At a time when technology bluechips are struggling to maintain growth rate and margins in an atmosphere difficult to win new deals, India?s fourth-largest software exporter HCL Technologies is on a roll. The focus on reducing costs in the European market and the emerging trend of progressive deals in the US has brought several deals to HCL Technologies. The company won 58 deals this quarter ? its highest client additions ? while Tata Consultancy Services and Infosys Technologies added 39 and 34, respectively.
HCL?s strategy is to focus on progressive and cost reduction deals in the enterprise applications space, which contributes 21.4% to the company?s revenues. Progressive deals are important because of their volume and involve customer relationship management work, product life cycle management and a lot of work on the mobility platform. Quite in contrast, the cost reduction deals are important because larger revenues are attached to them.
?In terms of numbers, around 70% deals are in the progressive category but in terms of revenues, the same percentage accrues from cost reduction ones. The number of progressive deals have doubled for HCL in the last one year,? said Steve Cardell, president, HCL Axon. He further explained that a year ago, cost reduction dominated the client market due to recessionary or post-recessionary effects for some clients. ?We suddenly see progressive deals, that is a healthy sign,? Cardell said.
Cost-cut deals are multi-year contracts in the range of $10-100 million (R45-450 crore) whereas the progressive deals are front-end or phase one contracts ranging from $1-10 million (R4.5-45 crore).
With Europe still emerging from recession and the US back on its feet, it is natural to see the progressive flow from North America, Cardell explained. Vertical-wise, life sciences, healthcare and utilities are getting progressive deals, especially in the US. On the other hand, government, banking and manufacturing industries are bringing in cost reduction deals in Europe markets where operational efficiency is the focus area. With progressive deals being smaller in size than cost reduction and mostly coming from the US now, Eric Simonson, managing principal (research) at research firm Everest Group explains the changed deal scenario in different geographies: ?Transaction volumes and average contract value (ACV) has decreased in North America by 5% and 22% respectively this quarter ending March 2011. Whereas in the Europe, transaction volumes (number of deals) have decreased by 9% this quarter.?
HCL is seeing traction in other geographies as well.