tcs: Outgoing TCS CEO Rajesh Gopinathan’s operating model may have caused concern

new operating model discussed last year outgoing CEO Tata Consulting Services (tks) Rajesh Gopinathan could cause “unrest” among some employees of the country’s largest exporter of software services, several company sources and industry experts told ET.

However, the link between the restructuring and Gopinathan’s sudden departure cannot be clearly established, analysts and insiders say. In an unexpected move Gopinathan announced his departure from the company after a six-year tenure as CEO and a 22-year career with TCS.

He is the only CEO of TCS to ever quit, with four more years left to remain as CEO. Insiders also reported that, despite some “negative sentiment”, the new structure received approval from the board of directors of the company and from Tata SonsChairman N Chandrasekaran, it was a work in progress and things were going well despite some teething issues.

The lack of any top-level employee turnover and strong growth in TCS over the past three quarters do not indicate any negative impact from the reorganization, industry analysts said.

TCS did not respond to ET’s request for comment.

In March 2022, the tech giant organized the entire company into four new business groups to focus more on customers as it hits the $50 billion revenue milestone by 2030.

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“With the new structure, it is difficult to find accountability in some cases where there are too many chefs in the kitchen, this is completely different from the usual TCS interactions, which are usually disciplined and focused on results,” said Peter, chief executive of an IT research company. Bendor Samuel added that given TCS’s recent streak of good results, it’s hard to say whether the restructuring has caused a significant performance hit. Several executives felt “unhappy” with having to deal with smaller clients as their accounts got bigger and moved to another division.

The sources added that the organizational restructuring announced in April last year could also lead to confusion in customer relations. However, other analysts suggest that it is too early to assess the impact of such massive changes on the scale of TCS.

An equity analyst who did not wish to be quoted said that in the case of peers infosys And Wipro, the appointment of a CEO and organizational restructuring activities were accompanied by high staff turnover. There was no such churn at TCS when Gopinathan was appointed in 2017, re-appointed in 2022, or after the restructuring program was introduced last year.

“The underlying data does not indicate an increase in the churn of top-level employees, or even a change in growth rates.” TCS meets or exceeds revenue growth reported by Infosys for the past three quarters. Only a retrospective analysis of the impact of such changes is possible, and three quarters is a very short time for this, ”the analyst said.

Under the new structure, the existing “acquisition” of customers should attract new customers, the new “incubation” business group will support customers who are at an early stage of interaction with the company, ideally customers with income below the $20 million range.

Once mature to meet a wider range of requirements, they will be serviced by the existing “growth” unit, which includes 200 Industry Service Units (ISUs). Finally, the largest clients with long-term commitments (ideally over $100 million) will be transferred to the new “transformation” division.

Mrinal Rai, chief analyst at ISG, said the main purpose of the restructuring was to expand TCS’s transformation commitment to large clients and expand its presence in the midsize business segment. He added that both of these indicators have improved over the past year, but this may be due to more than just restructuring.

“TCS is generally viewed as an IT service provider serving large corporate clients. Based on our research, we also see TCS making inroads into the small-mid market segment as well as markets such as Europe,” Rai said. The new structure created some internal tensions, especially when it came to attracting new clients, said Phil Fersht, chief executive of HfS Research.

“The new structure was well-suited to growing existing large customers rather than attracting new customers,” Fersht said.

“There has been some stress on Gopinathan because of this, some people have been unhappy and unhappy about it, but any transition has its own set of issues before it settles down,” another source said. The experts added that in some cases, clients did not understand whether they needed to interact with the head of the group or a specific head of ISU, which led to inefficiency in supporting new (especially small) clients in the system.

“Leaders who were trained with the earlier industry service unit model have been redeployed to lead these new groups. In some cases, people suddenly found themselves in charge of much smaller but new customer markets. Obviously there were some teething issues,” said a TCS source close to initial development. ET was unable to independently verify whether these issues led to Gopinathan’s resignation.

Four new divisions were created: Acquisition, Relationship Incubation, Enterprise Growth and Business Transformation. Groups were created based on the amount of income that an individual client provided to TCS, with the goal of moving each client to the next group by acquiring additional business from them.