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Volvo Group sells Swedish external IT to Indian supplier HCL Technologies

Vehicle manufacturer Volvo Group is selling some of its IT operation in Sweden to Indian supplier HCL

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Outsourcing

Global truck manufacturer Volvo Group has signed a letter of intent with HCL Technologies to sell its external IT business, Volvo IT.

About 2,600 Volvo Group staff – most located in Sweden – will be affected and offered employment by the Indian IT services company.

“I am convinced that this will benefit personnel, suppliers and customers,” said Jan Gurander, Volvo’s CFO and Acting President and CEO.

"This has been a thorough process and I am pleased with the outcome. Not only will our co-operation with HCL Technologies provide significant cost-savings, we will also make a capital gain when the contract is signed. An equally important aspect is that we will have a partner who can ensure the operation of our IT infrastructure is developed in a manner that will enable us to be at the forefront of our industry.”

The deal, expected to conclude in early 2016, is another step forward for HCL Technologies which is fast becoming a major player in enterprise IT across the Nordic region.

Statoil engaged HCL to provide strategic infrastructure management services across 36 countries, Sweden’s Tele2 uses HCL for strategic and operational support of mobile and internet of things (IoT) applications, while HCL now manages the IT infrastructure services and application operations for all DNB businesses across Norway and its key international locations.

The sale of Volvo IT is part of sweeping efficiency measures initiated last year at Volvo Group, which aims to cut approximately SEK900m (£70m) of costs at the truck maker. As a result of this transaction, Volvo Group’s operating income and net financial debt are expected to be positively affected by approximately SEK10bn (£750m).

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Peter Schumacher, CEO at business consultancy Value Leadership Group is not surprised by the deal.

“In the auto and truck manufacturing sector, companies around the world are examining their IT spend in terms of the business value it adds," he said.

"Application development and management in the emerging areas of connectivity, mobility, autonomous vehicles and customer experience will be critical to the future competitive advantage of a company like Volvo Group. With a shift in focus towards in-truck technology, it becomes a simple decision to outsource or sell infrastructure management."

The deal also affects Volvo Cars, despite the brand being a separate company since 1999. Now a wholly owned subsidiary of China’s Zhejiang Geely Holding Group, Volvo Cars continue to be one of Volvo IT’s biggest customers. Other external customers of Volvo IT include SCA, Assa Abloy, and the City of Stockholm. HCL remain committed to serving and growing the external customer base, according to a statement.

“It is pleasing to note that skilled personnel will be joining HCL and our culture will further flourish globally,” said Anant Gupta, CEO at HCL Technologies.

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