What are you doing to maintain or improve your margins?
When it comes to margins, one very important dimension in the current demand-supply situation comes from the fact that we need to over invest in talent. Sometimes we have to hire fresh talent far ahead of the time because you need the time to train them and make them ready for the work that they have to do. Then, in terms of retention, wage inflation is happening and all that is adding to the cost.
Our employee cost as a percentage of revenue has gone up by 4% over the last three years. It is a significant increase. It is something which will moderate over a period of time as we bring in fresh talent, train them and deploy them. It will moderate over a period of time. We are looking at everything from a longer term perspective and not in the immediate term.
Is it then fair to say that margins will be slightly under pressure at least in the near term given the investments that you are talking about? Of course, it will bear fruit over the longer term but at least for the next two to three quarters, should we expect some margin pressure?
Yes we have guided for 18% to 20%, I mean there will be certain margin pressures.
Then what is the long-term strategy for HCL Tech. You have talked about your 5-pronged strategy and objective that you are going to look at differentiated products. How are you looking at that? What kind of differentiated products should we expect and how does it fit in your long-term strategy there?
Today there are a lot of opportunities to differentiate your products and services. HCL traditionally has always been a pioneer in introducing newer service offerings. We created the engineering services, the remote infrastructure management services. Now we have created the products and platform business. Now within every business that we have, we are looking at integrated propositions.
We are looking at how to co-create innovation through ecosystem partners. We are looking at automation. We are looking at solution accelerators. Of course, we have been doing these things over a period of time but we continue to focus on them and enhance them so that the products and services remain differentiated and we end up creating more and more value for our clients. That is the strategy.
Over the last couple of years, you have done acquisitions. Going forward, should we expect that focus to be more towards organic growth rather than acquisitions?
You are right. A significant amount of focus will be organic growth because there is so much demand in the market; so focus on meeting customer expectations and demands.
Should we expect that the deal pipeline which was $8.5-9 billion in the year gone by, is expected to improve to $10-12 billion in the coming year?
It is expected to improve. I do not want to give you a number. It is all part of our overall guidance of 12% to 14%.