HCL Tech beats Wipro in engineering services

Wipro Technologies, which has for years been the market leader in outsourced engineering and R&D (ERS) services in India, has just been upstaged by HCL Technologies. In the quarter ended September, HCL Tech reported $186 million in ERS revenues, against Wipro's $184 million. HCL Tech said that two years ago, in the July-September 2009 quarter, the company was behind Wipro by $54 million (annually a difference of about $200 million). That means HCL Tech has seen a sharp rise in ERS revenues from $117 million two years back to $186 million, while for Wipro the growth has been more modest, from $171 million to $184 million. A Wipro spokesperson did not comment directly on the figures, but said, "Wipro continues to have a leadership position in the R&D services space. The differentiation comes from the proven hardware and software design engineering expertise across the product lifecycle in semiconductor, consumer electronics, mobile devices, telecom networks and automotive electronics industries." Some analysts say that HCL operates at lower margins than Wipro and this enables it to become more aggressive in winning deals. However G H Rao, corporate vice-president for ERS at HCL Tech, said, "Over the last two years we have made significant investments in ERS. We have also built an ecosystem of partners in system design & manufacturing across industries, universities etc." The company is also increasingly working with clients to develop patents and leveraging on its global delivery centres in the US and Europe where 1,500 of its 17,000 ERS team sit. A recent Frost & Sullivan report states that a major differentiator for HCL is its "Engineering out of the box". HCL offers capabilities and solutions for not just the core product, but also its surrounding ecosystem, and user experience. For instance it enables clients to extend the reach of their core products into new markets by creating platforms using productized solutions like mobility, cloud, collaboration, etc. Chaitanya Ramalingegowda , director for globalization advisory at consulting firm Zinnov, said that though Wipro has the capabilities to deliver similar experiences as that of HCL, it has been more focused on end-toend product development. "HCL makes greater efforts in creating better user experiences," he said. The ERS market has slowly evolved from the days when IT companies were given product requirements and specifications by clients based upon which certain portions of the products would be engineered. Though lower-end work continues to form a major portion of the industry, clients are now handing over the entire product lifecycle responsibility as well. This includes conceptualizing the product and its go to market strategy, designing the technology architecture and delivering the integrated product. Apart from software skills it also requires skills in areas like mechanical engineering and semiconductor. Zinnov estimates the R&D offshoring market in India will reach $13.1 billion in 2011, a growth of 11.4% over 2010. The major sectors that outsource ERS include independent software vendors, semiconductor and telecom, aerospace & defense, and transport. ERS contributes around 19% of HCL's and 12.5% of Wipro's overall revenues. The two companies are well ahead of the rest of the pack that includes Patni, Infosys, Mahindra Satyam, Persistent and MindTree.