HCLTech’s GenAI Pivot
C. VIJAYAKUMAR or CVK as he is popularly known is HCL Technologies second-longest serving CEO after founder Shiv Nadar. Since he took over in 2016 (and appointed MD in 2021), HCLTech’s revenue has almost doubled from $6.9 billion in FY17 to $13.2 billion in FY24.
In the last fiscal, HCLTech grew the fastest among India-headquartered IT service firms at 5% on a constant currency basis while peers TCS and Infosys grew 3.4% and 1.4%, respectively. The company also saw increased free cash flow of 27.7%. On a YoY basis, while IT and business services grew 6.2%, engineering services grew 1.6%.
The last fiscal was a rather difficult year for the IT industry, as clients squeezed discretionary spends. HCL’s digital business (which relies heavily on discretionary spends) portfolio (which contributes to 37% of revenues), saw a 5.3% YoY increase with Cloud transformation and cyber security along with the company’s SaaS services clients aiding growth. “What worked for HCL Tech is the all-weather portfolio that has discretionary, non-discretionary and IP products,” says CVK.
The changes in the macro environment led to changes in IT industry buying patterns with discretionary spends directed towards efficiency and optimisation deals. Explaining why the all-weather portfolio is at the centre of its growth, CVK says, “In a good macroeconomic environment, when customers are looking for new capability, the discretionary part of the portfolio grows very well. During difficult times, we have a very strong non-discretionary set of offerings like operations, landing, mission critical infrastructure, doing engineering, product sustenance and all of that becomes much more amplified”.
In FY24, HCLTech added three $100 million customers, taking the number of such clients to 22. It also added six clients in the $20 million category.
Artificial intelligence and GenAI form a central piece of technology offerings for HCLTech. In 2016 when CVK took over as CEO, a research team focused on application of AI in software development was instituted. To plug into the changing service landscape, the company has developed AI Force — a full-stack service platform offering clients efficiencies in development and testing of operations. What HCL sees as its differentiator from peers in AI is its early investments in capabilities. When Gen AI became mainstream, “we had to only plug in GenAI capabilities, create extensions to GitHub, copilot, Google, Gemini and Llama to make the product much more comprehensive,” says CVK.
HCL’s AI Foundry — a software platform which helps streamline development and deployment of AI applications — is another piece in its new-tech story. Earlier this year, the company announced Enterprise AI Foundry for Amazon Web Services, Microsoft Azure and Google Cloud Platform for deployment by clients at scale in their on-premise infrastructure. For clients, AI Foundry caters to all the data driven innovations that they would be looking at in an organisation, says CVK. “There are so many different data structures and data sets and how do you bring all of them? Or how do you derive better business outcomes and values from all the data? That’s what we are doing.”
HCLTech has built AI labs in London, New Jersey, Santa Clara and Noida. In FY24, while it took over 200 proofs of concept taken to its clients, in the last few months it has seen GenAI deals like a US-based telecom OEM partnering for deployment of LLMs to design, build and integrate tech solutions, and Europe-based insurance provider using the firm’s GenAI capabilities for transforming its contact centre and back office operations for claims management. In FY25, HCLTech aims to upskill over 50,000 staff in GenAI and related capabilities.
What does GenAI hold in the future for HCLTech? CVK sees offerings such as AI Force getting embedded into every service it delivers. Second, collaboration with hyperscalers and chipmakers will create a market for either bespoke solutions for every customer, or solutions which can be repeated. It has already started creating industry focused repeatable solutions (IFRS). “We have IFRS across 30 industries, and each industry will have 7-10 solutions which can be replicated across customers in that industry. So, it’s going to become a solution play” he says.
HCLTech has expanded delivery capabilities with more nearshore locations. In Asia it has expanded to the Philippines, Malaysia, Vietnam, Sri Lanka. In Europe it expanded teams in Poland, Romania, Bulgaria while in the Americas it has expanded in Canada, Costa Rica, Mexico, Guatemala and Brazil. CVK says nearshore locations are a business necessity. “Working in the same time zone has the benefit of higher productivity. There is also resilience in the delivery model. Some of that might not be quantifiable, but play into a long-term strategy of most clients.”
Apart from global expansion, the company is building campuses to tap into towns, including Madurai, Lucknow, Vijayawada and Nagpur, where employees are working on cutting edge projects. To bring greater focus, at the beginning of the fiscal, HCLTech announced changes in roles of some leaders. Kalyan Kumar, chief product officer for the software business, and CTO and head of ecosystems, will now focus on the HCL software business as its chief product officer. Vijay Guntur, president, engineering and R&D services, was moved as the chief technology officer and head of global ecosystems, while Hari Sadarahalli will now lead the engineering services business and delivery organisation in an expanded role.
In FY24, HCLTech’s market capitalisation crossed $50 billion. In a year where all top tier IT companies saw a reduction in headcount, HCLTech closed with 227,481 people, up 1,537 including 12,141 freshers. “We believe in empowering people and in an entrepreneurship culture. That’s the real proof point,” says CVK.