Key Findings & Highlights:

HCLTech articulates its strategy around the following principles:

• Service portfolio management
• Large deals
• Account mining and cross-selling
• Delivery network competitiveness
• Margin improvement
• Geographical expansion.

Portfolio Management

HCLTech’s portfolio management approach unveiled in 2016 was based on model 1 (mature IT services, ER&D, and BPS), 2 (digital, cloud, and analytics), and 3 (software products and IP partnerships). The approach is now phased out, and HCLTech does not break down its services mix anymore. However, it does emphasize that Digital (which also includes cloud and security) represented 37.3% of revenues in FY24, a significant progression over the years.

Large Deals

HCLTech’s growth has relied on an emphasis on big deal wins, addressing significant deals at renewal time and targeting IBM/Kyndryl, DXC, Atos, Fujitsu, and local champions (such as Tietoevery and NNIT). The company estimates that big deals (above $50m) bring 2 to 3 pts of additional growth each year. HCLTech has been more successful with big deals in IT infrastructure services and ERS and selectively in BPS. An area of improvement remains application services big deals, where the company now offers bundled services across its portfolio. Examples of mega-deals wins include Verizon Business ($2.1bn), Xerox (~$1.3bn), Nokia (~$1bn), Ericsson (~$600m), and Broadcom. The company complements such mega-deals with large contracts whose TCV ranges from $200m to $300m.

Account Mining and Cross-Selling

Like most of its peers, HCLTech focuses on Global 2,000 enterprises in its Services business (i.e., all units apart from HCLSoftware). The number of:

• $100m+ clients increased from 15 in FY20 to 22 in FY24
• $1m+ clients increased from 791 to 951.

Delivery Network Competitiveness

Since the pandemic, HCLTech has aimed to reshape its pyramid age with a larger base. To do so, the company has favored hiring freshers, reaching ~20k during the peak of the Digital Catch-Up in FY22. The company has continued this effort. Nevertheless, hiring freshers has a cost: a short-term impact on its operations, as the company needs to train them for up to two quarters before they are billable.

Margin Improvement

HCLTech has for several years been targeting an EBIT margin of 19-20%, a range the company has not achieved since FY20 (19.6%). This has been a disappointment given its ambition to grow its EBIT by 50% when it announced the IBM deal in late 2018. However, after the acquisition, during the pandemic, the company suffered from dropping revenues and extra costs in its digital portfolio. During the Digital Catch-Up, it suffered from increasing personnel costs arising from attrition and country and portfolio investments.

Geographical Expansion

HCLTech articulates its target countries in three buckets:

• Key countries: U.S., U.K., and Nordics
• Focus countries: Germany, France, Canada, Australia, and Japan
• New frontier countries: Brazil, Mexico, South Korea, Spain, and Portugal, along with Vietnam and Taiwan.