Location-independent delivery model is silver lining: HCL Tech CEO

HCL Technologies resumed sharing annual revenue guidance as the management is confident of growth returning in the ongoing quarter. Chief Executive C VIJAYKUMAR talks to Sai Ishwar on the company's cost optimisation plans, impact of H-1B visa row, and mergers and acquisition plans. Edited excerpts:

You have said some revenue impact was seen on offshoring of large deals commissioned last year, apart from Covid-19 impact. Could you explain?

If you recall, we had very good growth in the previous financial year:  Almost 11 per cent organic revenue growth and 16 per cent overall. It was coming from a few large deals we had transitioned. A lot of work is done onshore in the first year and it is gradually shifted offshore in the second year. Once a large deal is transitioned, there will be a reduction in revenue. It is a normal trend.

You have significantly cut outsourcing costs and other expenses. What are these cost optimisation measures?

We outsource some works to smaller firms, the volume of which has reduced and has reflected in the cost. The dependence on subcontractors has fallen. In terms of non-people costs, travel was virtually nil in the last quarter, and that is the biggest saving.   

What is your mergers and acquisitions plan?  

Our M&A is three dimensions — expanding geographic footprint in key countries of strategic interest to us, to add more digital cap abilities and lastly, intellectual property-related acquisitions. At the moment, we don’t have anything big lined up.

Analyst reports suggest firms such as HCL Tech that have more fixed-price contracts are immune to Covid disruptions. How do you see this?

It is not necessarily an advantage. Fixed-price projects can also be ramped down. It is not a fixed price versus time and material projects construct. It  depends more on the nature of services.

Do you see Covid fears fully receded? 

We believe the worst is behind us. And, we see the growth trajectory coming back in the current quarter. That’s why we have shared revenue guidance of 1.5-2.5 per cent for FY21 on an average. 

How do you see the H1B visa ban affecting you?

There is no immediate business impact but it is affecting a few employees personally, which is definitely a concern. If this continues in the long term, we need to relook how we operate. We will have to slightly rethink our hiring model for some highly-specialised staff who are not necessarily available onshore. That’s where the current silver lining could help, as most customers are comfortable to get services delivered from anywhere in the world. It is this factor that is going to act as a big mitigation to any visa restriction. Already, two-thirds of our US employees are not visa- dependent.

How do you plan to go about your work from home model?

It is too early to comment. We believe it will be like a 50:50 model of the workforce operating from office and home. It, however, needs detailed planning and estimations on feasibility.