TCS Corporate Sustainability Report 2010-11 - Tata Consultancy ...

Sustainability of Business Performance
Key stakeholder concerns around the sustainability of our business performance are centered around
five major areas: whether there is sufficient headroom for continued growth, whether the Company’s
size could impede agility, whether supplyside constraints could hamper growth or impact margins,
whether macroeconomic uncertainties or new technologies might impair business and lastly, whether
the company is investing sufficiently in innovation. Some of these concerns are addressed in this
section of the report.
Some of the key risks to our longer-term sustainability, and TCS’ approach to mitigating these risks are
summarized on Pages 26-29 of our FY 2011 Annual Report.
Demand-side Sustainability
TCS has had a consistently stellar track-record of revenue growth. Our 6-year CAGR is 22.5% and we
closed FY 2011 with a revenue of USD 8.187 Bn (up 29.1% YoY).
Other highlights of FY 2011:
n 97.8% of revenues from existing customers
n Volume growth of 29.6% YoY
n Gross Margin of 45.3%, EBIT margin of 28.1%
n Gross headcount addition of 69,685
n Net headcount addition of 38,185
TCS believes that a strong growth trajectory is sustainable in the foreseeable future because
(a) the global market for IT services is growing, (b) offshore outsourcing is today a mainstream strategic
option, (c) TCS has the strong foundational elements needed to partake of this growth and
(d) TCS’ strategy for longer-term growth is delivering results.
Global market: Headroom for growth
Figure 5: Revenue Growth in USD (FY2006-2011)
According to the IDC-NASSCOM Strategic Review 2010-2011, global spend on IT Services and BPO was
estimated to be $732 Bn in 2010, i.e. 2% higher than in 2009. This is a highly fragmented market in which
our marketshare is ~1%, suggesting significant headroom for growth.
Going forward, technology spending is expected to further increase as the technology intensity of
businesses increases and lagging verticals as well as geographies play catch up. The 5-year CAGR for the
period 2011-2015 is expected to be 4% according to Gartner. Historically, TCS’ growth is far higher than
the growth in global spend on IT services. This is due to shifting customer preferences favoring greater
offshore outsourcing – a shift that became even more pronounced in the last few years of global
economic dislocation and drift.
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