Artificial intelligence (AI) automation and generative AI is unlikely to impact headcount at HCLTech anytime soon, said CEO and MD C Vijayakumar, coming at a time when there is a rising debate in the technology world on AI replacing people and jobs.
Vijayakumar said that for HCLTech, currently customers are looking at deploying AI into three areas of work including customer service or call centre related work, speeding software development process and embedding AI into operations like managed services, application support and infrastructure support that the IT major provides.
He added that HCLTech does very little work on customer service support and whenever it does, it mostly around consulting.
For software development related work too, Vijayakumar, believes that while efficiency and productivity can be increased by 10-30 percent, but the journey won’t be immediate. “It's going to happen gradually over the next three years. We think that level of productivity is only possible in a pure play software development kind of environment,” he told Moneycontrol in an interview at the World Economic Forum (WEF) in Davos.
In the case of the third areas, which involves managed services, he said that these services are already highly automated driven by machine learning and all the hyper automation solutions. This leaves very incremental benefit from generative AI, maybe another 10-15 percent improvement.
“So effectively, I don't see this to be reducing headcount. There's going to be lot more work around Gen AI, and all of that will be more than offset. Next set of discretionary spend, is going to be largely driven by all the surrounding areas, which really makes AI much more productive and useful for everyone,” Vijayakumar said.
HCLTech’s Q3 performance
HCLTech reported its earnings for the third quarter ended December 31 last week, beating estimates on all three parameters of net profit, revenue and operating margins.
Net profit rose 6.23 percent year-on-year (YoY) to Rs 4,351 crore. Consolidated revenue for the quarter grew 6.54 percent YoY at Rs 28,446 crore. Operating margins came in at 19.8 percent, surpassing its own guided range of 18-19 percent.
The company, however, reduced its revenue growth guidance for full year FY24 from the previous quarter at 5-6 percent YoY in constant currency terms to now 5-5.5 percent. This is including ASAP acquisition.
Speaking on the operating margin guidance, Vijayakumar said, “Our guidance of 18-19 percent is for the full year. Usually in the December quarter, we'll always do better than our guided range, because we have a software business which peaks and that directly flows into the bottom line. So I think it will normalise in the next quarter.”
For FY25 expectations, he added that it's too early to “put something more definitively.”
“But given where we are, we hope that we will do better than FY24,” he said.
This quarter, HCLTech also became an outlier among the top four IT companies having added 3,617 employees, bucking the industry trend.
When asked about his hiring plans for next year, he said, “I think our portfolio is about 88 percent services and 12% software. That 88 percent of the services business has some linearity between the people addition and revenue growth. So with the good growth of 5-5.5 percent that we're forecasting, we needed to add more people.”
“So while in the first half, we declined. In the second half, we started hiring more. Last quarter we had 3000 plus people, which includes 3800 freshers. It's really correlated,” he added.
On a year-to-date basis, HCLTech added 9,000 freshers so far in FY24, getting closer to its target of 10,000.
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