HCL Tech to invest $250 million in research and development: C Vijayakumar3 min read . Updated: 18 Oct 2020, 04:23 PM IST
- ''We have some very good relationships with our existing clients and they have shown confidence by giving us more work, expanding some of the scope combined with areas that are very critical for them''
NEW DELHI : IT firm HCL Technologies Ltd bounced back in its September quarter performance, with its net profit growing 7.4% sequentially and 18.5% year-on-year to ₹3142 crore. In an interview with Mint C. Vijayakumar, president and CEO, HCL Technologies spoke about how digital transformation, cloud businesses and next-gen technologies will continue to be a focus area over the next 2 quarter. Edited excerpts:
What led to HCL’s Q2 growth?
Last quarter, I had said the worst is likely behind us and this quarter has definitely proved that we have had a very smart recovery. We have some very good relationships with our existing clients and they have shown confidence by giving us more work, expanding some of the scope combined with areas that are very critical for them. Overall, the tech intensity and spending have gone up, we have a strong proposition in digital foundation. What we used to call infrastructure solutions this is hybrid cloud, digital workplace, networks, cybersecurity – this is a very strong service offering from HCL and today, it has become a super critical pre-requisite for any transformation plans that enterprises have. I would very strongly attribute our performance to our employees who remain very dedicated against all the odds and ensured client deliverables are met.
How is HCL’s Mode 2 and 3 (digital transformation framework and next-gen technologies) business growing? By when do you see Mode 2 & 3 contributing to 50% of HCL’s revenue?
Mode 2 has grown very well because of two reasons. One is our digital and analytics practice has delivered very good growth along with cloud native solutions and these are the investments that we made in the past few years which continue to support us, to scale and really be relevant to our clients. Mode 3 has largely been acquisition-led. We are also investing on an annual basis $250 million in research and development (R&D) largely into our Products and Platform business which is helping us to launch new products and innovation on some of the mature products that we had acquired. That is going to enable stickiness of the client and customers adopting the upgraded versions of the new products as part of the digital transformation strategy. That’s the direction Mode 3 is taking.
This will increase over the next 2-3 years and I believe next generation services and Products and Platforms will contribute to half of our revenues in the next 3 years.
Are acquisitions now an integral part of your strategy?
Yes, acquisitions will be a part of the growth strategy so we will continue to look at acquisitions in the digital space, in the product space to build IP and innovative products and to expand in some geographies. We are already present in Germany, France, Australia, Canada and Japan but we want to enhance our focus in these geographies.
What is your hiring strategy?
We had a plan of hiring over 12,000 freshers this year. We have hired 3000 in the first half and we plan to make up in the second half. However, overall hiring will also see some pick- up in the second half of the year because there is a lot of demand for which we need to hire. Regarding hikes, normally our operating plan is every July all junior level colleagues get salary increase and effective October all the senior hires get hikes. This year we have moved it by one quarter – so the those in the E3 band and below will get hikes from October while E4 and above will get salary hikes effective from January 2021, so there is a one quarter lag from the traditional cycle. We are in a good growth momentum so there is no reason for layoffs. We always look at retraining people and make them productive in newer areas and this is a very employee-centric strategy.
Post-covid, what is driving HCL’s digital agenda?
There were certain digital transformation strategies underway and covid has accelerated many of these transformation programs. Something that significantly changed is adoption of public cloud. It has found more acceptance in larger corporates than in the past so we are seeing some good momentum here. I think the outlook for the industry is very promising so that should be good for the country. I think the most important aspect is upskilling the talent on a continuous basis to ensure that we are able to deliver to all the new requirements. We are concerned about the second wave of the pandemic in some geographies and that is something we are watching out for and seeing how to respond.