IT major HCL Tech has signed a seven-year outsourcing deal, covering the entire IT landscape from infrastructure to applications, with Reader's Digest Association, Inc. (RDA) for USD 350 million. HCL will provide IT support to RDA's operations across 45 countries and 14 languages covering North America, Latin America, Central and Western Europe, and Asia Pacific.  

R Srikrishna, Senior VP – North America Operations, HCL Tech said the deal involved covering all of RDA’s application, maintenance, development and infrastructure operations and would be executed in two phases.

Srikrishna sees outsourcing interest in the media publishing and entertainment industry to continue. “This deal reaffirms our ability to compete and win in global mega deals. It also reaffirms our belief that the media publishing and entertainment industry is one of the hottest and growing industries.”

Here is a verbatim transcript of the exclusive interview with R Srikrishna on CNBC-TV18. Also watch the accompanying video.

Q: Could you elaborate on the contours of the deal, the size and scale of the engagement?

A: The deal is for USD 350 million over seven years. It covers all of Reader’s Digest’s IT operations globally. So, we will be supporting Reader’s Digest in 45 countries and 14 languages. It involves all of their application, maintenance, development and infrastructure operations.

It really will be executed in two phases. Phase I is going to focus on improving service levels for Reader’s Digest whilst reducing cost of the operations.

In Phase II, we will jointly with the clients decide on how to reinvest some of the savings into more transformational activities specifically focused around how we deliver the content that Reader’s Digest publishes in a more digital format? For example, how do you publish the content in a PDA or a BlackBerry? So that is going to be the focus in Phase II.

Q: What is the kind of pricing structure that you are working with? What kind of margins are you looking at and how would this eventually impact your bottomline?

A: The deal is priced like any other large deal will be. I think it will be in line with what we see in any other deal that we have done. It will be neutral to our profitability.

Q: This is a very interesting space that you have forayed into? Do you see further potential in this segment and are you expecting any more orders in the pipeline?

A: Over the past several quarters we have seen an increase in interest in outsourcing, aggressive interest in the media publishing and entertainment industry as we call it. We definitely expect the trend to continue.

In general, this deal does reaffirm our ability to compete and win in global mega deals. It reestablishes our leadership in integrated deals that have both application and infrastructure. It also reaffirms our belief that the media publishing and entertainment industry is one of the hottest and growing industries.

Q: Could you throw some light on the scenario in the North American markets? Do you see any turnaround happening in those markets?

A: That is really a trillion dollar question. But in the last couple of weeks there are some people that have said that the light is around the corner. But I don’t know. What we do have out here is the light is clearly on and how does it impact our business, and this deal is a good validation of what I am saying.

There are two components to customers’ budgets. There is a budget that cannot go away, what it takes to keep the lights on and run the business? Customers are focused on improving services and reducing costs because they cannot shut that down. That portion is continuing.