In its recently concluded second quarter earnings, HCL Technologies Ltd retained its double-digit revenue growth guidance for FY22 on the back of a positive demand environment and robust deal pipeline. As a policy, it only provides a directional revenue guidance. The Noida-based IT services firm continues to see increased momentum from its digital or ‘Mode 2’ business that grew 36.3% year-on-year in constant currency during the September quarter. In an interview, C. Vijayakumar, CEO & MD, HCL Technologies talks about the demand environment, digital growth, and the deal momentum. Edited excerpts.
How is the overall demand environment for the next few quarters?
The overall demand environment is strong. There are three broad areas where there is a significant change in demand. The first is modernizing the application landscape and embedding more and more analytics into everything that businesses are doing – from modernization in commerce to supply chain to customer experience. The second theme is migration to cloud as a lot of our clients are embarking on a cloud transformation journey where cloud strategy is part of the business strategy for a number of clients. The third area is digital engineering which includes industry 4.0, 5G, building next generation products, converting on premise products into SaaS (software-as-a-service) products, among others – all of these are driving strong demand in the market.
Large deals could be a key differentiator. What is HCL’s strategy to really win some of these mega deals?
We cannot really predict such mega deals. When we find one, we obviously have all the right leadership and strategies to win the game as we have won in the past in the case of Xerox, Volvo Cars and others. These are all sweet spots for HCL. But today we see more of the mid to large size deals in the range of $50-200 million in the market. Last quarter, we signed 14 new large deals worth a total contract value (TCV) of $2.25 billion. If you look at our client additions, it has been very aggressive. For example, our $50 million client increased from 29 to 41 in a period of 12 months. So, a lot of incremental growth from our existing clients is also driving the deal momentum.
What is HCL’s digital game plan and how do you differentiate yourselves as far as digital is concerned?
First, a lot of customers are moving to a vertical product led operating model. So, we are very focused on IT operating model changes which are driven by business operating model changes, which requires not only physical transformation skills, but it also needs significant organizational management capabilities. In fact, many of the deals that we won are led by this. The second piece is the infrastructure and applications, integrated modernization and operations. The third piece is of course cloud. We are one of the strongest players here. So, these are the three broad areas and then we are also the largest engineering services player. Digital engineering is an area where we have invested in, and we continue to invest. So that will be a strong differentiator for us.
What led the products and platforms business decline 8% sequentially and 5.5% annually in Q2?
The products and platforms business is a seasonal business and the September quarter is the weakest one. Some of the deals due for the second quarter got slipped to the current quarter. Otherwise, the overall business remains strong. All of our strategic initiatives are going well and we are very confident of the overall growth trajectory for these solutions.