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Having seen larger rival Infosys miss its Q4 and FY revenue targets last week (see Infosys limbos under the bar), fourth largest Indian HQ’d IT/BP player HCL Technologies beat its Q3 expectations, following up on an impressive Q2 (see HCL still rolling along).
HCL's Q3 revenue grew 13.6% to $1.19bn, and was up 3.2% qoq. Net profit meanwhile jumped 59.2% to $193m, and was up 8.6% qoq. Operating EBIT margins grew over four points to 19.9% vs. 15.7% last time. This was no doubt helped by tight control on costs and headcount, which declined 1% qoq. Although HCL still ended the year with 84,403 employees, almost 2,000 up on this time last year.
HCL is seeing strong growth in infrastructure services, which rose 41.6% to $356.1m – reflecting the significant opportunities we see for remote infrastructure management. Software services meanwhile tracked at a more modest 4.8% ($783.3m), meanwhile the smallest division BPO grew at 3.9% to $51.3m.
Vice chairman Vineet Nayar said ‘The future of the IT services industry will lie in transforming traditional outsourcing models to higher value, innovation driven, non-linear and outcome based business models’. We would agree with some of this. IT/BPS providers certainly need to shift their strategies to become more flexible and focused on the CxO level business drivers. But there are plenty of risks attached (see our recent note Outcome-based business process services – what’s it all about?)
