TCS expects the USD 1 billion retail sector business in the UK, Europe to outpace the company’s overall revenue growth on the back of strong demand for IT services, a senior official has said.
The country’s largest software exporter on Wednesday announced a multi-year, multi-million dollar deal with Marks & Spencer, with which it has been working for over a decade, to transform the British retailer’s human resource operations. The company’s business head of retail in Europe, Abhijit Niyogi, told PTI that the demand for IT services remains strong in Europe and the UK despite macro headwinds like inflation, rate tightening, political turmoil in the UK and the ongoing Russian invasion of Ukraine.
Stating that the business headed by him has a topline contribution of over USD 1 billion a year, Niyogi said it has been clocking a revenue growth faster than the one reported by the company on an overall basis for the last two-three quarters. Around 10-15 per cent of the company’s reported total contract value (TCV) comes from the business. At present, it is chasing mid to large-size deals having a revenue possibility of around USD 300 million, as demand from retailers continues in the market.
When asked if he sees the business continuing to outpace the company’s broader revenue growth, Niyogi replied in the affirmative. “At least in FY23, I don’t see any slowdown specifically at the back of a very strong Q1. What we see for Q2 and Q3, the pipeline is very strong, the conversion ratio is also quite good, and the demand is at an all-time high,” he added. In the first quarter of the fiscal, TCS reported a 10.2 per cent growth in revenues to USD 6.7 billion, and the retail sector led the pack with over 25 per cent growth in revenues on a constant-currency basis.
He said the retailers want their software vendors to be partners both in good times and also in testing times, and added that clients are not so skeptical because of the macros. The profit margins are typically wider in growth and transformation deals like the one which it has signed with M&S, because clients want to invest in the futuristic services which are of relevance to their customers, and also the importance of the brand.
About 70 per cent of the work on the M&S deal will be offshored to India, while the rest will take place locally in the US, Niyogi said, adding that much of its existing staff with domain expertise to understand regulatory processes governing the retail sector in the UK will be deployed on this project. While TCS has worked on HR solutions in the past as well, the work for M&S, which has over 80,000 employees, is new because it is being carried out on the Oracle supply chain management platform, he said.