HCL Technologies is betting big on its application services business as an engine of growth for the next couple of years.
Currently, the business is the biggest contributor to the $5.5-billion company’s revenue at $2.4 billion, followed by infrastructure services ($1.7 billion), engineering and R&D services ($1 billion) and the rest from its BPO business.
“Applications services grew 6.5 per cent year-on-year in FY-2014 from 3 per cent in FY-2013. The next couple of years will see much higher double digit growth,” Ajit Kumar, President – Systems Integration and Applications Delivery, HCL Tech, told BusinessLine.
“This is because, after four-five years of flat to zero spend in technology, there is more confidence among organisations to spend money on refreshing technology.”
Pointing out that nearly $84 billion worth of IT and BPO contracts are coming up for renewal over the next 12-16 months, Kumar said there is a positive business sentiment in the US and Europe in industry verticals such as manufacturing, life sciences, engineering and natural resources.
Customers are also looking for business opportunities by leveraging emerging technologies such as social, mobility, analytics and cloud, he added.
As of September 30, 2014, 56.3 per cent of HCL Tech’s revenue accrued from the Americas and 32.3 per cent from Europe.
To achieve double digit growth in app services, HCL is looking to provide two superior value propositions – alternative applications systems maintenance (ALT ASM) and digital systems integration.
“ALT ASM is all about using traditional levers like offshoring and de-skilling, where you use an employee with one year of experience instead of an employee with three years of experience; and package it with proactive obsolescence, where you rationalise some of the apps and render them obsolete,” said Kumar.
For instance, if a customer is using three-four training apps in different locations, the company combines them into one which is easier to maintain.
“We also use automation around applications to reduce the manpower intensity required around it and focus on delivering business outcomes,” he said.
Explaining the second value proposition, Kumar said: “Digitalisation is about creating a digital road map for our customers wherein, they can interact with all their stakeholders digitally.”
For instance, for L&T, it may start with digitally interacting with their service providers, supplier companies and customers.
Similarly, Banks are looking to digitalise their interactions with the regulators, their suppliers and end customers; engineering companies are looking to interact digitally with their suppliers and pharma companies with their contract manufacturers, he added.