once in a while. We do try to ask, try to learn something, definitely at least once a day.

What questions is Shereen (Bhan) going to ask me?