HCL sees growing demand for IoT in Europe, and we’re not surprised

HCL Technologies is one of the fastest- growing IT services players, and holds a respectable position in the highly competitive IT landscape. One of the company's greatest strengths is its ability to change in tune with the changing dynamics of the IT industry. The company has earned its position in the top league of IT service providers and is reporting respectable revenue growth year after year.

Now HCL is ramping up its activities in the Internet of Things (IoT) space as one of the areas it expects strong growth in its target geographies, including EMEA. PAC’s own figures suggest the total software and services IoT opportunity in EMEA is worth around €92.7bn in 2018 but will grow to €161.5bn by 2021.

HCL has a broad-based portfolio around engineering and R&D, infrastructure and application services. These core service offerings are key to HCL's overall success in the IT services business, generating more than 80% of the company's revenue. Read our worldwide profile of HCL here.

In the infrastructure services space, HCL is winning more deals from project services engagements. PAC believes that HCL will continue its success in infrastructure services, however given the rising volume of business from this segment and decreasing deal sizes, the company may not see the same stellar growth rates it once did.

However, the company's engineering and R&D capability, coupled with its know-how in the infrastructure market is one of HCL's core strengths and also a key differentiator in the market. This business is bringing good results due to organic growth from existing clients. To further strengthen this service line, HCL has made some strategic investments, both in acquisitions and partnerships, which created new business opportunities in engineering services.

On a recent briefing call with IoTWoRKS, a dedicated IoT business unit of HCL, the company told us it has a strong pipeline in the IoT space, particularly in life sciences and healthcare and manufacturing. The other major verticals it is targeting include transport and logistics and energy and utilities. This industry focus aligns well with what PAC is seeing in terms of IoT initiatives, though perhaps HCL would do well to make more noise about the work it has been doing around Smart Cities in the UK, France, the Netherlands, Germany and Sweden.

HCL says it can help organisations define, build and run their IoT transformation initiatives. Define can be technology-, business- or strategy-driven depending on the customer’s situation (or a combination of these). At the build stage the company’s engineering function can be called upon to ‘IoT-ise’ formerly ‘dark’ assets within an organisation – effectively putting the ‘things’ into IoT. Its IoT Data Platform can be used for secure data ingestion, management, and syndication; and the company can bring analytics driven insights to the table to analyse results as well as enable customer-defined business applications and micro-services. The company tells us it is investing in creating enablers for the ecosystem of partners and customers, by co-innovating on IoT offerings.

At the run stage the company offers IoT device and platform management including remote management where desirable; data pattern and performance analysis and report generation; and IT and operational technology (OT) convergence. The company can offer various levels of service level agreement (SLA) and 24x7 support.

The company is also tempting customers with flexible licensing options, such as building IoT solutions for OEMs to offer to their own customers, and only billing the company when it actually wins business of its own. HCL built Verizon’s IoT platform, for example, which Verizon in turn sells to its own customers and prospects. HCL is able to continue to make revenues from such deals as platform implementations tend to require customisations, which HCL provides.

The company doesn’t always go it alone – it has an ecosystem of partners up and down the stack, including being a Microsoft Gold partner. But with its IoT offerings spanning the define, build and run stages of an IoT project as well as its strong engineering function, we think HCL is well-placed to continue to win deals in the burgeoning IoT space. One slight drawback is that around 70% of HCL’s revenues come from two verticals: manufacturing and financial services – yet financial services is less commonly a hotbed of IoT innovation than other verticals.

Nevertheless, there should be sufficient low-hanging fruit in other sectors for HCL to go after. Perhaps its biggest challenge is not whether it has the technology and skills to offer end-to-end IoT deployments, but whether it has the brand recognition to be on organisations’ radars.