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ShareMumbai: HCL Technologies, the Gurgaon-based IT services major, wants more out of its infrastructure services business, which had been its mainstay so far.
In the September quarter, HCL Technologies' revenue grew 3.8%, a close second to TCS' 3.9% revenue growth followed by Wipro Technologies' 3.2% and Infosys Technologies' 2.9%.
So, what's new this time?
"There would be some redefinitions, there would be some opportunities that may open up, and especially how do we get into more businesses associated with systems integration, hosted solutions and ways in which we can help our customers manage their assets better, Suresh Sundaram, global head, marketing & strategy, HCL
Technologies told DNA Money.
"Right now we are only looking at services so there would be some redefinitions of the space usually that may come up in the future and we are looking at how we prepare ourselves in that front," he said.
The firm sees more opportunity in integrating infrastructure services with application services, which analysts say, could take some time.
Nimish Joshi of CLSA in a note after HCL's September quarter financial results wrote, "The 3.7% quarter-on-quarter decline in enterprise applications will inevitably raise questions on Axon's integration. However, we believe integrating an acquisition of Axon's size is a multi-quarter process and judgement day here will need to wait for a few more
quarters. Also, the current demand pick-up for ITservices is being led by the need for large enterprises to cut costs and discretionary ERP spends are yet to pick up." Besides delving more into the infrastructure services, HCL is now getting choosy in pursuing deals.
"It is not that we chase everything and stretch our bandwidth and not have much to show. Our win record in large deals is very good. For instance, in integrated services, we have a dominant share of wins in the deals that we choose to participate," Sundaram said.
Analysts say that HCL operates with a couple of inefficiencies which if improved can help balance margin pressure. "We consider manpower reduction driven margin gains more transient than operational improvements. HCL has substantial operational inefficiencies to work on, including higher overhead costs, lower ratio of revenues per salesperson, long tail of accounts, scattered facilities and the like. In our view, operational improvements at HCL can help somewhat buffer margin headwinds from flexible pricing for some more time," wrote CLSA's Joshi.
HCL Technologies saw a net addition of 227 people in the September quarter. The analyst said, "HCL has unique advantages in infrastructure management, a lead which has strengthened through the downturn. While integration issues with Axon needed to be watched, we would continue to have a positive bias on HCL."
