India’s fourth-biggest software and services company HCL Technologies is betting big on gaining part of $50 billion worth contracts that come up for renewal by big outsourcing companies. Chief executive Anant Gupta told FE’s R Jai Krishna that the strategy is to focus on certain part of the rebid contracts wherein the company can offer more of services to potential clients as it grabs the contracts from global majors including international business corp. Excerpts:
What makes you sound confident of the future prospects despite a 2% sequential drop in net profits during the January-March quarter?
I think the order book (of $4 billion in past nine months) itself is robust and strong. We have made reasonable investments (in digital) and they have started impacting deals and value proposition. Our belief is to provide an end to end value chain. The rebid market is about $50 billion and less than 20% is addressable. We want to play selectively. Increasingly, we will also create and mature for them.
Can you give us some details on how much of digital is part of new deals signed?
About 80% of our deals have a component of digital. Of these going forward, how these move from initial to large phase is where the issue will be.
You had also highlighted softness in deals from financial services vertical, can you explain?
As a vertical, financial services is significant, and contributes about 30% of worldwide outsourcing spend. A little bit of shift makes a big impact. There is increased pressure to cut costs. There is a slight restructuring in the banking industry for compliance reasons. Essentially, the large middle office operations are governed by regulations. The clients will first look at low-cost centres before outsourcing to third-party. The impact will be for couple of quarters, before the growth comes back.
What is the rationale behind acquiring Geometric?
ERP is pretty much saturated. We think PLM is the next big thing. Geometric acquisition is largely about engineering services. We can further accelerate our market. Overall the market is yet to be penetrated. We see a big interplay between ERP and PLM, with Geometric acquisition, that’s where the next wave will come. It’s a big hanging fruit as I see.