Small Business'We plan to integrate BPO with the total landscape of HCL'
Kirtika Suneja / New Delhi January 26, 2010, 0:43 IST
HCL Technologies has reported a 20 per cent fall in net income for the second quarter ended December 31, 2009. The management, however, is bullish on the economy and sees early signs of recovery. In an interview with Kirtika Suneja, CEO Vineet Nayar says the company has to change its strategy every 18 months to remain competitive. Edited excerpts:
Jan cement sales in high double-digit
How does the environment look in terms of budgets and clients?
There was a softness in deals in the previous quarter and not many deals were coming, But there has been an upswing in deals now. This is because CEOs (chief executive officers) and CIOs (chief investment officers) are negotiating with customers and further opportunities for outsourcing and offshoring are coming in. This is the budgeting season and that is why there is a greater inflow of deals. This is reflected in our repeat business too, which was 94.4 per cent in this quarter.
Now that the environment looks better, will HCL’s ‘Blue Ocean Strategy’ change?
From saving costs to transforming businesses, our customers are looking for innovation. During recession, our growth drivers were infrastructure services and application development. Now, the blue oceans will be constructed around three ideas. First, discretionary spend will be led by enterprise application services (EAS) and engineering. We got Axon for EAS and engineering is in good shape. The second idea is to integrate business process outsourcing (BPO) with information technology (IT) services. And third, cloud computing. These three will construct our "Blue Ocean Strategy" for the next five years till 2015. That year will be dramatically different from 2010 and we are getting ready for that. It is important to change the strategy every 18 months to stay competitive.
As an aside, there were some reports that HCL had roped in Satish Chandrasekaran as the number two in the company...
Chandrasekaran is the head of retail and delivery services in the company and is reporting to a corporate vice-president, who further reports to me.
Going forward, what is your BPO strategy?
We plan to rejig the BPO business in terms of giving equal weight to both voice and non-voice services and, second, by integrating it with the IT business. Currently, BPO is 10 per cent of our business. It was 20 per cent earlier. The BPO story is interesting as the voice part has come down and business transformation has gone up. So, that proportion is being rejigged and will be made 50-50. Moreover, we plan to integrate BPO with the total landscape of HCL. We see a recovery in BPO by the middle of next year and its integration with the rest of the business.
What about acquisitions?
Acquisitions are a core part of our business. We are in talks with companies, as there are gaps to be filled in areas like cloud computing, and acquisitions will be done to fill in the capability gaps across verticals and geographies.
Where does India fit in the scheme of things?
India is very interesting for us and we are looking at it very strategically. India and China will be the growth markets for us till 2015. They will contribute a very large part of revenue growth. This is because of a shift in buying behaviour. Also, the India market is attractive for us because we have a better cost advantage due to total IT outsourcing type of deals. Engagements in India are undergoing a change and, though margins are lower, profitability can be higher here. We will see larger transformation outsourcing towards the second half of this year from India.
What is your outlook for HCL and the IT industry?
In the calendar year 2010, two trends will drive the growth momentum — budget negotiations and investments in discretionary spends, that is giving a glimmer of hope. The next five years will be driven by BPO, EAS and engineering. There will be growth in what we call the ‘consumers’ vertical, comprising service provisioning done in a unique way. Moreover, large deals may go out of fashion and short-term deals may be in fashion.