The whole digital transformation opportunity is big, growing: HCL Tech CEO

Having forecast a revenue growth of 14-16% in the current financial year, HCL Technologies' commentary was far more encouraging than its peers as it announced its fourth quarter results

Having forecast a revenue growth of 14-16 per cent in the current financial year, HCL Technologies' commentary was far more encouraging than its peers as it announced its fourth quarter and annual results for 2018-19. C Vijayakumar, president and chief executive officer, speaks to Neha Alawadhi. Edited excerpts:

What gives you the confidence to expect 14-16 per cent constant currency growth in this environment?

The whole digital transformation opportunity is very big. Look at the $6-trillion spend in information technology (IT) and services. Of this, $1.2 trillion is getting spent on digital transformation and that’s growing at 18 per cent yearly.

Some of the core capabilities we have invested in over the past three years is putting us in a very strong position to capitalise on this trajectory. We have very strong engineering capability. We have built strong capability on scale, agility, digital, user experience and design thinking. It is reflected in our 28 per cent growth, year-on-year, in our Mode-2 (digital) services. I think we’ve made all the right investments to propel growth on the services side. 

The traditional services will continue to have pressure but firms need to be investing enough to transform themselves. Apart from services, we are looking at products as a very big opportunity. We want to really double up our products business. We are doing that significantly through the inorganic route but we’re also modernising and there is good organic momentum in that area. 

You are working on more products that you will take to market this year. What is the strategy there?

We are. There are a lot of products we’ve acquired and these are being launched in a managed services version. There are other areas like AI (artificial intelligence) and machine learning. And, we have the DRYIce (AI-backed automation platform) capability, which is helping us not only in services deals but we are also selling it as a standalone product. 

Similarly, a number of things coming from our engineering services, around 5G (fifth-generation technology) and IoT (the Internet of Things), will also drive our products business. 

You are now the country’s third largest IT services firm. What in the past year did you do to make this possible?

We remained sharply focused on pursuing large opportunities, especially integrated ones which bring together the capabilities of HCL, like products, infrastructure, applications and all of that. Our IMS (information management system) business has also grown well. The past two quarters have been stellar ones. 

What about deal renewals on the infrastructure side?

That continues. There are, of course, certain dynamics of competition, and productivity and automation, but we’re doing fairly well and I remain optimistic on this business. 

What is the larger strategy around Mode-2 and Mode-3 (analytics and IP-led business)?

We are already at 28 per cent and believe we will get to 35 per cent next year. I think similar growth momentum will continue if you make the right moves.

Your overall deal pipeline?

Looks good. Compared to the end of last year, we're at least 10 per cent higher. In spite of the good bookings we have, the pipeline also looks good.

How are you thinking of protectionism in different regions? 

Like the way we stepped up on local hiring in the US, we are also stepping up on local hiring everywhere. We have close to 67 per cent localisation across all the geographies we operate in and we continue to propel forward with that. 

Does it impact your margins?

Yes but landed resources and locally hired would be more or less the same. Sometimes, you will have to invest a little bit more in training and that's the one-time incremental cost we have to incur. It does impact our costs.