TCS seeks to use Microsoft AI partnership to improve margins

By Sankalp Phartiyal

Tata Consultancy Services Ltd is betting on its partnership with Microsoft Corp to develop artificial intelligence-based software services for clients, seeking to win higher margins to fuel growth.

Asia’s biggest outsourcer has deepened its collaboration with Azure OpenAI, the association between Microsoft and Sam Altman-led OpenAI. It’s also using cloud-based AI tool GitHub Copilot to offer solutions such as fraud detection to financial services clients or personalized customer services to retailers.

Services that leverage this partnership could help TCS improve margins, Chief Executive Officer K Krithivasan told Bloomberg News in an interview.

“We work along with Microsoft in building industry-specific solutions that we can take to market together,” Krithivasan said. “The only thing is, when does it gain a critical mass to make a difference to your overall market? We believe it will take at least a couple of quarters before it reaches some sort of a material number.”

TCS, which has more than 100,000 generative AI-ready employees, is embedding the technology in several of its software offerings, a manoeuvre it says is helping win large deals.

Krithivasan, who took over as CEO in June, has also revamped the company’s structure to better tap the business expertise of its senior executives and improve client connect.

“We need to see whether it provides a sustained growth over a period of time,” Krithivasan said. “Does it remove the friction within the organization?”

TCS and smaller rivals such as Infosys capitalized on the dot-com boom in the late 1990s to offer cheap backoffice operations to the world. They’ve since become IT service providers to some of the world’s biggest enterprises such as Apple Inc., Merck & Co. Inc., Vodafone Group Plc and PepsiCo Inc., helping create India’s $245 billion-plus software services sector.

As the traditional outsourcing business faces a margin squeeze due to fears of a global recession and Russia’s invasion of Ukraine, Indian IT firms are counting on big data, machine learning, analytics, cloud and AI to help clients transform their legacy businesses and counter the rise of nimble startups.

“That’s the aspiration. We should be participating more where the customers are investing for future,” Krithivasan said. “We will continue to enhance our capabilities so that we can participate more.”