HCL's pricing, deals and future growth
HCL CEO talks about pricing, deals and future growth drivers for the firm.
By Deepshikha Monga, ET Bureau |
NEW DELHI: HCL Technologies CEO Vineet Nayar says he is happy with the company���s revenue growth and limited margin erosion in the Jan-March, or JFM, quarter. In an interview, he talks about pricing, deals and future growth drivers for the firm. Excerpts:
The market was disappointed with your results. I can understand the disappointment but we had already indicated the forex losses to the market. The good news is that we managed to limit the margin erosion due to the Axon acquisition to 50 basis points and grew our revenues in a difficult environment.
What is the outlook on pricing and deal flow?
Pricing pressure is there as we saw in the JFM quarter. Everybody is questioning the value you deliver. But it can be offset by improvement in efficiencies. There is a reduction in the number of new deals in the market. In fact, we saw the least number of deals this quarter.
Globally too, there was a reduction in deals in the JFM quarter. Deals worth $10.6 billion were signed by all vendors in the Oct- Dec quarter, while deals worth $6.4 billion were signed in the Jan- Mar quarter.
We signed a large number of smaller deals of over $1 million in JFM. We are targeting the 500 largest companies globally, against the 100 largest earlier. These are companies that lack sophisticated IT infra-structure, unlike their larger peers, and there is potential to grow our engagement with them.
What are going to be key growth drivers for HCL going forward?
While the focus will be on survival in the old way till 2010, total IT services outsourcing will become extinct. There will be a new way of buying IT and it will involve cloud computing and software-as-a-service. We have signed some deals already but it���s very small right now. We believe public sector, utilities and healthcare verticals will lead in terms of adopting these trends.
You are growing your onsite presence. Is that the strategy to counter protectionist sentiments? What about an increase in costs?
We don't believe offshoring is the right strategy to focus on. HCL has added 2,500- 3,000 employees to its headcount in the US and UK in the recent past. We believe this would help us gain deals in these markets
How attractive is India for you? Your Asia Pacific revenue contribution came down during JFM.
The market was disappointed with your results. I can understand the disappointment but we had already indicated the forex losses to the market. The good news is that we managed to limit the margin erosion due to the Axon acquisition to 50 basis points and grew our revenues in a difficult environment.
What is the outlook on pricing and deal flow?
Pricing pressure is there as we saw in the JFM quarter. Everybody is questioning the value you deliver. But it can be offset by improvement in efficiencies. There is a reduction in the number of new deals in the market. In fact, we saw the least number of deals this quarter.
Globally too, there was a reduction in deals in the JFM quarter. Deals worth $10.6 billion were signed by all vendors in the Oct- Dec quarter, while deals worth $6.4 billion were signed in the Jan- Mar quarter.
We signed a large number of smaller deals of over $1 million in JFM. We are targeting the 500 largest companies globally, against the 100 largest earlier. These are companies that lack sophisticated IT infra-structure, unlike their larger peers, and there is potential to grow our engagement with them.
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What are going to be key growth drivers for HCL going forward?
While the focus will be on survival in the old way till 2010, total IT services outsourcing will become extinct. There will be a new way of buying IT and it will involve cloud computing and software-as-a-service. We have signed some deals already but it���s very small right now. We believe public sector, utilities and healthcare verticals will lead in terms of adopting these trends.
You are growing your onsite presence. Is that the strategy to counter protectionist sentiments? What about an increase in costs?
We don't believe offshoring is the right strategy to focus on. HCL has added 2,500- 3,000 employees to its headcount in the US and UK in the recent past. We believe this would help us gain deals in these markets
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as clients are becoming more sensitive about such issues. As far as costs are considered, we would rather focus on what value these employees can deliver.How attractive is India for you? Your Asia Pacific revenue contribution came down during JFM.
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We have already signed a large deal (Rs 393 crore contract with National Insurance Company) and we will announce two more large deals in the domestic market. India is very important to us and we are increasing our salesforce here. We are revamping our strategy for Asia-Pacific as the lack of growth in this market has been a disappointment for us in the JFM quarter.Download
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