VENDOR PROFILE R&D/Product Engineering Services — How Is
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VENDOR PROFILE R&D/Product Engineering Services — How Is HCL Technologies Thinking Out of the Box and Providing Value to Technology Product Customers? Mukesh Dialani IDC OPINION m To provide services to their customers, R&D/product engineering services vendors o c . have, in the past five to seven years, continued to build additional competencies by c d i . hiring relevant engineering talent, acquiring industry-specific product development w w w and engineering capabilities, building labs, creating intellectual property (IP), and so forth. And, since this area of IT services is in a relatively nascent evolutionary phase 5 1 0 compared with its traditional IT services counterparts, vendors that implement 4 . 5 3 strategic initiatives and lead with innovative partnerships to build their own 9 . 8 ecosystems will gain market share. In studying HCL's technology product 0 5 . F development and engineering services, IDC is of the opinion that HCL has until now 0 thought through its strategy in building differentiating capabilities and that the 0 2 following initiatives are crucial for HCL sustaining its momentum in growing this 8 . 2 7 business: 8 . 8 0 5 . Increase scope and depth of offering. HCL should ensure that they continue to P build additional solutions across key industries in order to get additional A S business. U 1 0 7 Focus on customer satisfaction. Keep customer satisfaction levels high to 1 0 ensure additional opportunities to move up the value chain — resulting in higher A M , billing rates. m a h g Intellectual property. Ensure that it builds reusable intellectual property to n i m increase utilization rates. a r F t e Expand reach. Increase marketing efforts in Europe and the Americas to e r t improve brand recognition and image. S n e e p S 5 : s r e t r a IN THIS VENDOR PROFILE u q d a e This IDC Vendor Profile updates HCL Technologies — Vendor Profile Series for H l a R&D/Product Engineering Services (IDC #214698, October 2008) that was published b o l as part of a series of R&D/product engineering vendor services profiles. This G document describes and evaluates HCL's Engineering Out of the Box (EOOTB) approach that focuses on three key tenets — user experience, the ecosystem that enables the R&D and creation of new products, and complete life-cycle product development — as the primary building blocks that enable HCL Technologies to offer outsourced product development solutions to its customers. Filing Information: May 2012, IDC #234586, Volume: 1 Global Sourcing Strategies: Vendor Profile SITUATION OVERVIEW Company Overview About HCL Technologies The HCL group comprises HCL Infosystems and HCL Technologies, and the total revenue for both group companies currently adds up to approximately $6.2 billion. In terms of business: HCL Infosystems is primarily a systems integration company and a leading manufacturer of computer hardware in the Asia/Pacific region. HCL Technologies is a global services provider of IT services, including infrastructure services, engineering and R&D services, and BPO services (see Table 1). For the quarter ending December 2011, the Engineering and R&D Services (ERS) group at HCL Technologies achieved annual run rate revenues of approximately $1 billion. TABLE 1 HCL Technologies ERS a t a Glance Category Details HCL Technologies revenue $3.9 billion HCL Technologies engineering services revenue $772 million Investment in R&D intellectual property $21 million HCL Technologies employees 83,076 HCL Technologies ERS employees 17,500 Patents filed on behalf of customers 200+ Total HCL Technologies customers 500+ Total HCL Technologies ERS customers 200+ Delivery locations Chennai, Bangalore, Pune, Hyderabad, Rochester, Cary (North Carolina), Redmond (Washington), Welwyn Garden (United Kingdom) Investment in product development and $15 million intellectual property Customer labs 35+ Top 5% customers' share of total HCL 16% Technologies ERS revenue Source: IDC, 2011 2 #234586 ©2012 IDC The HCL group began its operations in 1976 as an IT product company. In the late 1990s, HCL saw an opportunity to provide outsourced engineering services to global companies — a business that would leverage its engineering knowledge and infrastructure and the credentials of its own product business (see Tables 2 and 3 for investment in laboratories and certification, respectively). Product engineering and R&D has since been a focus of the company and has resulted in engineering partnerships with technology/product companies that include Boeing, Cisco, and Microsoft. Table 2 does not include investments made prior to 2008. These can be referenced in HCL Technologies — Vendor Profile Series for R&D/Product Engineering Services (IDC #214698, October 2008). By 2009, HCL ERS was a key provider of outsourced technology product and engineering services offering hardware, software, and mechanical and regulatory/compliance services to its clients (see Table 4). TABLE 2 HCL Technologies R&D/Product Engineering Services Laboratory Investments, 2008– 2012 Lab Description Activity Year Antenna Lab Concept design to manufacturing of base Development and testing (functional and 2008 station antenna endurance testing) Implanter Lab Processing multiple silicon wafers at a time Software development (sustenance and 2008 and fabricating circuits on silicon wafers enhancement) of implant control system and product support In-Flight This In-Flight Entertainment Lab has two 49- Development, testing, and maintenance of 2008 Entertainment Lab seater racks catering to two major aircraft in-flight entertainment systems configurations and a business jet rack. All the necessary hardware/equipment is provided by the customers, and the lab is set up by HCL's systems engineers. Handler Lab Handler, also called "equipment front-end Software development, software testing, 2010 module (EFEM)," is part of all the and system engineering services to semiconductor equipments in the chip customers fabrication unit. The primary objective in building this lab is to service customers completely from offshore. Teardown and Value engineering to impact the bottom line Cost analysis, cost modeling, 2011 Benchmarking Lab benchmarking Mobility Lab Complete mobility solutions including Device interoperability testing, cross- 2011 (Singapore and application development and device testing platform development, application Chennai) development, middleware development certification, device testing, application testing Printing End-to-end design of next-generation Development and testing 2012 Technology Lab printing technologies Source: IDC, April 2012 ©2012 IDC #234586 3 TABLE 3 HCL Technologies R&D/Product Engineering Services Certification Investments Certification Skills Vertical ISO/TS 16949 Design/development, production, installation, and servicing of automotive- Industrial related products manufacturing IEC 61508 Functional safety of electrical/electronic/programmable electronic safety-related Industrial systems manufacturing ISO13485:2003 Maintenance and implementation of quality systems focusing on medical Medical devices devices ISO/TS 16949 Continual improvement, emphasizing defect prevention and the reduction of Automotive variation and waste in the supply chain SPICE — ISO/IEC Project management, configuration management, quality assurance Automotive 15504 AS 9100 Ensure quality and safety in the aerospace industry Avionics DO 178/254 Scheduling, cost estimation, and tool selection Avionics TL 9000 Design, development, production, delivery, and service for the communications Telecom industry ISO 20001-1:2005 Requirements, planning and implementing service management, service delivery process, relationship processes, resolution processes, control processes, release processes, and planning and implementing new or changed services BS 15000-1:2002 Scope, terms and definitions, requirements for a management system, planning and implementing service management, planning and implementing new or changed services, service delivery process, relationship processes, resolution processes, control processes, release processes ISO/IEC 27001:2005 Formulate security requirements and objectives, cost-effective management of security risks, definition of information security processes, provide information about information security to customers BS7799-2:2002 Define scope for information security management systems (ISMS), identify and assess risks and how to handle the risks, risk management, intrusion detection and response, review of risks and consequences, regular testing of security mechanism, implementing and testing improvements ISO 9001-2000 Provide products that meet customer and applicable regulatory requirements, enhance customer satisfaction through the effective application of the system, including processes for continual improvement of the system and the assurance of conformity to customer and applicable regulatory requirements CMMI — SVC Services certification for CMMI CMMI — Level 5 Planning, risk management, configuration management, monitoring and review mechanisms, issue escalation and resolution, change management Source: IDC, April 2012 4 #234586 ©2012 IDC TABLE 4 HCL Technologies Current Active Customer Contracts Size of Global Contract (Annual Length of Customer Revenue) ($M) Contract Brief Description of Work Telecommunication 50+ 3–5 years End-of-life product support — GRRP, product equipment company development, verification and validation (IV&V) Office automation major 50+ 5–7 years Joint IP development, end-of-life support, end-to-end