Tech Spending on the Rise in North America
As the global economy navigates uncertain waters, India’s Tata Consultancy Services (TCS) is betting on a surge in tech spending from its retail and manufacturing clients in North America. This optimism is fueled by the recent upswing in the banking and financial services segment.
A Season of Hope
The CFO of TCS, Samir Seksaria, attributes this expected growth to the strong holiday season sales in the US, which should boost consumer sentiment. Additionally, the resolution of labor issues in the manufacturing sector is expected to contribute to this upward trend. Seksaria believes that if these three verticals – retail, manufacturing, and banking – improve overall, the company will witness a significant recovery.
Global Economic Uncertainties
Despite this optimism, Seksaria acknowledges the broader global economic uncertainties and sticky inflation that have forced clients to be cautious with their tech spending. This is reflected in TCS’ revenue in North America, its largest market, which has declined for the fifth consecutive quarter.
Retail and Manufacturing: Key Contributors
Retail and manufacturing are the second- and fourth-largest revenue contributors to the $29 billion behemoth. The recent record-breaking sales on Black Friday and Cyber Monday by major retailers, including Walmart and Shein, as well as the 9% increase in US online spending during the holiday season, bode well for TCS’ prospects.
Communications and Media: A Laggard No More
Seksaria also expects the communications and media vertical, a capital-intensive segment that has been lagging, to see some improvement if interest rates start to decline. This sentiment is echoed by CEO Krithivasan, who believes that the incoming US administration will remove policy uncertainty and boost client confidence to spend on discretionary projects.
Insourcing Concerns Downplayed
TCS has also played down concerns over the rise of insourcing by multinational corporations through global capability centers (GCCs), which could potentially slash work that would have been contracted to IT players in the past. While GCCs may offer cost advantages in the short term, Seksaria believes that maintaining cost and delivering cost productivity in the long term will be a challenge for these centers.
A Growing Market
The India-based GCC market size is estimated to reach $105 billion by 2030, with a growing number of global companies increasing their local offices in India and expanding in-house teams. However, Seksaria remains confident that TCS’ expertise and ability to deliver cost productivity will help the company navigate this changing landscape.
A Brighter Future Ahead
As TCS looks to the future, its Mumbai-listed shares closed up 5.6% on Friday, its highest single-day rise since July 2024. With its fingers on the pulse of the global economy, TCS is poised to capitalize on the expected surge in tech spending from its retail and manufacturing clients in North America.
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