Lifting the depressed mood set by Infosys, its bigger peer, HCL Technologies has beaten analysts’ expectations with its third-quarter numbers. It registered a record number of order bookings, worth $1.5 billion, in the last three months. Vineet Nayar, vice-chairman and chief executive officer, talks to Piyali Mandal on the reasons and what is ahead. Edited excerpts:
What acted in your favour during this quarter?
Some of the growth drivers you could see are Europe and US. The US business is up 20 per cent and Europe 17 per cent year-on-year. The enterprise application services business has been the number one growth driver for us in the last six months.
The infrastructure management business is back into growth and BPO (business process outsourcing) is back in the black. This is the biggest ever quarter for us in booking terms. We have done $1.5 billion of order booking across 14 customers this quarter. Our ability to book high quality customers in turbulent times is the result of the strategy that we followed.
What is that strategy?
Companies in the US and Europe are becoming prudent. They are going to keep the same dollar spend on information technology.
However, they are going to change the mix. They will spend less for running the business and more on changing the business. To be able to achieve it, they needed to do vendor consolidation. We were one of the few who spotted this trend early.
You are saying one should be cautiously optimistic about the market, but we are getting mixed commentaries from different vendors, especially from Infosys. What is the reason?
The market is very large and the angle from which Infosys sees the market is different from the angle we do. We are participating in a certain section of the market and they may be participating in a different section. HCL being on the winning side of vendor consolidation gave optimistic commentary. If someone else is on the losing side, their commentary would be different.
The macroeconomic indicators are still weak. Discretionary spends are yet to be back. Are you also worried about it?
In turbulent times, you have to be alert. Discretionary spending is a concern. People are moving to shorter project cycles, with higher return on investment.
Therefore, it creates unpredictability. But we have not seen any budget rollbacks. The only way to grow in uncertain times is to be aggressive, focused and thus gain market share. There are only two things that help you win — choose your battles and fight them well.
What is your strategy going to be in coming quarters?
We sharply focused on participating in the churn market, participating in deals coming up for renewals in the past nine months. This helped in increasing our win ratios. It now time to consolidate and focus on execution. We are not going to focus on booking any more.
Analysts say you have offered a price discount for winning these new deals. Will it not affect your power to renegotiate the price with your clients?
Pricing has been redefined. This is not about giving discount. This is the way you deliver your service. When Indian IT companies joined the offshoring world, they redefined the pricing that other large companies like IBM ignored. Thus, a $50-billion Indian IT services industry was created.
The financial services vertical, as well as your US business, have shown a dip in growth. Is this a cause for concern?
These are just one-quarter aberrations. You will see both the US business and the financial services business back to growth in the next quarter.
Are you considering a pay rise to your employees in 2012?
We will announce the appraisals in June. Thankfully, we can wait and watch others before deciding on that.
