Who Is This Quarterly Update For? NelsonHall’s Quarterly Update on HCL Technologies provides a snapshot of developments at the company in the last quarter. It accompanies NelsonHall’s more comprehensive Key Vendor Assessment program.Both programs are designed for: Marketing, sales and business managers developing strategies to target service opportunities within the BPO/IT Services markets Sourcing managers monitoring the capabilities of existing suppliers of IT and BPO services and identifying vendor suitability for these services Consultants advising clients on vendor selection Vendor marketing, sales and business managers looking to benchmark themselves against their peers Financial analysts and investors specializing in the BPO/IT services sector.HighlightsAnother strong quarter in December, bucking the market trend HCL Tech’s Q3 FY17 results showed increasing momentum, with 13.8% CC y/y growth, coming from a combination of organic and inorganic growth.Furthermore, where the recent trend with other Tier 1 IOSPs has been one of softening margins, HCL continues to deliver a y/y improvement in operating margin.IT infrastructure services continues to be the primary revenue engine, boosted by, but not solely due to, the Volvo IT captive acquisition.Engineering & R&D services saw accelerated growth, driven by early revenues coming from strategic partnership agreements with IBM.Management now expects FY17 revenues to be in the middle of the 12- 14% range that it had guided earlier.EBIT margin guidance of 19.5-20.5% remains.New CEO and the ‘Mode 1-2-3’ strategyOn October 21, C Vijay Kumar, who had been appointed COO three months before, was announced as CEO with immediate effect. CVK had recently been articulating the ‘Mode 1-2-3’ strategy and will doubtless accelerate its execution.An Engineering Services consolidatorThe April announced acquisition of Geometrics will complete in Q4. HCL’s largest acquisition to date in engineering services, it will bring in IP in PLM and be and enhance its capabilities in the automotive sector.The October announced acquisition of Butler Aerospace completed at the end of Q3. Butler brings in access to clients in the U.S with large R&D spends.HCL Tech has indicated that it is looking for other engineering services acquisitions. IP partnerships with IBM presents it with the opportunity to build a Products businessHCL’s ‘Mode 3’ ambition is to build a product revenue stream over time: the approach includes to take over the IPs of some existing products that are struggling for ongoing investment, and modernizing them.HCL and IBM have now formed three 15-year strategic IP partnership with IBM, involving the transfer of thousands of staff to HCL, who is investing ~$550m over two years, expecting revenue of $160m in the first year.
Scope of the Report The report provides a quarterly update on HCL Technologies, looking at financial performance and key developments during the period.It accompanies NelsonHall’s Key Vendor Assessment program which looks at HCL Technologies’ IT and BPO offerings, capabilities, and market and financial strengths, including: Identification of the company’s strategy, emphases and new developments Revenue breakdowns Analysis of the company’s offerings and key service components Analysis of the profile of the company’s client base including the company’s targeting strategy and examples of current contracts Analysis of the company’s strengths, weaknesses and outlook.