TCS Will Continue To Invest In AI/GenAI, Energy, 5G/6G & Talent TCS's global growth estimated at 3.2 percent in 2023 is projected to continue at the same pace in 2024 and 2025

As uncertainty seen through last year is expected to persist for the next few quarters, Tata Consultancy Services's (TCS) capex investments are projected to remain subdued as enterprises focus on maximizing returns from existing investments, resulting in muted spending on infrastructure, software, and services. Identifying the sectors, in a letter to shareholders, N Chandrasekaran, Chairman, Tata Consultancy Services, indicated that the IT firm would continue making investments in Artificial intelligence (AI), Cloud infrastructure, energy transition, 5G & 6G, and upskilling its talent.

TCS's global growth estimated at 3.2 percent in 2023 is projected to continue at the same pace in 2024 and 2025. Despite challenges, spending on IT services has been resilient so far. Cloud technologies have become the mainstay of an enterprise's agenda and key to achieving sustainable growth. Global IT Spending is expected to increase 8 per cent in 2024, with enterprises emphasizing on organizational efficiency and optimization.

Data Source: TCS

"Across industries globally, there are multiple mega trends that are shaping the priorities of businesses: AI, new energy, supply chain and talent. These transitions will require substantial investment in technology across industry sectors. TCS is making significant investments and building capabilities to partner with customers during this phase of rapid technological shifts," said N Chandrasekaran.

AI, GenAI

In FY 2024, TCS has consolidated AI and Cloud expertise with the creation of the AI.Cloud unit. In addition, each of the business groups are developing domain-specific AI/GenAI offerings relevant to the industry value chain. Over 300,000 employees have been upskilled on GenAI technologies in FY 2024.

AI is also being embedded in Cybersecurity services to enable predictive capabilities. GenAI technologies will impact almost every sector and country going forward. Enterprises have already invested in Cloud, data infrastructure and large processing power which will aid AI/ GenAI. GenAI will not only improve productivity, but also create impact. TCS aims to make "Every TCSer GenAI ready by 2025"

TCS also invested in 'Responsible AI' framework in intrapreneurial teams. It will continue investment in skill building, certifications, credentials, IP and accelerators.

Energy transition

Global energy transition is accelerating, and businesses are making clear commitments towards a sustainable future. The energy requirement of the fast-changing world is enormous. Key is to lower the cost of energy while also transitioning to renewables. This transition requires large investment in technology, electric mobility, renewable power, hydrogen and sustainable fuel. To partner with customers on their energy transition agenda, TCS is investing in research on green hydrogen, biofuels; developing digital platforms to help customers reduce Scope 1/2/3 emissions. "Our proprietary ESG framework enables enterprises to build transparency into operations and simplifies compliance reporting," chairman said.

In FY 2024, TCS further brought down its Scope 1 and Scope 2 emission by 80 per cent over base year 2016. This was despite increased electricity consumption in FY 2024 from employees' return to office and addition of new offices to the reporting boundary. TCS will need additional CAPEX and OPEX to ensure compliance. The company has envisaged this as a risk, and is developing greener solutions and transitioning to renewable energy. In FY 2024, RE accounts for 74 per cent of total energy and has increased the percentage of green tariff. i. TCS' new campuses are designed according to green building standards for energy and resource efficiency to reduce the carbon footprint. The company invests in energy efficiency initiatives taking into consideration a payback period of 4-5 years. It is also retrofitting its older buildings with energy efficient equipment.

5G/6G

TCS is engineering the 5G/6G communication stacks using open standards. BSNL awarded TCS the mandate to supply, install and commission the pan India 4G/5G mobile network across 100,000 sites. This project is governed as a 'mission-mode' project by TCS, BSNL and the Department of Telecommunications. As of April 2024, TCS has delivered 11,000 sites and is on its way to complete the roll-out by end of this year. BSNL has already added to the scope another 22,000 sites to further densify the coverage and to include 'saturation' sites. This is to ensure digital inclusivity to rural and remote areas of India.

Setting up communication infrastructure, two state-of-the-art labs for future ready communication infrastructure and interoperability have been set up at Bengaluru and Gurugram. Investments are being made in multiple niche technologies such as 5G SA Core, O-RAN radios, to build these solutions indigenously.

Upskilling its talent

TCS continues to invest in upskilling its talent base of over 600,000 employees. Employees are actively leveraging experiential and personalized learning on a wide range of emerging technologies, clocking over 51 million learning hours in FY 2024. TCS continues to build talent supply chains by partnering with leading educational institutions, shaping the curriculum for newskill needs for the future. TCS has a strength of 601,546 employees, "Our LTM attrition in IT services was 12.5 per cent, down by 760 bps over the previous year. Our workforce continued to be very diverse, with over 152 nationalities represented and with women making up 35.6 per cent of the employee base and talent retention reverted to normal range in FY2024," said the company's annual report.

In FY 2024, TCS has crossed annual revenues of INR 240,893 crore, a growth of 6.8 per cent, over the previous year. With focus on operational excellence, this growth has come at an industry leading operating margin of 24.6 per cent, an increase from 24.1 per cent last year. The order book for FY 2024 came at $42.7 billion supported by strong client relationships and engagement. Client metrics continue to exhibit healthy progress with strong client additions.

Key demand drivers expected to power the company's growth in FY 2025 include, technology transformation, business transformation and operations.