Companies
Tech mood not as bad as in 2008; bet on strong growth: HCL Tech CEO
Summary
In an interview, C Vijayakumar, managing director and chief executive of HCL Technologies, said the company slashed its FY24 guidance due to a weak overall first half of this fiscal.
NEW DELHI : On Thursday, HCL Technologies Ltd beat Street estimates to report a better-than-expected September quarter. Quarterly revenue remained sequentially flat, although net profit surged 7.9% to $464 million, while operating margin rose by a significant 1.5 percentage points. In an interview, C Vijayakumar, managing director and chief executive of HCL Technologies, said the company has slashed its FY24 guidance despite this result due to a weak overall first half of this fiscal. He added that the overall industry sentiment is not as negative as the 2008 financial crisis, and elaborated the company’s stance on internal adoption of generative artificial intelligence (AI) tools. Edited excerpts:
Are you seeing similar caution and sentiment among clients as the 2008 financial crisis?
No; I don’t think there’s any sentiment that is so negative as during the financial crisis. Customers are continuing to spend on technology projects, only not as much (as last year).
That is why our revenue continues to grow, and there is some sense of stability. But, during the covid-19 pandemic, there were a lot of new projects that got initiated.
Some of them came to an end. But, other areas—data analytics, cloud migration, cyber security and network resiliency remain important priorities, and I don’t see customers cutting down on these core areas.
The client-side slowdowns are coming from specific projects that aren’t delivering returns—those are the ones that are being cut down.
Yet, there was a mid-year guidance revision. Are large-deal executions being delayed?
While we’ve revised the guidance, this is largely post facto. Our first half was bad, so we had to revise the guidance to reflect what the full year will look like.
But, given that two quarters lie ahead of us this year, we’re hoping to see very strong growth, which forms the basis of our new guidance.
We are also bringing in operational efficiencies through automation and managed services programs.
You have disclosed record deal wins this quarter. When will they start reflecting in earnings?
A lot of these deals will come into impact starting this December quarter itself, while some of the rest will start reflecting from the March quarter.
Alongside these deals, you plan to hire 10,000 freshers. How will this tie in with the rising involvement of generative AI?
Generative AI will bring more efficiency; so, some areas will need fewer people eventually. Some of these areas include testing, customer service, and business process outsourcing (BPO)—once generative AI is fully deployed.
Similarly, in software development, there are significant efficiencies to be gained—our pilots have proved that.
But, to get to that state, there are a lot of dependencies that will need to be addressed, and we are not there yet. Can we get 10-15% more efficient by leveraging generative AI fully, for the same work that we’ve been doing right now? I would completely agree.
But, I think this will take some time—there are a lot of dependencies that need to be addressed, and we’ve to go about it in a very calibrated manner. We’ll need to continue evaluating risks, and make sure that mitigation steps are put in place. And, that is definitely happening.
What interest are you seeing from clients in generative AI?
Clients can do a lot of things (with generative AI), and they will need help from providers like us. While we’ve done proof of concepts (PoCs), clients today need far stronger data strategies in order to deploy generative AI at scale. Data governance is becoming important, and data quality is already important. We have to get these elements right to get meaningful effectiveness from this new area of tech.
Today, we have over 100 opportunities that we are working on. But, most of them are PoCs, and are sub-$500,000 or sub-$1 million opportunities.
Does this suggest that we’d see a further headcount reduction in the coming quarters?
No. In fact, we expect headcount to grow in the next two quarters.
