1. You have to look at HCL on a year-on-year basis

You have to look at HCL on a year-on-year basis

Krishnan Chatterjee is a multi-disciplinary strategic marketer with experience straddling across consumer goods...

By: | Published: February 9, 2015 12:19 AM

Krishnan Chatterjee is a multi-disciplinary strategic marketer with experience straddling across consumer goods and technology industries. Currently, senior vice-president and head of strategic marketing at HCL Technologies, he is acknowledged for incubating the global marketing team and evolving a differential positioning for HCLT, India’s fourth-largest software services exporter by revenue. The company’s strong focus in developing next generation propositions around digitalisation, engineering platform services and targeting operating model for enterprise IT have allowed it to gain significant market share in the global IT services market. “The nature of spending in technology is dramatically changing. As technology is becoming a source of competitive edge, businesses are increasingly participating in the buy side,” he tells Sudhir Chowdhary in a recent interaction. Excerpts:

Give us a sense of the big story emerging out of HCL Technologies. Where is it headed?

In order to understand HCL’s big story, you have got to start with a little game we play, which we call ‘One Five Fifteen’. When we closed fiscal 2014, the company crossed a billion EBIT, $5 billion revenue and $15 billion market cap. There are only 8 companies in this metrics. So it’s a pretty good place to be for at least 14 years, since the company visibly made its presence felt in the market. Historically, this is a company which has always had to depend on innovation. It never had the bulwark of, let’s say, the commodity EDM kind of business in our sector to fall back on.

If you go back in time, the company has always been strong in engineering and R&D services, so it was a product company moving into services.

Then in 2008, the enterprise systems business with the Axon acquisition was again our first. In 2009, we spotted the rebid market opportunity as the recession descended on the world and the whole ITO rebid what we call IT outsourcing, the rebid market which we have done well over the last few years. Then about 18 months back, we spotted this trend of proactive obsolescence as the cloud started disrupting the economics of IT. That’s when we launched things like ALT ASM which is a proposition that helps shrink the application support work.

What is encouraging is as we stand on 2015 today, there are two very nice disruptive opportunities in front of us. The first is this whole thing of structured engineering outsourcing. The second disruption that is clear upon all of us is the digital business. The digital business transformation and what is happening here is very simple. Today if you are on the board or the CEO of any major company, you are finding that competitiveness is moving towards born digital company. You can’t just set up a digital business model and then not operationalise it, and operationalising it is a very unique process.

What were the key takeaways from the December quarter?

I can tell you there are three key takeaways that I see and again going back to the business model conversation. First is that it’s a solid sustained business performance and if you look at the business model and then come back and look at these numbers, HCL is not a quarterly story. You have to look at it on a year-on-year basis.

The second is that we have a significantly balanced portfolio which is very good as momentum switches. So we saw momentum over the last few years because of the rebid market in infrastructure services, we saw the growth there. Now as momentum is shifting towards engineering services, you are seeing HCL perform well. So as long as you hold the balanced portfolio which is pretty much our service line mix, where the momentum goes so you go there.

The third key takeaway is that we are encouraged by our ability to work in disruptive environments and the fact that there are multiple disruptions. So beyond the rebid of ITO we can see engineering and we can see digital too has disruptive opportunities, which is very encouraging.

Is HCL Tech looking at newer geographies and sectors to ensure continued growth?

The two largest markets are obviously the Americas and Europe. These need to be the focus of a displacement strategy. If you now look at these two markets, in Americas quarter-on-quarter (q-o-q) we grew 6%, year-on-year (y-o-y) we grew 14% which is the highest. Similarly in Europe q-o-q we did 2%, y-o-y we did 14% which is again the highest. Both these geographies are performing well. In America, as you are aware things are beginning to look up. People are looking at deploying technology to actually revisit business models.

Rest of the World is a region we have found very exemplary in terms of building unique new capabilities and harvesting them and then deploying them. If I go back a few years and we worked on the APDRP project, perhaps the largest smart grid implementation in its own way that happened in the world, which is in Uttar Pradesh. That resulted in us taking a leadership position around smart grid and power which got featured into the World Economic Forum.

If you look at breakthroughs in existing industries like payments and financial services, we are doing some amazing work in this region.

Where do you see the increasein technology spending coming from?

The nature of spending in technology is dramatically changing. There is another thing that you have to factor in: who is buying. According to Gartner, back in 2000, 80% of the technology spending in the enterprise was directly in the CIO’s control. Gartner predicts that by 2020, 10% will be what the CIOs directly control. So your buying centres are proliferating significantly which basically is a reflection of the reality; technology is becoming a source of competitive advantage for business. Therefore, business is participating in the buy side, more and more and more.

What is your perspective on the Indian market. Government has announced major plans to adopt technology with its Digital India and other e-governance initiatives.

India market is a big opportunity for new technologies and a fantastic place for creating leapfrog technology solutions. Our strategy is that currently to maximise US and Europe, because this is the time and this is the window wherein those markets, you can create maximum competitive advantage. So overall, change from a strategy perspective we should not defocus that, but leverage the India market to create unique new capabilities which can be deployed globally.

Why is the Internet of Things an (IoT) important topic today? How will it have an impact on businesses in the near future?

If you look at digitalisation and Internet of Things , these are sort of two sides of one coin—these are the two things which will put technology into the heart of business competitive advantage. IoT is not a new discussion. It started back in 2003-04 when IPv6 came in and you had enough capacity to give an IP address to any device of future. I think what is beginning to change is the competitive reality. Because of the IoT, two things are now possible, the front office and the middle stroke back office. On the front office, I can arguably use this technology to
intentionally personalise the resulting action to a customer, channel partner, consumer. So in effect, why the IoT is becoming so critical is now you can leverage data to dramatically disrupt transaction cost models in your any industry both front-end and back-end and make P&L far more competitive than anybody else.

What is important at this stage is companies, who take a leadership position in terms of their ability and understanding to gauge and take advantage of this opportunity for clients, are when it comes are going to shoot. So that’s really where we are focused now.

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