HCL Tech bags large IT outsourcing contracts from Volvo

Also, HCL Tech acquires Volvo Group's external IT business

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India's fourth-largest software services firm HCL Technologies has bagged the largest outsourcing contract in recent times from Swedish auto maker Volvo Group, with the deal valued at over $1.8 billion spread over five years.

The deal also involves HCL buying the IT technology arm of Volvo for $138 million (Rs 895 crore) that mandates it to take over 2,500 employees and 40 customers of Volvo globally on its rolls. Around 200 engineers at Volvo's Bengaluru facility will be rebadged by HCL.

According to sources, the outsourcing deal is valued at $1.8 billion over five years and an additional $1 billion that HCL would get from committed contracts of $1 billion over the same period from the 40 customers of Volvo in Europe. HCL will be the sole global vendor for the Swedish auto giant

"We welcome over 40 new Volvo IT customers to the HCL client base. This addition enables HCL to achieve an even stronger presence in the Nordics and the wider European region, and accelerates our journey in these markets. The Volvo Group employees and consultants will add great value for our customers with the skills and expertise that they bring," Anant Gupta, President & CEO, HCL Technologies. HCL did not comment on the value.

The deal is one of the largest IT deals signed by any Indian IT company, and a first in the industry to use principles of Vested Sourcing as the basis of the relationship for an IT outsourcing engagement of this size and magnitude.

Earlier the company had agreed to buy the external IT business of Sweden's Volvo group for $138 million (around Rs 895 crore) in an all-cash deal.

. According to the company it will deliver on a technology transformation roadmap that spans over 3,500 applications, over 20 data centres and 11,000 servers, 12 PB (petabyte) of storage, 20,000-plus MIPS of mainframe capacity and over 15,000 network devices.

As part of this roadmap, HCL will also provide over 65,000 Volvo end-users with access to productivity and user enablement solutions like Microsoft Office 365, the company said.

The relationship will enable HCL to create an automotive Centre of Excellence in Gothenburg, based on the domain expertise of the Volvo team, to serve HCL's global automotive and manufacturing customers.

"Combining the strengths of HCL with those of the transferred parts of Volvo IT will result in an organisation with formidable capabilities and an intimate understanding of Volvo Group needs and opportunities. This, and the cultural fit between our two organisations, is the foundation for a partnership that will provide long term and strategic benefits for the Volvo Group," said Olle Högblom, CIO of the Volvo Group and President of Volvo IT.

Since its emergence on global landscape after its IPO in 1999 and listing in 2000, HCL Technologies, along with its subsidiaries, today operates out of 32 countries and has consolidated revenues of $ 6.1 billion, as on 31st December 2015 (on Calendar Year basis).