Analysis of HCL Technologies – IT SECTOR Information technology in India is an industry consisting of two major components: IT services and business process outsourcing(BPO). The sector has increased its contribution to India's GDP from 1.2% in 1998 to 7.7% in 2017. According to NASSCOM, the sector aggregated revenues of US$160 billion in 2017, with export revenue standing at US$99 billion and domestic revenue at US$48 billion, growing by over 13%. The United States accounts for two-thirds of India's IT services exports.

1. Analysis of HCL Technologies –
IT SECTOR
Rohit CV
Riya Aseef
Madhavi Sherpa

2. IT Industries
• Information technology in India is an industry consisting of two
major components: IT services and business process
outsourcing(BPO). The sector has increased its contribution to India's
GDP from 1.2% in 1998 to 7.7% in 2017. According to NASSCOM,
the sector aggregated revenues of US$160 billion in 2017, with export
revenue standing at US$99 billion and domestic revenue at US$48
billion, growing by over 13%. The United States accounts for two-
thirds of India's IT services exports.

3. Customer outlook and Demographic Info
• Employee Strength - 124,121 on 30
th
Jun, 2018
• Offices - Offices in 41 countries
• Geographies - Americas , Europe and ROW

4. Industry/Company Report Analysis
• The financial services industry is witnessing a phase of rapid
transformation driven by disruptive technologies – smart contracts,
block chain, Automation & AI.
• Today’s customers demand a rich ecosystem of value-added services
and a holistic capital and asset management solutions.
• HCL believes in rationalizing and converging IT and operations across
business processes.
• Consolidated Revenues - USD 8.0 billion, for 12 Months Ended
30
th
Jun, 2018

5. Introduction of HCL Technologies
• HCL Technologies Limited (Hindustan Computers Limited) is an
Indian multinational technology company. It is a subsidiary of HCL
Enterprise.
• Founder – Shiv Nadar, Arjun Malhotra.
• Type – Public
• Headquarter – Noida, Uttar Pradesh, India.
• Current CEO – C VijayaKumar

6. History of HCL Tech
• On 11 August 1976, the company was renamed Hindustan Computers
Limited (HCL). On 12 November 1991, a company
called HCL Overseas Limited was incorporated as a provider of
technology development services. It received the certificate of
commencement of business on 10 February 1992 after which it began
its operations.

7. Competitors
• Accenture
• Wipro
• IBM

8. Demand - Supply scenario of IT Industry.
• The domestic demand of electronics hardware is estimated at US$ 400
billion by 2020.
• This provides a huge opportunity for India to become an electronics
hardware manufacturing hub to meet its domestic requirements as well as
the global requirements.
• Although the segment is promising and has immense potential, the
increasing demand-supply gap remains to be a cause of concern. While the
demand for hardware was estimated to be USD 13 billion in FY12, the
production of goods stood merely at USD 6 billion.
• While this is seen as a challenge, it is also unveils a plethora of
opportunities for hardware manufacturers, be it global or India, who can
gain significantly while bridging this chasm.

9. • There has been a dramatic increase in the number of organizations moving from
real to virtual by adopting virtualization, which enhances utilization and
significantly reduces costs.
• These multiple advantages are the contributing factors for the increasing demand.
• IT and ITES industries continue to drive the demand for the IT equipment. With
Indian firms adopting automation, the demand for IT equipment is increasing.
• Need for innovative products at low cost : Innovative low cost products like the
Aakash tablet are also driving demand from both consumers as well as the
government.
• Government focus on digital education: Various state governments in the country,
like Tamil Nadu and Uttar Pradesh, have mandated laptops for all school children.
This is driving a massive spike in the demand for laptops and other computer
hardware.

10. Challenges
• Taxation – In comparison with other Asian low cost destinations, complex
taxation policies in India makes the IT Industry less competitive. Frequent
changes in taxation have resulted in companies not being able to firm up
their long-term business plans, let alone make sizeable investments.
• Limited incentives for investment: With no natural advantage for
manufacturing and with uniform taxation across the value chain, sizable
investments, especially at the components and sub-assembly level have
evaded the segment.
• Inadequate infrastructure/logistics: The country’s lack of infrastructure,
coupled with insufficient international quality logistics, lack of power, land
acquisitions issues poses a challenge to the growth of the segments.

11. • Low broadband penetration: India has 6.8 million broadband connections and only 60
million internet users. Further, the quality of broadband remains much below the desired
levels. This has hampered the development of a vibrant content industry, which has led to
the absence of a virtuous cycle. Thus, the market for PCs/devices, without a pull factor,
continues to remain limited.
• Slowing growth in domestic consumption: PCs recorded a negative growth of about of
7% in 2008–09. The sales of notebooks that had been growing over 100% for the last
consecutive four years declined by 17%. As of now there are no preferential laws or
incentives in place which enforce usage of domestic products to some extent (KPMG,
2012).
• Employment generation: Given the right impetus, growth in the segment holds the
potential to triple the country’s current employment base by FY14.
• Increased competitiveness in the global market: A technologically advanced
manufacturing ecosystem in India prospectively offers an international platform to Indian
manufacturers. Indian players can expect to compete globally with established
manufacturers in the long run and make their own mark in foreign markets

12. Competitive Scenarios – Porter’s five forces.
The model acts as the framework for industry analysis. Michael Porter,
a famous strategist, and author, first came up with this model. In this
model, five parameters are analysed to see the competitive landscape.
They are:
• Barriers to Entry
• Supplier Power
• Threat of Substitutes
• Buyer Power
• Degree of Rivalry

13. Existing competition:
• The IT Industry landscape is characterised by intense completion for conventional IT services:
Application Development & Maintenance, IT Infrastructure Management Services, Network
Management Services, Data-center Services etc. leading therefore to commoditization.
• There are several firms in the market offering similar services and it is difficult to
differentiate based on these service offerings. The existing competition comes from both domestic
players (Infosys, TCS, Wipro, HCL technologies, Tech Mahindra, Mindtree and so forth) and
international ones (IBM, Accenture, Capgemini, Cognizant and so forth).
Bargaining power of customers:
• For conventional IT services, bargaining power of the buyer is large and the possibility of pressure
on rates exists. The buyer, having worked with both with international IT providers as well as
Indian ones is largely the price setter and has negated (to a large extent) the offshore advantages
through mature procurement and global delivery.
• In case of non-conventional services, i.e. those that cater to emergent technologies and technology
trends (in Data Analytics or Enterprise Mobility) there is potential for differentiation and higher
margins. Also this is the case for non-conventional, partnership-style engagements where both risk
and rewards are higher.

14. Bargaining Power of Suppliers:
• The bargaining power for suppliers is very low and since high-
standardization exists, there is little scope of suppliers having any clout. The
suppliers consists of IT Infrastructure providers (Servers, computers etc.),
Recruitment firms, Office Space Suppliers etc.
Threat of New Entrants:
• In context of the highly commoditized IT services, there is little threat of
new entrants. That said, the Industry is also characterised by high people
dependence and therefore can see veterans detach from existing companies
to invest in new ventures. An example of this is Happiest Minds, which was
started by a co-founder of an existing IT provider.
• The newer technologies allow the possibility of new niche players that are
not dependant on size or experience constraints.

15. Availability of Substitutes:
• There are no substantial substitutes to IT services apart from Internal IT departments,
which have lost clout over the years and are ever thinner in numbers and significance.
One argument for internal IT is retaining control over pertinent aspects of business but the
argument against would be since the main business of the company is not IT services, it
should outsource as much as possible and focus on future growth in core areas.
• Over time there has been a steady decrease in in-house IT development and maintenance
with more and more being outsourced and the internal IT staff has settled into a
supervisory (program management) role.
• It is unlikely that the market for conventional services will vanish overnight but the future
promises to hold a highly modified view.
• Application development is fast morphing into app-development and a large part of
revenues continue to be drawn from conventional services as the need to adapt and
incorporate new technologies and engagement models looms over an IT industry that
needs to reform and re-invent itself rapidly.

16. PEST Analysis – IT Industry.
Political
• Tax rates in India for the hardware sector is 20%-30% plus which creates obvious possibilities for the further
reform and faster growth.
• 10 Year Special Economic Zones programs and tariffs change to promote the hardware production.
• 26 new projects as a part of a national E-Government Plan.
• Tax initiative by government to ask state government to fix VAT at 4% in the hope of attracting investors.
• Manufacturing Associations of IT(MAIT) an Electronic Industry Association of India(ELSINA) are also
pressing for reduction in land acquisitions rights by stamp duty exemptions.
Economic
• In last 18months there is growth in sales in PCs and computer hardware, mainly due to lower prices.
• But as per the trade cycle rotation there will be a possible slowdown in demand.
• IT plays a important role in bringing 50%of rural household to the banking innovation.
• IBM, Dell, Lenovo has announced new investment to expand capacity
• Compound Annual Growth Rate is 15% between2005-2010.
• Due to the depreciation of the Rupee in comparison to Dollar the software and outsourcing has suffered
negatively due poor exchange rate .

17. Social
• Only 1.3% of people in India own a computer.
• Age Distribution:- 45% of the population is under 25
• Regional imbalance and low incomes.
• Inward Investment can lead to better job opportunities.
• Still Abroad is the fascination among the IT professionals to work.
• IBM, Wipro and Infosys recruit 15000-20000 graduates each year.
• Business practices varies region wise
Technological
• Plans by AMD to set up the country’s 1st chip fabrication(an investment upto US$3bn) to
stimulate local production and lower prices.
• Technological advances over the past decade, such as increased processing power with
reduced power consumption and reduced cost
• Ever changing and emerging Technologies
• Short product life cycle

18. SWOT – IT SECTOR
Strengths
• Highly skilled, English speaking manpower.
• Cheap workforce than their Western counterparts. According to NASSCOM, the wages
difference is as high as 70-80 percent when compared to other Western counterparts.
• Lower attrition rates than on the West.
• Dedicated workforce aiming at making a long term career in the area.
• Round-the clock benefit for Western companies due to the huge time difference.
• Lower response time with efficient and effective service.
Weaknesses
• Recent months have seen a rise in the level of attrition rates among IT workers who are
quitting their jobs to pursue higher studies. Of late workers have shown a tendency not to
pursue IT as a full-time career.
• The cost of telecom and network infrastructure is much higher in India than in the US.

19. Opportunities
• To capitalise and encash on the already established image of India being portrayed
as the most favoured IT destination in the world.
• Opportunities for Indian companies to work closely with western Governments
and assure their concerns and issues.
• India can be branded as a quality IT destination rather than a low-cost destination.
Threats
• The anti-outsourcing legislation in the US state of New Jersey. Three more states
in the US are planning legislation against outsourcing.
• Workers in British Telecom have protested against outsourcing of work to Indian
BPO companies.
• Other IT destinations such as China, Philippines and South Africa could have an
edge on the cost factor.

20. SWOT ANALYSIS - HCL
Strengths
• Association with Major Brands
• Consistent revenue growth
• Acquisition of Axon enables company to offer full SAP services
• Global Coverage in countries like U.S, Europe, Japan etc.
• Offerings like tablets, laptops and PCs expand the reach
• Over 80,000 employees are working at HCL
• Offers services like ERS, ETS, BPO and EAS
Weaknesses
• Total asset turnover is one of the weakness
• Tough competition from existing PC and laptop brands means limited market
share

21. Opportunities
• New outsourcing deals
• Strong presence in defence space and potential to benefit from offset
provision in Indian defence imports.
Threats
• Adverse impact on foreign exchange movement.
• Emergence of potentially disruptive technologies like cloud computing.

22. Recent developments
• Internet of Things (IOT)
The interconnection via the Internet of computing devices
embedded in everyday objects, enabling them to send and
receive data.
• Machine learning
A computer’s ability to learn on its own by analyzing data and
tracking repeating patterns.

23. Contd..
• Virtual reality (VR)
An artificial environment that is created with software and
presented to the user in such a way that the user suspends belief
and accepts it as a real environment.
• Cognitive Technology
A field of computer science that mimics functions of the human
brain through various means, including natural language
processing, data mining and pattern recognition.

24. Contd..
• Artificial Intelligence
An area of computer science that emphasizes the creation of
intelligent machines that work and react like humans.
• Chatbots
A computer program that mimics human conversations in its
natural format including text or spoken language
• Blockchain
A digital ledger in which transactions made in bitcoin or another
cryptocurrency are recorded chronologically and publicly.

25. Recent developments in HCL
• HCL Turbo, AI-based, end-to-end testing automation platform, aimed at
communication service providers.
• Joined the Blockchain in Transportation Alliance (BiTA), an organization
dedicated to determining best practices and standards for Blockchain in the
transportation industry
• Cognitive Orchestrated Process Autonomics- It has the ability to work with
unstructured and voice data inputs enabled by best-of-breed technology
solutions.
• Modem running on Xilinx All Programmable Zynq® UltraScale+™
MPSoC devices

26. Future scope of the industry
• The growth will be mostly limited to below 12%.
• Among emerging technologies in the workplace, IT pros expect IoT
and AI to have the biggest impact.
• Organizations are least concerned about security/privacy with 3D
printers and VR, but it’s their top concern with AI and IoT.
• The future will shift towards full or partial automation.
• Drop in the value of formal education.

27. Future scope of HCL
• Application Services
• Infrastructure Services
• Engineering & R&D Services
• Business Process Outsourcing
• Cloud Services
• Security Services

28. Thank You