Clients reshuffling budgets in ruthless prioritisation: Genpact CEO

At a time when rising global interest rates are weighing on the cost of capital, businesses are getting prudent with cash and are looking to bet on tech projects that can generate swift returns. “The cost of capital has gone up. For large enterprises, the way that translates is projects that have a long term payback versus projects that have one year payback, the one year payback gets priority. There is reshuffling of budgets and ruthless prioritisation,” Tiger Tyagarajan, CEO at US headquartered global professional services firm Genpact told Fortune India in an interview. Unlike in the recent past when the Covid-led boom in digitalisation nudged companies to take up a slew of experimental projects largely to interact with digitally-savvy customers better, firms are going slow on decision making and the attempt in most cases is to break up a project in phases giving them ample time to assess the impact and utility of the same. “If a client wanted to try ten experiments and didn’t have a problem with many of them not working but they will try it, now they are saying, they want to only work on--say--three. So, digital transformation, the attempt is to still preserve it as much as possible but the attempt is to break it up. The good news is that actually you can break up digital transformation into its parts. That’s the advantage of new technology. When we engage the clients on large engagements, we often talk about the vision of the large engagement, we agree on the vision and then we break it up into parts. Now, many more clients are thinking that way because they want the payback and they want the returns that come from the payback to be ploughed back into phase two and phase three (of the projects),” says Tyagarajan.

Quite candid and not the one to mince his words, Tyagrajan says that companies, many of which typically chart their growth strategies for the new business year in December are expected to get conservative with their budget allocations against the background of shaky macroeconomic fundamentals. In the month of December budget meetings start happening. Boards meet. They then think about next year’s plans, growth numbers. I expect a degree of conservatism in budgeting, people will be told to conserve budgets. Then they will prioritise even more,” says Tyagarajan.

For all the concerns around a slowdown in the US that contributes significantly to the business for companies like Genpact, Tyagarajan says the economic scenario in the country is comparatively better than Europe. “Clearly, Europe is more acute in feeling recessionary impact. Businesses see the early part of the next year to be a real problem. It seems like the UK is already in recession. So, that means consumers are actually going to shrink back a little more. We are seeing that as the narrative in Europe more than in other places. In the US, we actually haven’t yet seen consumer narrative change. However, clients are very wary. Everyone is doing scenario planning. It wasn’t a big topic two years back. Anyone who is planning a 6%, 7%, 8% growth is also saying what if my growth is 0%? In the US, everyone is planning what happens if, but everyone is hoping that actually it will never get there. So, the hope is a little better in the US. Energy prices haven’t gone up much,” says Tyagarajan.

But opportunities abound for tech companies even in the midst of a crisis. “There are some headwinds but there are actually equal numbers of tailwinds. And we are seeing that with new clients who otherwise don’t engage partners, talking about doing something. We are talking about clients who work only thinking about how to grow the business now thinking about how to run a more efficient business that actually can generate cash and improve margins. Our pipeline is strong,” says Tyagarajan.