HCL "concerned" as inflation reaches 6-year high

Wednesday, February 9, 2011

Indian IT service company HCL (NSI: HCLTECH) has become increasingly uneasy about Brazil's rising inflation, but will still forge ahead with expansion plans in the country, HCL's president of the Americas, Shami Khorana, told BNamericas.

Brazilian officials said Wednesday (Feb 9) that at 0.83%, January inflation was the highest since April 2005. HCL has started to take notice.

"I am concerned about inflation," Khorana said. "Obviously, that will have some impact. As of now, what we see is that from the services we are providing, we can carry price points that are okay as far as inflation is concerned today. But I cannot forecast what would happen if we become a more sizable operation."

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Khorana said HCL is trying to get around inflation by "providing value to the client."

"You provide services that are very optimized and efficient, and therefore you can drive price points that give you the margins you need to cover the inflation."

HCL has a global delivery center in São Leopoldo and additional service capabilities in São Paulo, and is readying other facilities in Curitiba, the executive said.

"We have a sizeable client that we are serving there," he said. "Also there are some skill sets around Oracle, and we were surprised to see that there was availability for quite a few consultants there. ... We expect that [the office will be open] in the next 30-40 days."

Recent wins in Brazil include local electronics retailer Ricardo Eletro, which tapped the Indian firm for Oracle (Nasdaq: ORCL) E-business and Oracle Retail systems support.


Aside from its Brazilian operations, HCL is working to build out its delivery center in the Mexican city of Guadalajara. Khorana said the facility has mainly served global accounts so far, but noted that HCL will start to target local clients at the start of its FY12 this July.

"Work is around application development and maintenance, with plans shortly for infrastructure and BPO," he said. "We first want to build up a base of consultants and employees that we can use to service our local clients in Mexico."

BNamericas previously reported that countries such as Chile and Argentina are also in HCL's sights, but Khorana said advances in those plans have been minimal.

"We are still at a very early stage on that," he said, adding that factors weighing on expansion plans include the consolidation of Brazilian and Mexican operations, the availability of resources and also the needs of global clients.

Globally, HCL saw net income rise 39.2% year-over-year to US$89mn, while revenues during the same period increased 32.6% to US$864mn.