"Indian providers are traditionally strong in engineering service”
Engineering Services accounts for about 20 percent of the total revenue of HCL technologies, an Indian IT major. It has customers in a wide range of industries including software providers, automotive, consumer electronics, and medical-equipment, which makes the company the world’s largest engineering services provider. Mr G.H Rao, the head of engineering service of HCL Technologies, sat with our journalist Hitoshi Okabe to talk about its business strategy.
(Article appeared on ITPro the online media for system engineers, owned by Nikkei BP, the largest business media conglomerate in Japan. NikkeiBP publishes more than 30 magazines in the area of business, IT, engineering, manufacturing and so on.)
Journalist: What kind of business do you handle?
We provide Engineering R&D service (ERS), and primarily target two types of customers. One is manufacturing, enterprises that develop and manufacture automobiles, airplanes, consumer electronics such as televisions, and cameras, office equipment including copiers and printers, and medical devices. To these customers, we provide services such as embedded software development, mechanical design, and product testing.
Another customer segment is IT companies. We provide services like development and improvement of package software, and development of service platform for SNS (social network service) providers. ERS does not provide implementation services of enterprise software.
The border between embedded software and enterprise software is getting blurred. The required technologies and methodologies are almost the same in both.
In an upsurge of interest in Internet of Things (IoT), not only enterprise software but also embedded software is required to adopt technologies such as security, mobile, social, and cloud.
Journalist : What is your track record?
Among the top 5 companies in industries such as communication, consumer electronics, and aerospace, half of them are our customers. This is also true with IT companies. Indian providers are traditionally strong in engineering services, and HCL Technologies is among the world’s largest in engineering service sector.
Journalist : How are you doing in Japan?
We have large businesses in consumer electronics and office automation sectors. Auto sector is just behind them. We see growth in medical devices as well. To grow, we focus on segments where we can and are making a strong showing, rather than developing in various new fields.
Journalist : Is the business in Japan promising?
Of course, I see great potential in the Japan market. Japanese companies are behind European or American enterprises in utilizing global talent pool. There is room for growth for Japanese companies, but it requires effective use of global talent. We, HCL Technologies, can support Japanese companies with this.
One key strategy in global business expansion is to increase the variety of products. Customers can manage it more easily with HCL ERS.
We can provide end-to-end product development service, not like just hardware design or just a part of embedded software development. Customers are able to outsource entire processes or operations in which they need not put their own engineers. For instance, if a customer outsources entire product development of their old product line to us, it enables the customer's engineers to concentrate on new product development.
Journalist : Which market is important from global perspective?
The largest for us is the United States. Japan is second largest and Europe follows Japan by a narrow margin. HCL ERS typically targets R&D operations of enterprises. The United States has put the largest investment in R&D accounting for slightly more than 30% of global total R&D spending, then Japan, accounts for slightly less than 30 percent. These two are large markets. Rest of the world is spending very little on R&D. I believe therefore growing our business steadily in these three major markets is our primary business focus.