HCL Technologies' strong March quarter performance has caused a mood swing after weak Infosys results had depressed the IT outlook. But HCL Technologies' Vice-Chairman, Mr Vineet Nayar, says it is still difficult to predict the long-term deal flow in the market given the global macro-economic indicators. The deluge of large deals in September and December quarters has been tapering off and the next three months will likely yield more of smaller, transformational deals and project engagements, he says. Excerpts:

You have delivered a strong set of growth numbers at a time when Infosys has given a below-par performance. What's the secret?

I can't speak for Infosys. From an HCL point of view, I do not see any surprise in our results. If at all, you should have been surprised when we delivered a fantastic set of numbers during recession. During that time, we saw the threats as opportunities and continued to make investments. So HCL delivering good results and a good margin expansion now was expected and not out of the ordinary.

Despite weak macro-economic indicators and flat IT spends, what gives you optimism about future growth?

The fact that every company has to leverage IT to drive competitive edge. Insurance companies have to become digital, media, publishing and entertainment companies have to become digital. Manufacturing companies have to have a digital presence and e-commerce is driving growth.

Everyone has to go to emerging markets and, therefore, there will be new rollouts. Everyone has to kill legacy applications and move onto SAP and EAS. Those with outdated infrastructure will have to invest in virtualisation and cloud. So everyone has something new to do.

So then what are the pain spots?

The problem is that people do not have the profits and the cash to make these investments. But eventually they will have to make this investment. So you can wait for a few quarters and go slow but you (the consumer) have to upgrade.

At a macro-economic indicator level you can see there is an opportunity because people are uncomfortable with high-cost service providers — essentially the global service providers. You can replace them, which is what is happening.

Does the drying up of large deal flow worry you?

We will gain market share irrespective of what happens in the market. Our strategy may change from time to time. I would say with 50 per cent of business on transformation side and 50 per cent being ‘run the business' work, it does not matter which horse is running faster.

In the next quarter, the transformation business will move faster than ‘run the business'.

We have seen a lot of management reshuffle and exits. How is HCL Tech managing aspirations at the top?

For us, structure is a competitive differentiation…It is not meant for managing. We have a matrix structure where every horizontal, vertical and micro vertical will have its own P&L. And they will go to market and collaborate in front of the customer. In contrast, a consolidated structure is a pyramid-type organisation where reporting is to one person at the top. In our case, everyone is a leader.

Also, there is a lot of passion because you do not have these hierarchies and reporting structures. So we have not lost leaders in at least five years. We manage individual aspiration by giving our leaders an opportunity to run their own businesses.

What's the update on the Japan market?

We are increasing our investments there. After the crisis, we have almost increased our headcount by 50 per cent with regard to engagement managers there, in order to have a more meaningful conversation with Japanese customers. We are telling our Japanese customers, we will increase our investments and demonstrate flexibility. It may be margin-dilutive but it does not matter. This is also a time when every company is cutting investment and headcount there. So when Japan comes back, you will see us ahead of the race, compared with others.

Any plans for a wage hike?

It will happen in September quarter. We will announce it after everyone has announced it. We watch, we see what others have done, and then we do our stuff. Again, it is a strategic advantage.

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