Why HCL Technologies is seeing growth when others are not

As against Infosys and TCS, HCL Tech posted better-than-expected July-September results. Its Q2 consolidated net profit was at Rs 2015 crore while dollar revenue was at $1722 million

We spoke to Rahul Singh, President, head of Financial Services at HCL, to decipher what this means for the IT industry, and some of the challenges being faced by IT companies in India and globally.

“The total IT spend is not changing, how it’s changing is a mix of the spends and mix of the clients where the spend is happening,” he said.

“So long as the company is focused on the areas the right spends are going into, growth rates can be maintained,” Rahul said, as he added that for old age companies, he could see the spends coming down, while for the new age companies, they have been going up.

HCL’s focus

Rahul said, "In non-discretionary elements, HCL is focusing more on automation and autonomics. We are bringing technology for our customers in non-discretionary spends and enabling them to focus more in automation and autonomics."

At the same time, he said, customer is also spending new money on new technology areas.

"We have got products and platforms focusing on that as well. So, we are trying to focus in the areas where customers are reinvesting the spends. That is the reason we are able to see some growth rates," he said.

Impact of the growth numbers on IT industry

HCL claimed today it has retained our guidance both on top line growth and margin this quarter.

"Total IT spend is more or less stagnant. So, there are within industry market shares are going to move up and down. Some will gain and some will lose. Also, many new age companies are coming up, perhaps they are taking away some market shares," said Rahul.

Challenges being faced by IT companies

- Commercial change is happening

Customers are expecting more from service providers. Rahul said, "A lot of the work which customers are giving us today are about more ownership for outcomes being taken by the service provider. Clients will outsource technology, but they will do it on manage-outcome services basis to service providers,"

He added- "If a service provider has been working on a TNN basis or staff augmentation basis, then the the business will see compression in both price points and total revenues coming in. While if a service provider is abreast with manage service construct basis, he takes more responsibility and risks, and these are the businesses that do well.”

Secondly, in the past, customers were buying commoditized services, which are mode 1 services. Mode 2 is where consumers are buying more services now. So, service providers are expected to be aligned towards mode 2 services.

With the regard to the loss in faith while outsourcing, Rahul said, “it's to do the way company's philosophy is. Ours is to be as local as we possibly can. We have centers in the US where we work with the local government and create a supply chain of people to come and work with our company. We are socially responsible globally, but I cannot comment on our peers.”