Employment issue a wake-up call for all: HCL Technologies CEO

New Delhi: Six months after Anant Gupta took over as chief executive of HCL Technologies Ltd, the company has maintained its earnings track record. In an interview, Gupta said that the company will further sharpen its focus on the so-called re-bid market, which relates to renewal of existing business, as discretionary technology spending is still elusive. Edited excerpts:

add_main_image What factors are contributing to HCL’s growth?

In a market which has a flat IT budget and has been depressed for two-and-a-half to three years, companies reach a point where they can’t just sit and do nothing. They have to take a decision to accelerate the business so that they can save some money to put in either to ‘change the business’ or ‘run the business’. The way we are positioning ourself is that we are telling them that we will ‘change the business’ and ‘run the business’ for the same (price). We will assure you that we will do the change and also transformation etc. This is what is finding relevance in the market place.NextMAds

Are companies still hesitant about new projects, given that 90% of the more than $1 billion of deals in the March quarter came from the so called re-bid market or renewal of existing business?

Absolutely. They don’t want to give a new scope till they are confident.

The fact is that the re-bid bucket is large, which is driving it. Also, from our perspective, some of the new scope is not in our sweet spot or addressable market that we want. And new scope will be more complicated and maybe in markets we don’t want to enter right now, so it must fall into a broader strategy. The momentum is in the re-bid market that gives us the ability to acquire marquee customers, get our foot in the door. So we will sharply continue to focus on the re-bid market as it is a limited window of opportunity. And suddenly if there is a need for us to do transformation, then our high-value services are already there. It is not that it’s not happening, enterprise application service grew by 4% this quarter. Is it that one mega deal that came in and swung it? No. It’s a combination of many small deals for which blue-printing happened a while ago.

Most of your growth is being driven by infrastructure services this quarter, what about other service lines?

Why not? It is better than saying that it grew by 1% quarter-on-quarter. The discretionary spend is a higher component of those other service lines as compared to infrastructure, so they are more challenged.

In terms of margins, do you have any more levers to exploit to improve them as pricing is not going up and your utilization rates are at a record high?sixthMAds

The traditional levers are exhausted, but there will always be a new set of levers. And there will be different elements which will drive non-linearity. It’s still not at the level which I can say it is capped out. As far as utilization is concerned, I can say that it is an optimal level and we wouldn’t want to go higher from here.

Is 2013 the first time HCL hasn’t visited campuses for recruitment?

See, times change and it’s like saying when was the last time you went to the bank. We are still recognized in the talent markets but it doesn’t require the traditional act of campus hiring every time. The fact is that there is a shift in the talent markets and we should not hide it. I think it is easier to get the talent one wants, at least in the average profile. So, do we need to go to the campuses in a particular month or quarter, I don’t think so—the times have changed. We will continue to hire, you want fresh minds, fresh blood to always keep coming into the system. But the curve has shifted now.

Fresh graduates constitute almost 60-70% of the total hiring traditionally. Will that change significantly in the future?

I would believe so, because the nature of the engagements is changing. You have the social aspect of operating in multiple countries also coming in. If you want to participate in an addressable market, the delivery models will need to change —it can’t be a single-country delivery model. We have to find alternative models to have multi-skilling, (increase) employability etc otherwise see what happened to the BPO industry; lock stock and barrel in three years it moved to Philippines.

Therefore it is a responsibility that every stakeholder will have to take and not just the government, as you are talking about so many young individuals. Today, it is a concern area for all stakeholders and the traditional model will not work. It is a wake up call.

Could HCL have handled the controversy over delaying the absorption of new recruits better?

I am sure. There are always (different) ways to do it.