HCLT’s recent acquisitions will develop software services and consulting capabilities, enabling the firm to evolve its strategy to better compete in the dynamic IT services market
At the end of June, HCLT finalized its acquisition of IBM Software products (analysis and details of which can be found in our most recent full report on the company). We believe HCLT is taking the right approach as it develops a dedicated software business unit, as opposed to transitioning corporate culture, sales models and brand identity from an outsourcer toward a software-centric organization, a strategy pursued by Infosys that resulted in culture clashes and conflicting company visions. There are bright spots in developing software products and offerings with a vertical orientation. For example, Infosys’ Finacle platform and Tata Consultancy Services’ BaNCS solution enable both firms to generate banking processes and system transformation engagements that propel financial services revenue. HCLT’s launch of HCL Software as a small business unit will help the company offer products and enterprise software without shifting the entire organization’s vision but still reaping the benefits of an increase in managed services opportunities tied to license and subscription-based revenues around the new products. HCLT is also better suited to bundle its legacy IT and emerging technology offerings using its product-focused sales staff.
In addition, the acquisition of Strong-Bridge Envision will help HCLT strengthen its advisory services. However, TBR believes the company may want to further develop its ability to guide digital transformation projects, pursuing a partnership with an established consulting brand such as PwC or EY. The additional advisory services improve HCLT’s ability to market its software portfolio while folding in offerings that address client demand for business process transformation offerings.
In a messy, transitioning and highly competitive IT services and software market, we think HCLT has been making smart moves to evolve its strategy. As 2019 winds down, we will continue looking at the company’s progress against peers and within the broader digital transformation landscape.