HCL eyes engineering services for new revenue stream
Bangalore, September 12:
HCL Technologies is betting on engineering services outsourcing (ESO) R&D to create new revenue streams and for a broad-based growth.
The Shiv Nadar-founded company, which has grown at a fast clip over the past eight quarters, is looking to rely less on revenues from managing IT infrastructure. A spate of recent outsourcing deals point to this trend.
For a leading consumer electronics company, which has a revenue of $18 billion, HCL was responsible for the ownership of software development and testing for a range of HDTVs. Similarly, HCL generated 70 patentable ideas in a year for a North America-based office automation equipment supplier in areas such as colour accuracy improvement, image compression algorithms and near field communication. GH Rao, President, Engineering & R&D Services at HCL, told BusinessLine that helping customers reengineer their business process and transitioning it into business benefits are some areas where the company is seeing increasing traction.
HCL and other IT exporters are seeing opportunities opening up in this area due to rapid technology shifts, which is making businesses to quicken their product launches compared with previous years.
According to Shashi Bhusan, an analyst at Prabhudas Lilladhar, in the January-March quarter, HCL witnessed a delay in IT infrastructure-related deals due to increasing complexity and is looking at broad-based growth.
According to Nasscom, the ESO R&D market in 2013-14 was $75 billion, which is less than 10 per cent of the global outsourcing opportunity. Further, Nasscom estimates peg Indian service providers have a 16 per cent market share.
While the opportunities around this segment have been there since 2007, contribution of ESO R&D is in single digits for TCS, HCL and so miniscule that others like Cognizant, Infosys and Wipro do not report revenues from this vertical.
For HCL, at the end of 2014 fiscal, this service line contributed 7.4 per cent of its $5.3-billion revenue.
Similarly, TCS' engineering & industrial services contributed 4.7 per cent to its $13.6 billion revenue. Cognizant, Infosys and Wipro do not report revenues from this segment.