The new unit (HCL Software) is being headed by Darren Oberst, corporate vice-president for products and platforms at HCL. He was formerly handling the platform business at IBM.
“As the (product) business is a little different from the services business, we are creating an eco-system to enable its growth by creating a dedicated sales and marketing channel, and product management (among others),” C Vijayakumar, president and CEO at HCL, had said at its June quarter results announcement.
According to Prateek Aggarwal, chief financial officer at HCL, a separate division would also help investors to gauge the return on capital employed in the product business. “Over the last three years, we have invested more than $3 billion on this business, one of the reasons for carving it out as a separate division, so that investors can see the returns at large from this segment,” he said.
Late last year, the Shiv Nadar-promoted firm had announced it would spend around $1.8 billion to acquire select IPs from IBM.
It has paid $812 million till now and is to pay the rest in tranches over the next year.
“HCL is putting a huge stake on the ground with its software investments, especially the focus on its DRYiCE platform and smart digital assistant ‘Lucy’, its impressive digital assistant. I believe this sets HCL apart from its competitors, though there is a long road ahead,” said Phil Fersht, founder of consultancy HfS Research.
Experts say with such a substantial bet on the products and platform business, hiving off of this division into a separate entity can’t be ruled out. “I don’t anticipate a spinoff to occur before this division hits critical mass in terms of (annual) revenue, which could be close to $1 billion,” said Hansa Iyengar, senior analyst at London-based Ovum Research.
In the June quarter, HCL posted an industry-leading revenue growth rate of 17 per cent year-on-year. Tata Consultancy Services’ was 10.6 per cent and Infosys’ 12.4 per cent, in constant currency. HCL says it expects revenue growth of 14-16 per cent in constant currency this financial year.