HCL Axon seeing improvement in SAP market

HCL Axon, the wholly-owned subsidiary of HCL Technologies that specialises in SAP services, says demand is coming back into the market. “In the SAP market, we have seen positive movement in financial services, retail and also some core entities like consumer and life sciences,” the company’s President Steve Cardell told CNBC-TV18. He also spoke on the company’s integration with HCL Technologies. HCL Technologies bought out Axon in 2008.

CNBC-TV18 also learns that HCL Axon is looking for acquisitions in continental Europe and emerging markets, reports CNBC-TV18, and is looking to buy out niche players. The company, which is focussing on deals in the USD 50-100 million range, is hopeful of closing new deals in the current quarter.

The company is focussing on deal closure for the next two quarters and hopes its order book would improve post that, Cardell said.

Here is a verbatim transcript of Steve Cardell’s exclusive interview on CNBC-TV18. Also watch the accompanying video.

Q: How hard has it been to get this integration [with HCL Technologies] done?

A: Something of this scale has its challenges but the approach we took at the beginning was key. In the value chain in which we operate, Axon was doing many of the high-end services, blue printing implementation, what HCL SAP practice had was an engine that supported all of that. So [HCL CEO] Vineet Nayar took a bold step — as is the way for that man — to move the HCL SAP practice under the Axon management team. What we did from day one was to build an integration model in that way.

Normally, when a company is acquired, the challenge is for the company that has been acquired. What we were doing here was a reverse integration in how we’ve done it. In terms of client retention and employee retention, it’s been a very successful process.

Q: So retention has happened but what about addition now and what about order flow because there have been concerns really on what is happening especially as far as the SAP market is concerned. Where do things currently stand as oppose to how you saw the picture last quarter and whether things have actually revived in picked up this quarter?

A: Certainly first quarter of this year, SAP put out some very bad new licence numbers and we saw demand disappear in the market as everybody saw demand disappear. Pipeline opportunity companies were very conservative about moving forward with projects and so we just saw the world pause. What we have definitely seen in this quarter is many of those projects now come back into place. So it will take a little while for that to feed through into order book but we definitely see optimism in the market compared to the first quarter of this year.

Q: Any particular sectors or verticals where you are seeing the revival or you’re seeing the finger off the pause button in that sense?

A: It has been very interesting by verticals. Specifically in the SAP market, we have seen positive movement in financial services, which might sound like a very strange sector to see that. We have seen it in retail, which also is quite surprising and also some of the core entities like consumer and in life sciences.

Q: Utilities, pharmaceuticals – I believe those are sectors that are looking pretty hot as well in comparison.

A: Utilities being another one – a lot of re-platforming is going there. So we are seeing positive movement in sectors like that and also sectors that are still slow.

Q: So what is the outlook now because as you said that the pause button is clearly coming off – what is the outlook now as far as the SAP market is concerned for HCL for the next couple of quarters?

A: What we will see this quarter and the next is a real focus on the pipeline deals that are down there so we would be focusing on deal closure for these next two quarters and then we should be seeing that positively impact into the order book beyond that. So, next two quarters is about closing the deals.

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