Noteworthy changes looming in biz landscape: HCLTech's C Vijayakumar

HCLTech saw its stock price slide by 8.63 per cent, closing at Rs 1,813.9 per share as the company’s 2024-25 (FY25) third-quarter (Q3) guidance, despite positive commentary, pointed to a weak FY25 exit. C VIJAYAKUMAR, chief executive officer (CEO) and managing director of HCLTech, discussed the performance and future outlook in a video interview with Shivani Shinde. He highlighted shifting demand dynamics, uncertainty, and the evolving role of generative artificial intelligence (GenAI). Edited excerpts:

 

The Q3FY25 performance seems to be weak, considering this quarter is a strong quarter for HCLTech due to its business mix. 

It’s largely in line, except for the software business, which was a little lower than our expectations. Services did a little better; overall, it was in line with our expectations.

 

Earlier, our guidance was 3.5-5 per cent, and now it has become 4.5-5 per cent. This 1 per cent increase at the lower end is split between a 0.5 per cent impact from acquisitions and a 0.5 per cent organic growth increase.

 

Any insights from your clients regarding their spending patterns or Budget plans for the coming year? 

We saw an improvement in December compared to the July-September quarter. Generally, the demand outlook seems to be improving. There could be noteworthy changes in the business landscape in the next few weeks. That may lead to some changes in the way clients are thinking about their spending, which we haven’t visualised any impact from yet, either positive or negative.

 

You said that GenAI is an opportunity for the company and that you are signing deals led by AI. Are deals getting bigger in the AI segment? 

GenAI is a capability that can be leveraged. Instead of looking at GenAI in isolation, I think it’s integral to everything that we are trying to do in the services world.

 

Programmes leveraging GenAI are increasing, especially in areas like data modernisation (a prerequisite for effective AI solutions), application migration, and application modernisation. This trend reflects the direction in which the industry is moving.

 

Two recent comments: first, from the Salesforce CEO, saying that because of productivity gains due to AI, it has negated the need for additional hiring for the company. Second, a recent Bloomberg analysis said that global banks will reduce 200,000 employees over the next three to four years. 

There is indeed a remarkable improvement in productivity and development velocity across the software development lifecycle. But that has not resulted in any reduction in the number of people deployed. There is more work, and the teams can deliver more output with the same amount of effort.

 

Over a period of time, do you see GenAI impacting headcount growth within the industry and for HCLTech as well? 

The industry has largely had linearity between headcount and revenue growth over a long period. I think that linearity will decrease. I think that headcount growth will be a little slower than revenue growth. However, there will still be a good correlation between the two.

 

HCLTech is celebrating 25 years of listing. What have been the most challenging times for the company, and how do you see things playing out? 

Our innovative and entrepreneurial culture has been pivotal, allowing us to stand out and create new market opportunities. For example, we created the entire remote infrastructure management business, which is now a multi-billion-dollar business for the industry. We pioneered the engineering and research and development services business in the early 1990s and early 2000s. And we also built a completely new product business in the past five years. I think HCLTech has always created big businesses out of new ocean opportunities. I think that’s something that truly differentiates us. That element will continue and will be very critical as we nurture it into the next 25 years.

 

The second aspect is that many of the things we did in the past, which helped us get to where we are, will require us to look at the fundamental changes happening in the landscape. GenAI is a big inflexion point in the industry, especially in the knowledge industry. The whole engineering capability we bring to the table in building new solutions across different industries — I think that needs to be amplified much more as we move forward.

 

What will also remain central and important will be our core people-centric culture.