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TCS creates separate business unit to focus on AI and Cloud

India’s largest IT service player Tata Consultancy Services (TCS), announced a new operating structure, which will be rolled out on August 1. One of the key aspects of this rejig is to bet on the future and in this connection, the IT major is setting up TCS AI.Cloud, a separate business unit.

TCS is perhaps the first major IT player to set up a separate business unit focused on AI. This arm will have its own sales team and profit and loss (P&L) statement, said sources in the know.

This move is different from that of its peers, which have either taken a platform approach or an intergated approach towards generative AI where it is part of all their offerings.

K Krithivasan, CEO & MD, TCS, in an e-mail to employees announcing the rejig and the formation of TCS AI.Cloud wrote: “Generative AI has captured the imagination of enterprises and consumers alike. All our clients and hyperscalers are looking to generate more business value and achieve productivity leveraging cloud and genAI. We have also made significant early investments and launched partnerships with key players in the AI space.”

TCS AI.Cloud will combine all the public cloud units and AI initiatives within the company. Products and platforms like ignio, Optumera, an AI-powered retail strategic intelligence platform, TCS ADD, which aids in faster drug development, and Cognix will now be part of the new business unit.

TCS’ AI platform approach started with ignio, which was launched in 2016 and has been able to gain momentum; it is the first platform business to have crossed $100 million in revenue. “Some of the products are doing well. For instance, Cognix, an AI-based platform; In FY23, this unit had 28 large deals, up from 19 in FY22,” said a senior executive at TCS.

Analysts believe that by setting up a different business unit, TCS is signaling its focus on generative AI, as well as the demand environment.

Peter Bendor-Samuel, CEO, Everest Group opines that the new rejig is reversing a significant strategic blunder. “The re organization which caused the downfall of the recently fired CEO was a huge mistake, it was designed to make way for the new wave of talent that TCS has developed, but it created duplication, and confusion in the clients and internally. The new org goes some way in cleaning up this mess, however, it still leaves the new functional organization in place, and we will have to see how it works out before TCS can claim victory,” said.

On the creation of a separate BU for AI Bendor-Samuel shares, “I am somewhat nonplussed with separating these out. I think either approach could work and it all depends on execution which in turn depends on leadership and collaboration. Given that the re-organization is intended to simplify the organization and its interactions with its customers, TCS runs the risk of still having too many cooks in the kitchen. However, they have taken some big steps to address this.”

But many believe for a company of TCS scale this makes sense. “Besides looking at TCS’ scale, creating a team or a unit makes sense. But this also means that TCS is gearing up to showcase its products’ power. So far, it has focused as a services player,” said Pareekh Jain, an IT outsourcing advisor & founder of Pareekh Consulting.

The sign of generative AI taking a stronghold within the company was evident during its Q1FY24 results media briefing. The management said it was already seeing a demand uptick for generative AI projects.

“Clients are exploring use cases for generative AI across productivity improvement, content creation, and enhancing customer interactions. We are currently working on over 50 proofs of concept and pilots, and have more than 100 opportunities in the pipeline,” said Krithivasan.

Krithivasan during the media conference said that TCS’ generative AI strategy builds on the firm’s corporate research and innovation in AI over the years. “This group has already filed 710 patents for AI inventions in five years. And of, these 282 patents have been granted.” Add to this, the firm plans to create a talent pool of 100,000 genAI-trained associates.

Before all this, TCS has already created an advisory offering to help customers create a holistic vision, strategy, and plan for enterprise-wide adoption of generative AI.

The rejig that has been announced by the new CEO had generative AI as the underlying theme. “Invariably, they (clients) are all keen to understand the potential of generative AI and how their enterprise and industry knowledge is going to take center stage to deliver value to their own clients,” said Krithivsan in the e-mail.

Following the rejig, almost 200 industry service units (ISUs) will be reporting to seven business units. Also, the changes made by former CEO Rajesh Gopinathan for focusing on smaller clients will now get folded into the ISUs. Business Standard

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