Not looking at big-bang buys, just small tuck-ins: HCL Tech MD & CEO

HCL Technologies (HCL Tech) reported its second-quarter (Q2) results on Thursday, with 4 per cent rise in profit sequentially, while keeping the forecast for the current financial year constant. The company's products and platforms business revenue fell 5.5 per cent year-on-year (YoY). In conversation with Neha Alawadhi, its Chief Executive Officer and Managing Director C VIJAYAKUMAR speaks about the way forward and the demand scenario for HCL Tech's business. Edited excerpts:
 
HCL Tech has spoken about softness in its products and platforms business. What is the bigger picture around that segment and where do you see it headed? 
 
The products and platforms business is 12 per cent of our overall portfolio. Eighty-eight per cent of our portfolio is services, which has grown phenomenally well, with 5.2 per cent constant currency growth and impressive YoY growth numbers as well.

 

On the products business, it's been a seasonally weak quarter. Some deals slid into the December quarter. We continue to remain positive about the products we have invested in. A lot of them have been modernised and we have launched Unica and other products on various hyperscaler platforms. 
 
We said we would see a flat to 1 per cent growth in the products and platforms business. Given the overall progress we made on the products business, we remain confident about a good trajectory. 
 
It has been a while since the IBM product acquisition. Do you have something similar in the pipeline? Are you looking at other big-bang acquisitions?

 
No. Today, there is so much momentum in the organic business. We are better off focusing and executing to the demand the market is presenting to us. Rather than looking at any major acquisition, we can always have small tuck-ins, expand in a geography or in a capability area. 
 
A lot of your peers have raised their guidance, but your guidance for this year remained unchanged.
 
If you see the past five years, we met the guidance - both on revenue and margins. We are trying to provide a broad range - that is the right approach rather than assigning a precise number and chasing that every quarter. We're going to give you leading indicators like the total booking number and net hirings. 

 
Given the softness in the products and platforms business, do you think your guidance is realistic? 

Yes, we are confident. Even though there may be slightly lower revenue from the products business, the services business will more than make up for it.
 
Attrition has been an issue this quarter across the spectrum. Do you see a problem on the supply side of talent, given your demand pipeline?
 
Attrition has picked up in the last quarter. But it's still fairly below many industry players. We're not looking at our engagement with our talent on a short-term basis. We're looking at a much more long-term career basis. I think that is resonating well. We took tremendous care of our employees during the most difficult phases of the pandemic.

 
How is the demand environment changing because of the pandemic? Is there a difference in the way deals are structured? Did you have to make new negotiations?
 
I think it's not completely new. But there is vendor consolidation. Some of the wins we had last quarter were related to that. As also, infrastructure (infra) and application operations, as well as modernisation of infra and application, and migrate them to Cloud. Sometimes both outsourcing and modernisation get combined into an overall deal. That's what we've seen in several large wins we've had in the past six months.