From satellite communications to e-security and network intelligence to remote management of networks, HCL Comnet’s has been a journey marked by changes that have underlined a swift response to changing market and economic conditions. And with ‘cost-effectiveness’ being the new enterprise buzzword, the key drivers at Comnet today are managed IT services and a strong push aimed at growing the overseas business

With an average employee age of 24 and a breezy irreverence for blind tradition, HCL Comnet embodies the aspirations of Generation Y. Spunky, opportunistic and on the move, this is no place for age-old business propositions that don’t sell anymore. But if it’s out of the box and follows the money-trail, the idea is grabbed outright and the pretty head that conceives it soon wears a crown.

Explains CEO Vineet Nayar—"Actually, age 24 itself is upsetting. I would like to see the average age drop further!" Nayar is quick to add that he has nothing against older professionals (Nayar himself joined the HCL group as a senior management trainee in 1985), but it’s just that the best ideas seem to come out of reckless young minds untouched by the baggage of tradition.

The TOP BRASS: (standing, from left) V-P (technology) S Barathy, V-P (HR) DK Srivastava, CEO Vineet Nayar, V-P (sales) J Kalyanaraman, V-P (sales, Americas) R Srikrishna and COO (Asean) Sanjeev Nikore. (sitting, from left) V-P (managed services) CRD Prasad, country manager (Asean) Pradeep Bindal, COO (global operations) Anant Gupta and V-P (finance) Sandip Gupta.

Fact Sheet

Subsidiary of HCL Technologies Established in: 1993 Revenue: Rs 186.8 crore Employees: 650 Areas of operation: Very small aperture terminals (VSATs), managed IT services, network security, network intelligence, end-to-end infrastructure management encompassing network devices, security, databases, systems, and Internet site operations management

Adamance in the name of focus?
Nayar is also proud that the company has exited almost every area of business it explored since its inception, preferring to move on to the next area of interest.

"As a policy, we enter those businesses that are strategic to our customers and are significant to them. New investments are made in business only if they meet the above criterion. Old business may still be part of the offering but are not the areas we proactively invest in for growth," he says. For instance, Comnet was one of the frontrunners in the structured cabling business in the early 90s. Quality and certification were key drivers of business. "But once these became a standard, we exited the segment," says Nayyar. Similarly, the company diverted focus from box sale of low end networking components and setting up office LANS once the criticality of these functions reduced.

Another area Comnet ventured into in the initial days, was the ISP business. Comnet exited this business because "performance guarantee to customers was an issue that would have lead to huge customer dissatisfaction".

"Uptime was critical for customers and VPN has no answer till robust backbones are in place. We transformed the VSAT products business into a solution business based on new applications (distance learning/disaster recovery/backup) and based it on multi media (VSATs/leased lines/VPN) using the best vendors in each class," says Nayar.

The company altered its general purpose networking product sale to a focused solution business around contact centers and WAN QOS implementation for enterprises and Telcos. The security product business too expanded to cover security assessment and management and then, managing security.

For, change as they say, is the only constant in the world of business. Even as IT’s roller coaster ride sweeps companies up into the crest of success at one instant and deposits them at the bottom of the trough at the next, it is the company’s ability to roll with the times that carries it through. The strategy adapted by Comnet is to anticipate change and be proactive in reacting to it.

Agility is King
The ‘98-2001 period saw the company’s purposeful but seamless transition to e-frastructure services from its area of expertise—satellite communication. With a stronghold in installing VSATs (very small aperture terminals) since the early 90s, the company was quick to decrease its dependence on the VSAT business. Satcom soon gave way to a foray in networking. Networking spanned out into a bouquet of ‘e-frastructure’ services. When investing in network security was unheard of, Comnet took the plunge by launching e-Secure, its network security division. It was during a brainstorming session on diversification that a senior management trainee came up with the idea of offering network security services and E-Secure was formed.

In the belief that if a market starts shrinking, it’s time to expand the portfolio, Comnet moved on to networking. Comnet stepped into the network intelligence space when buying bandwidth was a major expense for companies. Chief information officers (CIOs) had problems figuring out how much bandwidth was needed and did not know which users and applications were consuming how much. In such a scenario, providing a blueprint showing exactly how much bandwidth was being consumed where, helped.

Today, Comnet’s transition is from the technology heavy networking services area to a concentration on managed IT services. The company sees managed IT services as the biggest growth driver through 2002-03, simply because it involves a 50% reduction in operational costs for a customer—precisely what companies reeling from the bad times are looking for.

Another example of the company’s quick reaction to change, is the development of its second OMC (Operations Management Center) in New Jersey. (The first OMC was opened in Noida three months ago). Why invest in an OMC overseas when the cost advantage of Indian OMC is well known? "To assure business continuity to customers" says Nayar.

The brewing of Comnet…
The idea of a foray in network communication took root in 1992, when Nayar was asked to head HCL Technologies’ task force on strategic diversification under the chairman’s office. In 1994, he was nominated CEO of HCL Comnet.

"I was just one of the bunch of people at HCL Technologies who became the first few employees of Comnet. It was a team effort. We have no culture of placing individuals before companies, " he says brushing aside any mention of his ‘founder’ status.

"Actually, Comnet was created from what we decided we will not do. We said we will not sell hardware (PCs peripherals etc.) We decided to walk the tough path by being a pure-play networking company. They were tough times. We were not selling hardware. We had no branding in the market. Nobody wanted to work with us," he recalls. The turning point came in July 1995, when HCL Comnet won the contract for handling the National Stock Exchange of India’s (NSE’s) operations in Mumbai. Even today, Comnet services NSE’s 3,500-site VSAT network.

Customer on a pedestal
Comnet commissions an IMRB survey every year to gauge the satisfaction levels of its customers. It is mandatory that each year, the unique score arrived at in the survey, is improved by 30%.

But when it comes to handling global viz a viz Indian customers, Nayar says that Indian CIOs are more demanding.

"Given that we are not so well known in the overseas markets, it is difficult to get overseas customers. But if you deliver what you promised, they are far easier to handle. Indian customers have some ‘non-contract ‘ needs, which need to be fulfilled. Global CIOs are extremely competitive in cost reduction and will work hard with you to make it work," he says.

Barely 10 months ago, Comnet was concentrating on the network integration business, which relies heavily on technology. "One of the young professionals in the team came up with his solution to beating the slowdown—"Let’s go back to what the customer wants. Right now, he just wants to cut costs," he said. We decided to do just that-manage networks remotely and cut costs by 50%.

The concept of annual maintenance contracts has undergone a sea change with service providers gradually moving up the value chain, from repairing faulty equipment to fully setting up and managing a complex network. And that is the managed IT services opportunity Comnet wants to tap.

The road ahead
Out of its 62 customers currently, seven are global accounts worth a million dollars each. The rest are customers from India and other Asian countries (excluding Japan). Considering that the size of a single global account is close to 10 times that of a domestic account, it makes sound business sense to shift focus to the global front. The target is to have 70-80% of the company’s business coming from overseas customers and the rest from domestic customers. "While the focus is on the US and UK, Indian CIOs play a significant role in the strategy for Asian markets," says Nayar. Even as the client base tilts globally, the change will reflect on work patterns at Comnet back home.

"Right now, the proportion of employees working days and nights is 50:50. With more global clients, we’ll need to have more people working at nights" explains Comnet’s VP, global operations R Srikrishna.Nayar believes that he learnings from servicing these clients will help business overseas. "This does not imply that domestic customers can do with sub-standard service. However, if we do slip up in serving a customer here, we could always visit the customer and make amends, but if it is an overseas client, a slip up could mean the loss of a client," he explains.

On the people front too, there are plans of rapid growth with 150-200 of the company’s 650 employees having been added during the past year. Out of the company’s revenues of Rs 197 crore, Rs 127 crore comes from the materials business (which includes VSATs and other equipment like Cisco routers) and Rs 70 crore from the services business (consultation, network management and IT infrastructure management).

"We want to convert all satellite communication customers to managed services customers and move out of selling equipment as the margins are so low," explains I V Rajesh, general manager.

Bless the slowdown
Even as HCL Comnet pushes the cost advantage factor today, (which is the key driver of its managed IT services and remote network management initiatives), there has already been a quiet realization that in due course of time, people will come back and buy big and cost will not be a crucial factor.

The focus on cost-cutting comes with the understanding that this phase too shall pass. And the secret of brisk business lies in creating for tomorrow and building up responses in anticipation. Even as Comnet makes hay while the sun shines on managed services and in fact, takes advantage of the cost consciousness that the downturn brought in, the change management machinery is ticking away in Comnet’s backyard. Another team of the brightest and the best, yes, some of them Comnet’s famed Top Guns (see Box), have started working on projects that aim to meet the demands of the industry 12 months down the line. As was the case with global head R Srikrishna and his team while working on the managed services prototype a few years ago, without the knowledge of even most other employees of the company, this new team too is in hibernation.

So what’s cooking? Obviously, Nayar and his team will not tell. But it’s got to be something big to sell to companies when they celebrate the departure of the downturn in its entirety. As Nayar says, "No service or commodity can piggyback on the cost benefit forever. Soon, there will be a time when companies will want to spend big on fancy technology. And when that happens, we want to make sure we have it packaged and ready to be sold." Just like the Chinese say, as long as you sniff the money trail, you’ll never go wrong!

Manjiri Kalghatgi in New Delhi

Page(s)   1  2  3