AgenciesIn an interview with ET Now, Tata Elxsi's CEO and MD, Manoj Raghavan, talks about the company's plans for the future and their intentions to stick around in the sectors they have a stronghold in, before branching out. Edited excerpts:
What are the trends in technology right now, what has changed since the pandemic broke out to now? And what does the future look like?
Since the pandemic and the shift to working from home, digital technologies have become so much more important. Whether it is in healthcare or in the OTT space, for instance, telemedicine was non-existent or hardly many people had used it, even in the West. Hardly 5-10% of patients used telemedicine, now it's upwards of 80%. We've seen a lot of upward trends in technology adoption. Whether it is office spaces, whether it is factories they are moving entirely towards becoming smart and digital. It's a great opportunity for companies like ours.
You have a large presence across verticals, everything from aero space to consumer software but you are largely focussed on media, auto and healthcare. Are you looking to expand your footprint?
We are not a large company, we're mid-sized, so it becomes important for us to be focussed. We cannot operate in all industry verticals so we're primarily operating in the ones you mentioned. We are not in the aero space business.
Let us talk about the deal wins during Q1, what were the deal wins you saw? In which sectors?
We've had deal wins across all verticals - including medical, media and automotive defence. In the medical vertical we had a large healthcare provider based in the US selecting Tata Elxsi for their next generation digital health platform development. That is a pretty large multimillion dollar multi-year deal for you.
In the media and communication space, we have had interesting plays because a lot of traditional companies that have content - whether it is theatres or plays or musicals - have not been able to conduct these events and neither do they have a digital strategy at all. So there is one leading organisation we really supported and helped them get on to the digital platform. So, the entire digital transformation strategy we developed? We actually license that solution and build on that solution for them. Helping companies like that get into the digital arena has been a very positive development for us.
We have also won a deal with consumer appliance company again for a digital centre of excellence for next-generation connected and smart appliances. The entire digital play is happening across various industry sectors that we are in and I think that has been a positive, we have invested in all these technologies over the last four-five years and it is all coming together nicely for us now.
Do you by any chance see any risk of client budgets towards tech R&D being trimmed, on the back of an impending third wave of COVID-19?
Yes, you know research and development is usually discretionary; if things change, those budgets are usually affected. There is a possibility that we could see a cut in R&D spend and so on and we've seen that over the last couple of years. Also, we have seen many of our customers go through that. Again, it depends on the sectors and industries that we are in and if you look at the media and entertainment industry. I do not think we will have a cut because that industry is booming. I feel the same in the medical the healthcare space; I think the spend will continue to increase.
In the automotive sector things are improving and we have shown growth over the last two quarters but it is small growth and we'll ideally want to wait and watch on that particular sector, there could be some impact but it is very difficult to predict right now.
In the medical industry and automobile industry, automation is increasing, does their growth mean growth for you? Is it that simple?
See, it's not just about growth in the industry, it's about transformation in the industry towards digital product development and usage of digital tools and so on, more connected, more digital transformation will eventually result in increased business for companies like ours.
When will the base effect for Tata Elxsi kick in, the last couple of years have seen exponential growth and transformation has happened, right? Great work, but there will be a point in time where competition and the base effect, both kick in?
Yes, it is not as if we do not have competition. We do and it is very fierce, plus it isn't just Indian companies, it is global companies too. Again, we are not a very large company so I just hope we will be able continue executing our strategies. Our thought processes are really in these three industry verticals that we're in. We need to be the best, we need to build very strong capabilities and customers to work with us because of the value that we generate and deliver for them. It is not about price nor it is not about the cheapest product. So long as we deliver value, continue to execute our strategies well and maintain customer relationships and hopefully there is no industry downturn or a particular sector weakening or any particular company going through a tough time. If these do not happen then I think we hope to continue to execute on our plans and grow, whether we will maintain the growth rate, whether we will be able to accelerate, all of these are all difficult to say at this point in time but we definitely expect to grow at a much faster rate than the industry average.
How will the next three years be different from the last three years?
There are a number of things, internally, that we are looking at. While we look at these three industry verticals we clearly also want to de-risk ourselves so that we can look at new industry verticals as well as adjacencies within these industry verticals. That's where we are investing at this point in time, building capabilities as well as building sales muscle.
So yes, we will continue to focus on these three verticals but there will be adjacencies which utilise the same skills to be able to deliver value to adjacent industry spectrums. We hope that will lead us to our three-year goals that we have set for ourselves.
What are the trends and disruptions that you foresee for the healthcare sector in the next five to 10 years? How large is this vertical is bound to be for you?
So the medical and healthcare companies typically take a lot of time to design and the sales cycle is pretty long, so you need to build a rapport with the customers and this sector in general is a little slow to adapt to technology. We still see a lot of companies using very old technology. Now, with COVID-19 and digital disruption many of these companies are now aggressively looking to upgrade their technologies. A lot of connected technologies are coming into play. Cyber security is becoming very important because suddenly you have a lot of information and patient related stuff and in general privacy across the world is becoming a big issue. So, these are some of the trends that we would see playing and we are building capabilities in all these spaces. Over the next three to five years there will be a lot of spend on technology by medical companies. Of course, the healthcare space, hospitalisation, the entire push towards using telemedicine, using digital devices is also a trend that we hope we'll be able to leverage and participate in.
What are the trends in technology right now, what has changed since the pandemic broke out to now? And what does the future look like?
Since the pandemic and the shift to working from home, digital technologies have become so much more important. Whether it is in healthcare or in the OTT space, for instance, telemedicine was non-existent or hardly many people had used it, even in the West. Hardly 5-10% of patients used telemedicine, now it's upwards of 80%. We've seen a lot of upward trends in technology adoption. Whether it is office spaces, whether it is factories they are moving entirely towards becoming smart and digital. It's a great opportunity for companies like ours.
You have a large presence across verticals, everything from aero space to consumer software but you are largely focussed on media, auto and healthcare. Are you looking to expand your footprint?
We are not a large company, we're mid-sized, so it becomes important for us to be focussed. We cannot operate in all industry verticals so we're primarily operating in the ones you mentioned. We are not in the aero space business.
Let us talk about the deal wins during Q1, what were the deal wins you saw? In which sectors?
We've had deal wins across all verticals - including medical, media and automotive defence. In the medical vertical we had a large healthcare provider based in the US selecting Tata Elxsi for their next generation digital health platform development. That is a pretty large multimillion dollar multi-year deal for you.
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In the media and communication space, we have had interesting plays because a lot of traditional companies that have content - whether it is theatres or plays or musicals - have not been able to conduct these events and neither do they have a digital strategy at all. So there is one leading organisation we really supported and helped them get on to the digital platform. So, the entire digital transformation strategy we developed? We actually license that solution and build on that solution for them. Helping companies like that get into the digital arena has been a very positive development for us.
We have also won a deal with consumer appliance company again for a digital centre of excellence for next-generation connected and smart appliances. The entire digital play is happening across various industry sectors that we are in and I think that has been a positive, we have invested in all these technologies over the last four-five years and it is all coming together nicely for us now.
Do you by any chance see any risk of client budgets towards tech R&D being trimmed, on the back of an impending third wave of COVID-19?
Yes, you know research and development is usually discretionary; if things change, those budgets are usually affected. There is a possibility that we could see a cut in R&D spend and so on and we've seen that over the last couple of years. Also, we have seen many of our customers go through that. Again, it depends on the sectors and industries that we are in and if you look at the media and entertainment industry. I do not think we will have a cut because that industry is booming. I feel the same in the medical the healthcare space; I think the spend will continue to increase.
In the automotive sector things are improving and we have shown growth over the last two quarters but it is small growth and we'll ideally want to wait and watch on that particular sector, there could be some impact but it is very difficult to predict right now.
In the medical industry and automobile industry, automation is increasing, does their growth mean growth for you? Is it that simple?
See, it's not just about growth in the industry, it's about transformation in the industry towards digital product development and usage of digital tools and so on, more connected, more digital transformation will eventually result in increased business for companies like ours.
When will the base effect for Tata Elxsi kick in, the last couple of years have seen exponential growth and transformation has happened, right? Great work, but there will be a point in time where competition and the base effect, both kick in?
Yes, it is not as if we do not have competition. We do and it is very fierce, plus it isn't just Indian companies, it is global companies too. Again, we are not a very large company so I just hope we will be able continue executing our strategies. Our thought processes are really in these three industry verticals that we're in. We need to be the best, we need to build very strong capabilities and customers to work with us because of the value that we generate and deliver for them. It is not about price nor it is not about the cheapest product. So long as we deliver value, continue to execute our strategies well and maintain customer relationships and hopefully there is no industry downturn or a particular sector weakening or any particular company going through a tough time. If these do not happen then I think we hope to continue to execute on our plans and grow, whether we will maintain the growth rate, whether we will be able to accelerate, all of these are all difficult to say at this point in time but we definitely expect to grow at a much faster rate than the industry average.
How will the next three years be different from the last three years?
There are a number of things, internally, that we are looking at. While we look at these three industry verticals we clearly also want to de-risk ourselves so that we can look at new industry verticals as well as adjacencies within these industry verticals. That's where we are investing at this point in time, building capabilities as well as building sales muscle.
So yes, we will continue to focus on these three verticals but there will be adjacencies which utilise the same skills to be able to deliver value to adjacent industry spectrums. We hope that will lead us to our three-year goals that we have set for ourselves.
What are the trends and disruptions that you foresee for the healthcare sector in the next five to 10 years? How large is this vertical is bound to be for you?
So the medical and healthcare companies typically take a lot of time to design and the sales cycle is pretty long, so you need to build a rapport with the customers and this sector in general is a little slow to adapt to technology. We still see a lot of companies using very old technology. Now, with COVID-19 and digital disruption many of these companies are now aggressively looking to upgrade their technologies. A lot of connected technologies are coming into play. Cyber security is becoming very important because suddenly you have a lot of information and patient related stuff and in general privacy across the world is becoming a big issue. So, these are some of the trends that we would see playing and we are building capabilities in all these spaces. Over the next three to five years there will be a lot of spend on technology by medical companies. Of course, the healthcare space, hospitalisation, the entire push towards using telemedicine, using digital devices is also a trend that we hope we'll be able to leverage and participate in.
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