'There are a lot of opportunities in large deals in the $100-500 million range'

Noida-based IT major HCL Technologies Ltd continues to see robust growth momentum in its services business, driven by its digital engineering and application services with cloud adoption being a horizontal theme across all services and verticals. Clients continue to spend in their digital transformation initiatives despite partial concerns around recession in some select sectors. In an interview, C. Vijayakumar, CEO and MD, HCL Technologies, talks about the trends in client spending, new markets, and attrition challenges. Edited excerpts:

In your recent conversations with clients, do you see them cut their technology budgets due to an anticipated recession?

I think so far, the conversations with clients indicate that they consider digital transformation spend as a very critical initiative. And I have not heard of any significant change in that. There are obviously some pockets where there is some kind of reduction and things like that but largely the trend is intact. 

Which pockets do you see a reduction in spend?

There has been some reduction within manufacturing, retail and CPG (consumer packaged goods) etc. But these are minor reductions here and there and nothing that really changes the overall assessment of the situation.

Which are some of the key technology areas that clients are really looking to invest in?  

The most significant areas of investments include cloud transformation, application modernization, and data analytics…industrial engineering firms are looking at industry 4.0 or what we call as industry next. So, these are some of the areas they are looking to investment in. Automation is again a big theme as customers continue to enhance their focus on automation.

In the absence of any mega deals of over $1 billion, what kind of deals are you focussing on?

Mega deals are always very spiky and they come in once in a while. But I think there are a lot of opportunities in the large deals in the range of $100-500 million. Even in the June quarter, we closed a number of $100 million plus deals. We saw strong client addition across all categories. On a year-on-year basis, the number of $100 million plus clients was up by 3 while $50 million plus clients was up by 5.

What’s your strategy to expand beyond your key markets?

In India, we are already present in a number of smaller towns and cities. About six years back, we set up our presence in Madurai, Lucknow, Nagpur, and Vijayawada. Now, we have over 20,000 people in these locations. And globally, we have identified few countries as focus countries like Germany, France, Australia, Canada, and Japan. These are large IT spending markets and so we are trying to expand in these markets by acquiring more clients and growing the business. We are also targeting some new frontier countries like Brazil, Mexico, Spain, Portugal and a few countries in North Asia. It is a business opportunity. In countries like Vietnam, we are also using it as a delivery location because we get good talent and so we are trying to expand our delivery base.

How do you plan to manage attrition which still remains at record high levels? 

I think we managed attrition quite well. The high attrition is primarily due to the overall supply-demand mismatch and things like that. But we have done a lot of things over the last three years to manage attrition – including how we supported our teams during Covid, giving them a milestone bonus when we crossed $10 billion in revenues, etc. So, all of that helps in creating the right motivation and we are also investing heavily in training. A lot of our talent pursue a very strong technical career in HCL and that’s driven by the investments we make on an ongoing basis in training and upskilling our employee base. Thus, barring the industry dynamics, we are doing quite okay.  

What will be your acquisitions strategy for this fiscal?  

Last quarter, we acquired Switzerland-based Confinale, a digital banking and wealth management consulting specialist. We look for capability-led smaller acquisitions. That’s really the focus. Nothing big. Also, the acquisitions are driven more by technical capabilities rather than geography.