Posts Tagged ‘HCL’

You have to look at HCL on a year-on-year basis

February 9th, 2015

Krishnan Chatterjee is a multi-disciplinary strategic marketer with experience straddling across consumer goods and technology industries. Currently, senior vice-president and head of strategic marketing at HCL Technologies, he is acknowledged for incubating the global marketing team and evolving a differential positioning for HCLT, India’s fourth-largest software services exporter by revenue. The company’s strong focus in developing next generOutsourcing63ation propositions around digitalisation, engineering platform services and targeting operating model for enterprise IT have allowed it to gain significant market share in the global IT services market. “The nature of spending in technology is dramatically changing. As technology is becoming a source of competitive edge, businesses are increasingly participating in the buy side,” he tells Sudhir Chowdhary in a recent interaction. Excerpts:

Give us a sense of the big story emerging out of HCL Technologies. Where is it headed?

In order to understand HCL’s big story, you have got to start with a little game we play, which we call ‘One Five Fifteen’. When we closed fiscal 2014, the company crossed a billion EBIT, $5 billion revenue and $15 billion market cap. There are only 8 companies in this metrics. So it’s a pretty good place to be for at least 14 years, since the company visibly made its presence felt in the market. Historically, this is a company which has always had to depend on innovation. It never had the bulwark of, let’s say, the commodity EDM kind of business in our sector to fall back on.

If you go back in time, the company has always been strong in engineering and R&D services, so it was a product company moving into services.

Then in 2008, the enterprise systems business with the Axon acquisition was again our first. In 2009, we spotted the rebid market opportunity as the recession descended on the world and the whole ITO rebid what we call IT outsourcing, the rebid market which we have done well over the last few years. Then about 18 months back, we spotted this trend of proactive obsolescence as the cloud started disrupting the economics of IT. That’s when we launched things like ALT ASM which is a proposition that helps shrink the application support work.

What is encouraging is as we stand on 2015 today, there are two very nice disruptive opportunities in front of us. The first is this whole thing of structured engineering outsourcing. The second disruption that is clear upon all of us is the digital business. The digital business transformation and what is happening here is very simple. Today if you are on the board or the CEO of any major company, you are finding that competitiveness is moving towards born digital company. You can’t just set up a digital business model and then not operationalise it, and operationalising it is a very unique process.

What were the key takeaways from the December quarter?
I can tell you there are three key takeaways that I see and again going back to the business model conversation. First is that it’s a solid sustained business performance and if you look at the business model and then come back and look at these numbers, HCL is not a quarterly story. You have to look at it on a year-on-year basis.

The second is that we have a significantly balanced portfolio which is very good as momentum switches. So we saw momentum over the last few years because of the rebid market in infrastructure services, we saw the growth there. Now as momentum is shifting towards engineering services, you are seeing HCL perform well. So as long as you hold the balanced portfolio which is pretty much our service line mix, where the momentum goes so you go there.

The third key takeaway is that we are encouraged by our ability to work in disruptive environments and the fact that there are multiple disruptions. So beyond the rebid of ITO we can see engineering and we can see digital too has disruptive opportunities, which is very encouraging.

Is HCL Tech looking at newer geographies and sectors to ensure continued growth?
The two largest markets are obviously the Americas and Europe. These need to be the focus of a displacement strategy. If you now look at these two markets, in Americas quarter-on-quarter (q-o-q) we grew 6%, year-on-year (y-o-y) we grew 14% which is the highest. Similarly in Europe q-o-q we did 2%, y-o-y we did 14% which is again the highest. Both these geographies are performing well. In America, as you are aware things are beginning to look up. People are looking at deploying technology to actually revisit business models.

Rest of the World is a region we have found very exemplary in terms of building unique new capabilities and harvesting them and then deploying them. If I go back a few years and we worked on the APDRP project, perhaps the largest smart grid implementation in its own way that happened in the world, which is in Uttar Pradesh. That resulted in us taking a leadership position around smart grid and power which got featured into the World Economic Forum.

If you look at breakthroughs in existing industries like payments and financial services, we are doing some amazing work in this region.
Where do you see the increasein technology spending coming from?

The nature of spending in technology is dramatically changing. There is another thing that you have to factor in: who is buying. According to Gartner, back in 2000, 80% of the technology spending in the enterprise was directly in the CIO’s control. Gartner predicts that by 2020, 10% will be what the CIOs directly control. So your buying centres are proliferating significantly which basically is a reflection of the reality; technology is becoming a source of competitive advantage for business. Therefore, business is participating in the buy side, more and more and more.

What is your perspective on the Indian market. Government has announced major plans to adopt technology with its Digital India and other e-governance initiatives.
India market is a big opportunity for new technologies and a fantastic place for creating leapfrog technology solutions. Our strategy is that currently to maximise US and Europe, because this is the time and this is the window wherein those markets, you can create maximum competitive advantage. So overall, change from a strategy perspective we should not defocus that, but leverage the India market to create unique new capabilities which can be deployed globally.

Why is the Internet of Things an (IoT) important topic today? How will it have an impact on businesses in the near future?
If you look at digitalisation and Internet of Things , these are sort of two sides of one coin—these are the two things which will put technology into the heart of business competitive advantage. IoT is not a new discussion. It started back in 2003-04 when IPv6 came in and you had enough capacity to give an IP address to any device of future. I think what is beginning to change is the competitive reality. Because of the IoT, two things are now possible, the front office and the middle stroke back office. On the front office, I can arguably use this technology to

intentionally personalise the resulting action to a customer, channel partner, consumer. So in effect, why the IoT is becoming so critical is now you can leverage data to dramatically disrupt transaction cost models in your any industry both front-end and back-end and make P&L far more competitive than anybody else.

What is important at this stage is companies, who take a leadership position in terms of their ability and understanding to gauge and take advantage of this opportunity for clients, are when it comes are going to shoot. So that’s really where we are focused now.


IT stocks fall on concerns of a weak euro affecting realisations

January 6th, 2015

IT companies’ stocks fell in trade on Monday, as fears of lower revenue growth in a seasonally weak December quarter became more pronounced.
Continuing their underperformance over the past few months, the shares of Tata Consultancy Services (TCS), Infosys and HCL Technologies fell by 1.5-2 per cent on Monday, while that of Wipro ended flat. Tech Mahindra, too, fell by a similar margin.

Steeper correction due to rich valuations affected the shares of mid-tier players such as Persistent Systems, which fell 6 per cent, while MindTree slipped nearly 2.5 per cent. So, a combination of weak sentiments and profit-booking seems to be at play.

Cross-currency headwinds

Although the rupee has been fallen against the dollar to ₹63-64, which is expected to help margins, most IT companies still face challenges due to cross-currency volatility.

The euro also has been quite weak against the dollar, and hence realisations for software companies are likely to be affected for the December quarter. In general, the third quarter tends to be a soft period for most IT companies.

With more stimulus indicated by the authorities in the European Central Bank to set the Euro Zone on the growth path, the currency is expected to further weaken against the dollar.

Firm-specific concerns

Indian IT companies derive 20-30 per cent of their revenues from Europe, with the UK being the largest market.

Apart from currency challenges, there were also company-specific concerns with TCS indicating a weak December period while HCL Technologies had indicated a 200-bps impact on its revenue during the quarter.

There are also reports that lower oil price is leading to some large global refiners possibly reducing capex, affecting their IT outsourcing spends as well.

The markets appear to be factoring in a pretty weak scenario across the board for most IT companies. It is interesting to note, however, that revenues from the European geography have been growing at a healthy clip compared to the North American Region over the past three-four quarters for most IT companies.


IT stocks gain on weak rupee

December 30th, 2014

Five IT stocks rose by 0.37% to 0.85% at 13:35 IST on BSE as rupee edged lower against the dollar.Outsourcing32

Meanwhile, the S&P BSE Sensex was up 199.16 points or 0.73% at 27,440.94.

Among IT stocks, Infosys (up 0.6%), Tech Mahindra (up 0.56%), TCS (up 0.59%), HCL Technologies (up 0.85%) and Wipro (up 0.37%) gained.

A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion’s share of revenue from exports.

In the foreign exchange market, the rupee edged lower against the dollar due to appreciation of the greenback against other currencies overseas. The partially convertible rupee was hovering at 63.68, compared with its close of 63.57 on Friday, 26 December 2014.

Optimism about growth of US economy also supported IT stocks, US is the biggest outsourcing market for the Indian IT firms.


De Beers selects HCL for IT infrastructure transformation engagement

October 31st, 2014

HCL Technologies, a leading global IT services provider, today announced that the company has signed an IT Infrastructure transformation contract with The De Beers Group of Companies, the world’s leading diamond business.Outsourcing56

Leveraging its Enterprise of Future (EoF) offering, HCL will deliver end-to-end IT infrastructure solutions including data centre operations, multi-lingual service desk, LAN management, security services, service management including tools, desk side support and project services to transform De Beers’ IT Infrastructure across the globe. HCL already manages the IT Infrastructure of Anglo American, the majority shareholder of De Beers and the current deal allows a tighter integration across the two companies with common technology platforms and IT service management.

Craig Charlton, Group CIO, De Beers Group said: “Where we have previously had several service providers in each local region, this agreement affords us more comprehensive management of our underlying IT environment and enables us to run a more industrialised infrastructure service that underpins our broader IT strategy.”
“This deal marks HCL’s continued expansion in emerging markets like South Africa and many locations across Africa, Latin America and Asia. It further strengthens HCL’s presence in the mining vertical,” said Ashish Gupta, Executive Vice President & Head – EMEA, HCL Technologies ISD. “This deal is also a reaffirmation of the work HCL has done over the last 18 months with Anglo American to move them from a Gen 1 outsourcing contract and significantly improve services while driving a relationship culture focussed on delivering work beyond the contract.”

The engagement involves supporting De Beers’ global presence in Botswana, Namibia, South Africa, the United Kingdom and elsewhere around the world with HCL taking responsibility for eight data centres across five regions. The scope of the work includes some extremely remote locations such as offshore diamond mining vessels along the Namibian coastline and Snap Lake mine in Canada, accessible only via ice roads in winter.

De Beers will benefit from reduction in operating costs, improved processes and SLA-driven services, integration with the Anglo American environment, and benefits of advanced IT frameworks and processes such as HCL’s EoF, Cloud-based Service Management tool – Service Now, a common platform for all service providers within the De Beers environment; migration to cloud-based e-mail service and Office 365.

HCL established its South African operation in 2009 and is a level-three BBBEE contributor. Through a highly targeted focus on specific business, the company has gone about establishing a foothold in the southern African marketplace and made significant inroads into leading South African and multi-national organisations.


IT workers better off with IT service provider, says Lufthansa CFO

October 29th, 2014

IT professionals transferred as part of outsourcing deals could find more opportunities to develop their careers, says Simone Menne, CFO of Lufthansa.
Lufthansa is in final negotiations with IBM Global Services to outsource its IT infrastructure services in a seven-year deal. This will see the German airline’s IT services division broken with the infrastructure element sold to IBM. Besides providing IT services to the airline, Lufthansa Systems has 450 external customers.

With 1,400 employees from the Lufthansa System’s infrastructure division set to move to IBM, Menne said employees moving to IBM will have better job prospects.

“This will also give employees of the Infrastructure division clear job prospects and enable them to participate in future technological developments,” she said when announcing the IBM deal.

The division will continue to supply Lufthansa with IT infrastructure services and there will be opportunities for these staff to move on to other IBM projects.

Large global businesses are already heavy outsourcers with thousands of previously internal IT roles being carried out by third-party suppliers. Today’s trend appears to be mid-sized multinationals moving to outsourcing models, to reduce costs and keep pace with rapidly changing IT demands.

The number of recent transformative IT infrastructure outsourcing agreements in the mid-sized multinational sector is further evidence of this.

Recent deals saw South African diamond-mining and jewellery company De Beers announce plans to transform its global IT infrastructure through a deal with outsourced IT services company HCL. Last month also saw German company Vorwerk outsource its IT infrastructure and application development operations to Cognizant in a six-year deal to centralise and standardise IT.

Despite some examples of big companies, such as General Motors, bringing IT back in-house, it appears that the balance of IT professionals working at suppliers will continue to increase as in-house IT staff numbers decrease.

Modern IT infrastructures today, with developments around automation and cloud computing, will inevitably mean less manual work. Staff carrying out support functions might not be required in as high a volume. But people with IT skills and a good understanding of how IT works in business could play an important role in getting the most out of these new technologies.

There is also opportunities to work in different sectors with a service provider, where existing industry knowledge can be transferred to other sectors of new sector knowledge learned.

Sean Finnan, former head of Europe at IBM Global Services, said suppliers can be a good option and IBM rewards good staff well.

“If  you like a bit of variety in your job suppliers are good and IBM is a real meritocracy that rewards staff that work hard and know there stuff,” he said.

He said one day you can be working on a project for an airline and the next day for a bank.

This IT services sector can offer career development or IT professionals. It can broaden their technology and business skills.

In 2010, Computer Weekly spoke to one IT industry executive who flourished under a transfer to a supplier when his job was outsourced. Bob Scott, who got a mine manager certificate in 1987 and became a fully qualified mine engineer, joined the supply side when his role as part of a mathematical modelling team at British Coal was outsourced to Hoskyns in 1992, which was later acquired by Capgemini.

He has since been the head of Capgemini’s global testing business.

While working at Capgemini, Scott completed a masters at the London School of economics, which was supported and funded by Capgemini. By 1996, Scott was given the task of heading up business development for Capgemini in the UK. He relocated to Paris from 1997 to 2001 to take control of the new e-commerce and internet business at Capgemini. He has since held several senior roles at Capgemini including head of UK public sector business as well as taking charge of market strategy for services related to the police.


De Beers transforms global IT infrastructure in outsourcing deal with HCL

October 27th, 2014

South African diamond-mining and jewellery company De Beers is transforming its global IT infrastructure through a deal with outsourcer HCL.Outsourcing42

The single services supplier will take on De Beers’s IT around the world and enable it to industrialise services.

Previously, De Beers used a number of suppliers in different regions of the world.

The comprehensive agreement will see HCL run datacentre operations, a multi-lingual service desk, LAN Management, security services, service management, desk side support and project services. HCL will take over 8 datacentres across 5 regions.

HCL already manages the IT infrastructure of multinational mining company Anglo America, the majority shareholder of De Beers. The new contract will lead to common technology platforms and IT service management between the two organisations.

“Where we previously had several service providers in each local region, this agreement affords us more comprehensive management of our underlying IT environment and enables us to run a more industrialised infrastructure service that underpins our broader IT strategy,” said De Beers Group CIO, Craig Charlton.

HCL said that, during the course of its contract with Anglo American, it had moved beyond the initial basic contract to add value. “This deal is also a reaffirmation of the work HCL has done over the last 18 months with Anglo American, to move them from a first-generation outsourcing contract and significantly improve services, while driving a relationship culture focused on delivering work beyond the contract,” said Ashish Gupta, EMEA head at HCL Technologies.

HCL will provide services in remote locations such as offshore diamond mining vessels along the Namibian coastline and Snap Lake mine in Canada, which can be reached only through ice roads in winter.

De Beers said it expects to reduce costs and improve processes with service level agreements (SLAs). As part of the contract, De beers will move to a cloud-based service management tool from Service Now.


In-sourcing of IT operations gains traction

October 24th, 2014

“There has been shift towards in-sourcing by U.S. firms over the past three years in the manufacturing sector and also in specific areas of high intellectual property value in companies.”Outsourcing40

In a reversal of trend, major firms are now looking to move back their information technology functions in-house or what is termed as in-sourcing, from their earlier stance of outsourcing to low-cost providers in India.

Firms such as auto major General Motors, Target, Zynga, Nordea and AstraZeneca have looked to build their own information technology team.

“There has been shift towards in-sourcing by U.S. firms over the past three years in the manufacturing sector and also in specific areas of high intellectual property value in companies. The desire has been to keep vital IP and know-how within the company,” said Mary E. Shacklett, President, Transworld Data, a technology analytics, market research and consulting firm.

British-Swedish pharma major AstraZeneca is looking to bring down its IT outsourcing to 30 per cent in the next three years from 70 per cent now. It works with eight vendors, out of those HCL Technologies mainly handles infrastructure, while Cognizant, Infosys and Accenture do application development and maintenance.

The company’s global IT budget is roughly $1.3 billion, which it aims to halve in the coming years. “In-sourcing is a silent trend. Companies like General Motors are on it for the last three years. This is unlike the earlier outsourcing trend, which had people shouting from rooftops. So, nobody is talking about ‘in-sourcing,’ at least not yet,” David Smoley, Chief Information Officer, AstraZeneca, said. The firm has launched is own captive arm in Chennai which will handle in-house IT work and support its 51,500 employees worldwide.

In 2012, General Motors Chief Information Officer Rondy Mott embarked on a plan to bring back its IT work inwards. At that time, 90 per cent of General Motor’s IT services where provided by Helwett-Packard/EDS, IBM, Capgemini and Wipro and only 10 per cent was in- house. The plan is to reverse this ratio in three years. Mr. Mott is of the view that GM cannot be creative or fast enough with outsourced IT.

When contacted, a GM spokesperson said, “All we can confirm at this point is that GM IT’s in-sourcing strategy is on track”.

AstraZeneca’s Mr. Smoley said that one of the reasons why his firm looked at in-sourcing was to take control from an IT prospective and to improve efficiency in terms of faster delivery of drugs.

Research firm Gartner said it was seeing a fundamental shift in the approach to digital business causing organizations to rethink their approaches to sourcing. “The threat many Indian providers will face is from the shift happening from labour to technology arbitrage. How quickly Indian providers can change gears to grab the opportunity and move forward even if that means constructive destruction of some of the existing business models could define future success,” D.D. Mishra, research director at Gartner, said.

“The shift to captives represents a long-term commitment to offshore-based services. Overall, companies in Europe and the U.S. are looking to perform more work offshore in India, not less. Captives are not a threat for vendors, but, in the short-term, can cannibalize a vendor’s business,” said Peter Schumacher, President and Chief Executive of Germany-based consulting firm Value Leadership Group Inc. “Offshore services firms with strategic vendor status, and those that are organizationally agile and collaborative, are likely to be least impacted – some may even benefit.”


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