Covid-19 will push a lot more customers to look at outsourcing: HCL CEO

Traditional services also have some very strong propositions, like digital workplace, engineering services. Some of the demand for that is intact and it is only getting accelerated.

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If there are attractive assets available, we will be very open to look at it. We've not only been acquisitive, but we've made the acquisitions work, said CEO .
Digital transformations at global companies, expected over the next two to three years, will now hasten in crisis-mode due to the Covid-19 pandemic, according to C Vijayakumar, CEO of HCL Technologies. In an interview to ET’s Surabhi Agarwal and Raghu Krishnan, Vijayakumar said sectors or companies that were not looking at outsourcing will do so now to save costs. Edited Excerpts

HCL expects a recovery in H2. Between the United States and Europe, where do you expect growth to pick up?

I don't think the US and Europe are going to be very different, because in Europe, some geographies are already opening up. I think 23 states in the US have also already relaxed some guidelines... There is some hope that things will stabilize quickly, but customer behaviour may not change immediately. I heard that a lot of malls opened up in these 23 states, although footfalls have been low. This situation will push a lot more customers to look at outsourcing. It may not necessarily be offshoring, but they might want to do outsourcing to keep their costs variable… So, some sectors which were not looking at outsourcing, or some clients which were closed to outsourcing, will definitely be looking, at this point in time.

Do you expect high growth for digital services even as traditional services slow in the coming fiscal year?
Traditional services also have some very strong propositions, like digital workplace, engineering services. Some of the demand for that is intact and it is only getting accelerated. So, barring the short-term challenge, we will have good growth momentum. There could be a hit in the first quarter for sure. Industrial, auto, aero have been impacted significantly, and non-grocery retail is also quite seriously impacted. But Life Sciences is a strong vertical, almost 12% of revenue comes from there; tech services is also a strong vertical, close to 20% of our revenue comes from there. The impact on financial services, telecom and professional services is going to be low. I don't want to really take a call on the next two quarters. But I do believe the second half will be good.


Once the recovery happens, what kind of projects, what kind of wins do you expect? Will it be different from what we have seen before?
Digital spends will (only) accelerate. Whatever transformation was expected to happen over the next two to three years, it's almost going to get done in crisis mode, because for all the businesses, digital is the most viable channel to engage. I see acceleration in cloud adoption, digital transformation, spend on digital workplace and cybersecurity. Similarly, if you look at the healthcare providers, we believe the hospitals of the future will only have operation theatres and ICUs, everything will be done through telemedicine. That will create a whole lot of new health care infrastructure requirements. At least 50% of the spend will be a little bit different from what we have seen so far. Telemedicine and remote diagnostics are areas where I think we will invest a little bit more to capture demand. We also expect to gain from vendor consolidation in the future.

You said you expect 50% of employees to be working from home and the rest from office on rotation. So, how does the future of the IT services industry look to you?
Since work from home, the productivity is definitely much higher. We have tools to track productivity of every individual…right now, there is a lockdown so obviously everybody is glued on to work, but we have to see how a large scale work from home stacks up in a non-lockdown scenario. The second aspect is a lot of customers have comfortably accepted it because of the crisis. But in a normal scenario, their acceptance of the risk and their acceptance of the privacy challenges, is something which we have to work on.
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Is this the right time for you to acquire companies, products, platforms or capabilities because the opportunities may come cheap?
If there are attractive assets available, we will be very open to look at it. We've not only been acquisitive, but we've made the acquisitions work.
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