 "Everything will be digital in few years: Anant Gupta")
HCL Technologies may have disappointed the markets by reporting a 2.8% drop in profits for the June quarter on a yearly basis. But, in an interview to Surabhi Agarwal, HCL’s president and CEO Anant Gupta says that this short term drop on account of higher investments will yield big returns over a long time in the area of digitalisation. Edited Excerpts
How has this quarter been for HCL from a geography point of view, especially with fresh trouble in Europe?
There has been good momentum. It has been a good year. The commentary on the market is that we’re not seeing any specific skew in any industry or a service line. There is good pipeline in the US, Europe and select markets in the rest of the world. So, from a geography point of view, there is no standout. We have a strategy in Australia, New Zealand, South Africa and Asean (Association of Southeast Asian Nations). In Europe, we are in the UK and Nordic countries. Germany, Switzerland and Austria will open up for us. We are seeing extremely good signs of that. It is true for France as well.
There has been good momentum. It has been a good year. The commentary on the market is that we’re not seeing any specific skew in any industry or a service line. There is good pipeline in the US, Europe and select markets in the rest of the world. So, from a geography point of view, there is no standout. We have a strategy in Australia, New Zealand, South Africa and Asean (Association of Southeast Asian Nations). In Europe, we are in the UK and Nordic countries. Germany, Switzerland and Austria will open up for us. We are seeing extremely good signs of that. It is true for France as well.
Larger peers of HCL have started stating revenues from digital. Why is HCL being shy about those numbers?
I would say each of our service lines has a very significant component of digital. Some of the new stuff in the past three years is going the digital way, and that will continue. When I say digital, I include cloud, anything and everything to do with automation because that is the fundamental shift. Why we are not disclosing our revenues from digital on a standalone basis is, everything is going to be digital in the next few years. We’re taking the position that we will provide end-to-end digitalisation in every area and see that end-to-end nature evolve. The industry and analysts will also evolve and I think there will be a more legitimate evaluation of everyone's digital play.
I would say each of our service lines has a very significant component of digital. Some of the new stuff in the past three years is going the digital way, and that will continue. When I say digital, I include cloud, anything and everything to do with automation because that is the fundamental shift. Why we are not disclosing our revenues from digital on a standalone basis is, everything is going to be digital in the next few years. We’re taking the position that we will provide end-to-end digitalisation in every area and see that end-to-end nature evolve. The industry and analysts will also evolve and I think there will be a more legitimate evaluation of everyone's digital play.
What is the thinking behind the joint venture with CSC? Is it some kind of a carve-out?
It is a joint venture. It’s end-to-end in nature.
It is based on the philosophy that CSC has certain strong products in both banking and insurance. They (CSC) have been in the core banking and payments space in a lot of banks globally. So the joint venture is trying to build solutions so that we can impact the client more when they go on their digitalisation journey. For instance, if a bank is trying to build a payment system, it is not just going to be around the product but also services.
So HCL is bringing that capability to the table, while CSC will bring the product knowledge and the installed base - that’s the short-term objective. The medium-term goal is to use our engineering expertise to re-engineer the product into something, which is more aligned for the digital platform.
It is a joint venture. It’s end-to-end in nature.
It is based on the philosophy that CSC has certain strong products in both banking and insurance. They (CSC) have been in the core banking and payments space in a lot of banks globally. So the joint venture is trying to build solutions so that we can impact the client more when they go on their digitalisation journey. For instance, if a bank is trying to build a payment system, it is not just going to be around the product but also services.
So HCL is bringing that capability to the table, while CSC will bring the product knowledge and the installed base - that’s the short-term objective. The medium-term goal is to use our engineering expertise to re-engineer the product into something, which is more aligned for the digital platform.
What kind of investment has gone into it and what could be the gains from it?
Yes, there is investment. We have not disclosed it right now. But we will do it as we go along. It will be over a two-year period. It will go into expanding the reach and will go into re-engineering the platform. It is one step in the direction of being more relevant to the clients. There are some 160 clients. So it is not a small play in any way. It is very important to understand why we are doing that. If you look at the entire banking sector, there is a huge amount of legacy, and each one wants to transform it to become faster and more cost-efficient. If they (banks) don’t re-engineer and re-look at their legacy, they will be in trouble. So in legacy modernisation, we can get an advantage because CSC has an installed base, and we can lend the digitalisation expertise.
Yes, there is investment. We have not disclosed it right now. But we will do it as we go along. It will be over a two-year period. It will go into expanding the reach and will go into re-engineering the platform. It is one step in the direction of being more relevant to the clients. There are some 160 clients. So it is not a small play in any way. It is very important to understand why we are doing that. If you look at the entire banking sector, there is a huge amount of legacy, and each one wants to transform it to become faster and more cost-efficient. If they (banks) don’t re-engineer and re-look at their legacy, they will be in trouble. So in legacy modernisation, we can get an advantage because CSC has an installed base, and we can lend the digitalisation expertise.