Europe is a real concern, like the recession

Written by Diksha Dutta | Diksha Dutta | Updated: Aug 1 2010, 05:20am hrs
A day after announcing April-June earnings, the countrys fourth largest software exporter, HCL Technologies, expressed satisfaction at the growth in enterprise application and emerging verticals like healthcare and retail. In an interview with FEs Diksha Dutta, CEO Vineet Nayar said that the concerns from the European market and the companys BPO segment will stay for a while. Nayar also discussed the changing customer requirements and future strategies of the technology firm. Excerpts:

How conerned is HCL Technologies with the European crisis

Europe is as real a concern, just like the recession. The recession period showed that we converted concerns into opportunity. In the last four quarters, we focused on getting customers. We grew 17% last year and we saw a surge of 24% this time. While Europe is a concern, we believe we will be able to manage.

As the economy recovers, what changes do you see in the discretionary spending by customers

I think there is a new definition of discretionary spending coming in. Today, there is a business case for reducing supply chain or customer relationship management (CRM) and that kind of investment is happening by customers. They focus on reducing cost by making some investments in different and diverse areas. There is very high rigour on return on investment in discretionary spending by customers. And I call it strategic funding for strategic projects.

You believe that cloud is not just a technology but a business model. So, when will it impact the company revenues

The cloud business model means that customers will not invest in software, development, infrastructure or services separately. Vendors need to combine all that and offer it on per usage or per employee basis. Therefore, it is an opportunity and a stress, as customers will want to move to this model. It is a business model where vendor is willing to assume all the risk, make all the investment and then offer it to the customer on a usage basis. It is not a technology challenge but a business risk.

The BPO business has been one of the concerns for its low margins. When is it likely to improve and what is the game plan ahead

While the enterprise segment, enterprise application and emerging verticals like healthcare and retail grew one of the reasons for an overall dip in margin was losses incurred in the BPO segment. It will continue to be a concern for the next four to six quarters. But the BPO segment is also expected to be the biggest growth driver for the company in the next five years. We will enter new projections in business intelligence and predictive analytics. We also plan to invest in specific BPO platforms in some industries. We will also shift our focus from the non-core business like outbound calling to the core business. The non-core business contributes to 10 to 15% revenues in BPO. We will shift managers from this and invest in the core businesses which can be scaled up further.