Tech spend to increase, we'll hire 30K in FY24: HCLTech CEO C Vijayakumar

IT major HCLTech reported strong growth in net profit and operating margins in Q3FY23. C Vijayakumar, chief executive officer and managing director, in an interview to Sourabh Lele & Shivani Shinde says global technology spend will continue to increase despite macroeconomic challenges. Edited excerpts:

How will you summarise the company’s performance in the last quarter?

Q3 and Q4 have certain specific dynamics from HCLTech’s perspective, caused by our software business. In Q3, the software business peaks because before December there are a lot of new licence purchases. And that’s what has driven a very strong 30 per cent sequential growth rate in the software business. Of course, the services segment has grown about 2.2 per cent, but that’s after a furlough impact. But as a quarter progressed, I think we have had very good execution.

How does HCLTech’s ecosystem look in the near to short term?

Our capabilities and market presence are strong. We are the only provider in the leaders’ quadrant in all six IT services, according to Gartner Magic Quadrants. So I think that gives us a pretty strong position. And that’s also reflected in strong booking numbers. We did $2.4 billion in booking. These are all net new bookings. If you add the renewals, it will probably be much higher. We are winning significant deals, and we have also announced a few deals with companies like State Farm and Office Depot and Mattel recently.

You narrowed the revenue guidance range for the year during the Investor’s Day presentation. What factors led to this correction, despite strong growth in Q3? 

There were significant furloughs in the December quarter. What happened this year was a little higher than what we normally saw in the past and what we somewhat factored in. The software business will decline in Q4 because it saw a huge peak in Q3 and the January-March is a seasonally soft quarter for the software business. So you will see a decline there and services will have some growth. And combined growth is reckoned to be in the 13.5-14 per cent guidance.

What are the trends you are seeing in clients’ technology budgets?

For the calendar year 2023 budgets, it’s a little early. Maybe in the next couple of months we will get some visibility as we finish planning for the next financial year. The broad messaging we see from all industries and researchers is that tech spend will increase. It may not increase at the same levels it went up in the past few years. But it is still a positive uptick in tech spend. That’s the broad commentary from all the surveys. It will have a combination of both transformation and cost-laid opportunities.

What is driving growth in total contract value?

There are three trends. One is that a lot of customers are embarking on the IT-operating model transformation in line with their business transformation. So that is driving a set of opportunities we call a product-led operating model. Secondly, cloud adoption is accelerating in real terms. While a lot of customers are committed to spending with hyper scalars a significant amount of cloud capacity, they have not been able to leverage it because they’ve not completed the migration or they are lagging in plans as to how much they should have migrated by now. And the third thing is vendor consolidation, and the cost takeout kind of opportunities.

When you talk about vendor consolidation rising, from where are you gaining this market share?

I think two things: One, of course, is that customers who have a very large vendor landscape, maybe 100 vendors; they want to consolidate to two or three strategic vendors. And then some companies are not doing that well. And that kind of creates opportunities for us to win some more beats. We are well placed to benefit from this trend.

Do you think having a bench strength will become a strategy for HCLTech? Also, what’s your take on fresher hiring in the coming year and update on near-shore expansions?

It is very unlikely. We see still open demand and don’t see the bench becoming a challenge. There is enough work and we do think we will be able to deploy our people in good productive work. We have hired about 30,000 people this year and will most likely hire another 30,000 people (freshers) in the next financial year. We have a sizeable presence in about 20 near-shore locations. I think we have 16,000-17,000 people in these locations. And we expect to double that in three years.