A company’s decision to switch back to a vertical-based operating structure could make it better equipped to deal with the country’s macroeconomic concerns, analysts say.
Mumbai’s largest IT firm, TCS, split its largest vertical, BFSI (banking, financial services, insurance), into two, but a more geographic-specific approach is needed in the current environment than currently offered by TCS.
“For TCS, its recent change in structure has caused a lot of internal politics and issues with access to scarce resources. So going back more to what they are familiar with should help calm the waters as they target more client wins and expansions,” said Phil Fersht, chief executive of IT research firm HfS Research.
Chief executive K Krithivasan led the BFSI vertical while former CEO Rajesh Gopinathan was in charge. During that time, he ensured that BFSI remained separate from TCS’ 2022 operational restructure, which categorized the company into four units based on account size.
He announced close to a dozen changes to the company’s leadership on Friday, as well as a new operational structure aligned to its business verticals.
According to an equity analyst, the people who previously led client-specific groups are now leading the top new verticals, including Susheel Vasudevan, who was the incubation group’s manager with a focus on clients under $20 million; Krishnan Ramanujam, who led the enterprise group for clients with $20-100 million budgets; and Debashis Ghosh, who led the business transformation group with customers worth $100 million and more.
“The reporting hierarchy has not changed. What has changed is that Krithivasan needs these people back in their core verticals managing the biggest customers in each segment, because smaller and discretionary deals have dried up and they need to source demand,” said the analyst.
The analyst said the idea behind the 2022 structure was to incentivise leaders to grow the size of individual client engagements, and those performance metrics will continue to be relevant despite the updated business structure.
ET had reported on March 20 that several TCS executives felt “disgruntled” for having to deal with smaller accounts, as their accounts became big and moved to the other unit under the 2022 restructuring. Customers, too, were facing difficulties in figuring out the correct stakeholders under the structure.
To accommodate its scale, TCS has split its BFSI vertical into two areas: North America is lead by Susheel Vasudevan; the other regions are managed by Shankar Narayanan.
“On the one hand, BFSI is Krithivasan and TCS’ strongest domain, so there is a need to efficiently maintain the pace of growth within the segment,” said Jain. “On the other hand, current market conditions required better control on geography-focused sales to drive large deals, rather than a client group-focused approach.”
TCS’ BFSI vertical reported more than Rs 86,000 crore revenue in FY23, which was about 31% of the company’s total revenue.
TCS would likely consider more region-specific splits when each of its verticals reaches a certain size and scope, according to Jain. According to him, the present environment is more suitable for significant vendor consolidation transactions across industries that call for a domain-specific strategy.
“The new vertical structure also allows the business group leaders better control on sales teams within domains where they have expertise for decades,” he said.
Sources close to the company have said that the four client groups–acquisitions, relationship incubation, enterprise growth and business transformation–introduced by Gopinathan in 2022 will continue to exist within the seven business groups.