‘IBM Deal Gives HCL a $50-b Op­por­tu­nity’

The Economic Times - - Companies: Pursuit Of Profit -

HCL Tech­nolo­gies be­lieves the $1.8-bil­lion ac­qui­si­tion of seven IBM soft­ware prod­ucts, five of them with ex­ist­ing in­tel­lec­tual prop­erty part­ner­ships, will help the com­pany break into the soft­ware prod­ucts seg­ment and deepen en­gage­ment with cus­tomers, CEO C VI­jayaku­mar told Surabhi Agar­wal . Edited ex­cerpts:

What was the big idea be­hind such a mas­sive ac­qui­si­tion?

As part of this deal we are ac­quir­ing seven prod­ucts from IBM, in ar­eas such as mar­ket­ing, com­merce, se­cu­rity and col­lab­o­ra­tion. Of the seven prod­ucts, in five prod­ucts we al­ready have part­ner­ships. Over­all, these ar­eas, es­pe­cially se­cu­rity, com­merce and mar­ket­ing, are sig­nif­i­cant growth mar­kets and there is a $50 bil­lion mar­ket op­por­tu­nity. It is of great in­ter­est to HCL, es­pe­cially for our dig­i­tal and other pro­grammes.

The prod­ucts are good; they have got good recog­ni­tion in the mar­ket and they have good in­stalled base across the globe in a wide range of in­dus­tries and many geo­graphic mar­kets. And be­cause we have ex­ist­ing IP part­ner­ships, we are also con­fi­dent of what we can do with the prod­ucts.

What sparked this ac­qui­si­tion when you al­ready had a joint go-to mar­ket deal with IBM?

Of course, at this point, as an IP part­ner­ship we are adding a lot of value to these prod­ucts. So, it will be in our own in­ter­est to gain the en­tire rev­enue stream and di­rect client ac­cess, and also the con­tract di­rectly with the client. So it’s a huge step for­ward from the IP part­ner­ship per­spec­tive.

Once the ac­qui­si­tion is com­pleted, how much will it add to HCL’s bal­ance sheet?

As we have men­tioned, in at least five of these seven prod­ucts we al­ready have IP part­ner­ships and the rev­enue is al­ready there in our P&L. The in­cre­men­tal rev­enue that we ex­pect to get from these prod­ucts on an an­nual run rate per­spec- tive is $650 mil­lion in year two af­ter the con­sum­ma­tion of the deal. (Rev­enue) in year one will be a lit­tle less due to tran­si­tion­ing of the client con­tracts.

How much are the IP part­ner­ships con­tribut­ing right now?

What I men­tioned were in­cre­men­tal rev­enues; cur­rently we have not called out prod­uct-wise rev­enues.

In terms of client pro­files, what kind of com­pa­nies are these? Will there be cross-sell­ing op­por­tu­ni­ties?

They have a world-class cus­tomer base. While the core of these prod­ucts are in mar­kets which are strongholds for HCL in North Amer­ica, UK and Aus­tralia, there is also a very large cus­tomer base and ac­cess in Ger­many, Japan and China, across Europe, South Amer­ica, across Mid­dle East, etc., where they have part­ner ecosys­tems which we have the abil­ity to tap into.

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