Bengaluru: HCL Technology saw its revenue grow 7.6% sequentially, the fastest in 12 years, and faster than peers TCS, Infosys And Wipro, Growth was led by the products and platform business, and engineering R&D services. The first is a big bet that HCL has taken with the purchase of old products from companies like IBM. In an interview with TOI, CEO C Vijayakumar Talked about speed in these businesses…
It was an exceptional quarter for the products and platforms business…
Our development is broad based. The services business continues to boom. In products, some deals didn’t close in the last quarter, but did in the December quarter, and that helped growth. It is a long term business, it cannot be looked at quarter by quarter. It’s a strategic bet that we’ve taken, and is different than general industry, which is focused on services. It needs to modernize products, it needs to better position in analysts’ ratings. More marketing will help in creating good momentum for the business. Some products are mission-critical to our customers. For example, commerce runs e-commerce For many large corporations. Our products business has an annual run rate of $1.5 billion and is a profitable business. There are very few companies that have $1.5 billion in revenue annually from software products, and they are also profitable.
What was a mixture of organic and inorganic?
Gradual growth is 100% organic. In a year-over-year increase, possibly 1% could be inorganic. The demand for outsourcing and transformation services is very strong. Lots of customers are adopting the cloud, but even more so as a business strategy, as the cloud allows them to scale up and scale down, increasing the flexibility to suit business dynamics. We were one of the first to build a hyperscalar ecosystem and we had our cloud smart offerings, which we launched two quarters ago and focused on providing cloud consulting services.
ER&D contributes 16% to your revenue and has grown at 20% year-on-year…
Engineering R&D is the fastest growth segment for us. The verticals we’ve seen the most traction in are the software and internet segments, including silicon design projects. There’s tremendous traction in telecommunications too – whether it’s about low latency, enterprise 5G Deployment, There is also medical engineering.
Violence is increasing. How are you dealing with this?
There is a demand-supply gap around the world for technical talent. The only sure shot way to address this is to include more talent in the workforce and re-train the existing talent to do high-end work. We are doing a double whammy on these two. We are going beyond India to nurture talent. This shortfall is going to persist for 2-3 quarters, and then I expect it to normalise.
How are customers responding to higher prices for in-demand skills and how are you re-using the talent pyramid?
Each program has a mix of talent that comes together to deliver results, and this will determine the nature of the team – whether it’s a pyramid or some other talent structure. Clients are open to hiring technical skills at higher rates.
Services trading margin fell 190 bps. Was it because of the pay hike?
Of course, this is driven by supply-chain cost growth. We increased salaries, which reduced margins by 80 bps (100 basis points = 1 percentage point). Attrition has increased and there are backfilling costs. These are some of the factors that have contributed to the decline in margins.
It was an exceptional quarter for the products and platforms business…
Our development is broad based. The services business continues to boom. In products, some deals didn’t close in the last quarter, but did in the December quarter, and that helped growth. It is a long term business, it cannot be looked at quarter by quarter. It’s a strategic bet that we’ve taken, and is different than general industry, which is focused on services. It needs to modernize products, it needs to better position in analysts’ ratings. More marketing will help in creating good momentum for the business. Some products are mission-critical to our customers. For example, commerce runs e-commerce For many large corporations. Our products business has an annual run rate of $1.5 billion and is a profitable business. There are very few companies that have $1.5 billion in revenue annually from software products, and they are also profitable.
What was a mixture of organic and inorganic?
Gradual growth is 100% organic. In a year-over-year increase, possibly 1% could be inorganic. The demand for outsourcing and transformation services is very strong. Lots of customers are adopting the cloud, but even more so as a business strategy, as the cloud allows them to scale up and scale down, increasing the flexibility to suit business dynamics. We were one of the first to build a hyperscalar ecosystem and we had our cloud smart offerings, which we launched two quarters ago and focused on providing cloud consulting services.
ER&D contributes 16% to your revenue and has grown at 20% year-on-year…
Engineering R&D is the fastest growth segment for us. The verticals we’ve seen the most traction in are the software and internet segments, including silicon design projects. There’s tremendous traction in telecommunications too – whether it’s about low latency, enterprise 5G Deployment, There is also medical engineering.
Violence is increasing. How are you dealing with this?
There is a demand-supply gap around the world for technical talent. The only sure shot way to address this is to include more talent in the workforce and re-train the existing talent to do high-end work. We are doing a double whammy on these two. We are going beyond India to nurture talent. This shortfall is going to persist for 2-3 quarters, and then I expect it to normalise.
How are customers responding to higher prices for in-demand skills and how are you re-using the talent pyramid?
Each program has a mix of talent that comes together to deliver results, and this will determine the nature of the team – whether it’s a pyramid or some other talent structure. Clients are open to hiring technical skills at higher rates.
Services trading margin fell 190 bps. Was it because of the pay hike?
Of course, this is driven by supply-chain cost growth. We increased salaries, which reduced margins by 80 bps (100 basis points = 1 percentage point). Attrition has increased and there are backfilling costs. These are some of the factors that have contributed to the decline in margins.
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