'Time right for acquisitions'

Q&A: Vineet Nayar, CEO, HCL Technologies

HCL Tech posted a 29 per cent increase in its revenue for the quarter ended September 30, besides signing big deals. It maintains the global slowdown should be seen as an opportunity and not an excuse. CEO Vineet Nayar told Kirtika Suneja this has reaffirmed the leadership policy and will strengthen its momentum towards broad-based growth. Excerpts:

Are you seeing growth in deals and revenue?
Our performance must be viewed in the backdrop of the last four quarters, as the slowdown started then. In this time span, we added around $375 million in revenue. S&P 500 data show the worst is behind us but we do see a dip in growth in IT budgets for this year. In fact, the only market at this point of time is the churn market. This refers to market shares and total IT outsourcing deals. We ourselves have become a business transformation company from an IT services company, by converting the slowdown into an opportunity and not an excuse.

So, what’s the strategy?
A three-trajectory path. Organically, we offer innovative propositions. Two, we have to integrate the acquisitions much faster than others, like we did with Axon. Third, we have to keep on acquiring companies. This is the time when we can drive market shares away from the global players. We feel this is the appropriate time for acquisitions to fill in the gaps, as in Continental Europe, enterprise application space, BPO and the engineering side. We are actively looking at opportunities. However, acquisitions are only for filling in the gaps.

What are your clients telling you now?
The business model has changed and customers are asking for more value per dollar spent. No customer is talking budgets and budgets for the next year will be fixed only in November-December. We feel the budgeting will be on a quarter by quarter basis, meaning annual plans and quarterly budgets. There would be hard commitments on the quarter and soft on the year.

Does that reflect in the deal pipeline?
There has been a softness in deals, as the demand environment has softened in the last two quarters. The enquries have fallen in number. This is also reflected in our repeat business that was 93.7 per cent for the quarter, the reason being that the role of new deals is less now. The environment has also stabilised with the existing vendors.

Where does India feature?
We are trying to figure out the role of India, as it is an interesting market space. The level of activity has drastically gone up, especially in the government and public sector. Margins can erode, unless you have solutions in this market space. In India, we have solutions in power, telecom and financial services like insurance and stock exchanges.

What about the growing verticals and geographies?
The five big verticals for us are media and entertainment, telecom, healthcare and lifesciences and financial services, where we have seen significant growth. Geographically, we improved our share in Europe by getting new deals and new customers. We also invested early in emerging markets like the Middle East, Nordic countries and Continental Europe. Cloud computing will come in a big way in three years’ time.

What is the outlook for HCL?
We are proud of our past but cautious of the future, because the environment is nimble. We are going to hire 1,000 freshers in this quarter and the rest will be just-in-time hiring of laterals. Large deals will come only after some time.