Noida-based IT major HCL Technologies is confident of growth in its product and platform business, where the company has made significant investments, including a $1.8 billion acquisition of select IBM products.
The vertical accounted for about 14 percent of overall revenue ($2,617 million) in Q3 FY21 and grew 9.3 percent year-on-year for the quarter ended December 2020. It was one of the key growth drivers for the firm along with digital and new-age technology services such as cloud, where demand is huge.
In a conversation with Moneycontrol, C Vijayakumar, CEO, shared his outlook for the product and platform business, large-deal momentum and demand recovery in the Engineering and R&D segment.
Could you tell us your outlook for the product and platforms business and how you are measuring growth for the segment?
Overall, the business is very robust. We have done a lot of innovation and launched new versions. All of that is going to help drive growth. But as in any software business, there is seasonality. Generally there is a little more spending at the end of the year. So, the December quarter will be the peak and the January-March quarter will see a decline. That is the trend.
In terms of metrics, an important metric would be new license sales every quarter. We won $91 million in total contract value (TCV) in net new licenses (in December 2020). This is excluding renewals in the last quarter. These are the metrics we will be continuously looking for.
Are you looking at more metrics to measure growth in the segment?
We are mentally preparing to share more metrics. We shared net new bookings, we should share similar information as and when we become comfortable with the consistency of data that goes into reporting these numbers.
Growth in Engineering and R&D services (ER&D) is lagging, with a year-on-year decline of 5.1 percent in Q3. Where do you see growth coming from in this segment?
There are two businesses here. One is asset-light industries like hi-tech, communication and semiconductors. We continue to see good traction and a lot of good programmes that are helping us with scale.
Then there is another set of businesses, what we call the asset-heavy industry, like manufacturing and auto. Some of them have been impacted significantly due to Covid-19. The spend (there) is coming back a little more gradually than we are seeing in other segments.
In ER&D we will see growth in what we call digital engineering, which is around 5G deployments, IoT and data engineering.
Large deals have made a comeback. From the HCL Tech perspective could you tell us the nature of deals you’re seeing and how the company is positioned to tap into the large-deal momentum?
We signed 13 transformational deals and these are all large and net new deals. Because we don’t classify renewals. We don’t add them in deal wins. We only look at net new deals above a certain threshold. We see good momentum there. While we saw 13 deals, I see it accelerating a lot more this quarter and as we get into financial year 2022.
In terms of value, it varies: $50 million, $100 million, $200 million and $300 million.
We have a great rhythm around going after large deals and winning them. I don’t think I need to change anything there. We are already pursuing and winning a large number of deals. Sometimes we don’t announce them since clients don’t give us permission to announce. Other than that, momentum is good and there is no need to make any changes on how we are approaching this.
Do you see HCL getting back to double-digit growth in FY22?
We have not done very precise planning. As you would know, planning is a very intense exercise and there are many dimensions that need to be taken into account.
So, only in the next quarter would we be able to provide you a very fine kind of guidance. However the market momentum is very good. In the next five years, the industry’s growth will be faster than it was in the past five years. That is pretty much true for HCL as well.
As I shared earlier...I think double-digit growth in IT services is very much possible.