HCL Infosystems The New Road Ahead

The

IT business is one of the most dynamic sectors in the global economy where

business models are changed as rapidly as they are made. On this count, HCL

Infosystems (HCL Insys), the Indian computer hardware and services major, was no

exception. The home-grown brand had a single-point charter for the next few

years–to become a complete end-to-end (E2E) IT service provider by leveraging

its existing hardware customer base. At present, this base includes about 15,000

corporates accounting for nearly 70% of its total revenue.

The company made the thrust towards services, backed by a

team of 750

software engineers, after being faced with stagnating revenues for three years

in a row. Competition from multinationals like Hewlett-Packard and Compaq on one

hand and local assemblers on the other hand had resulted in falling margins and

almost flat volume growth. That HCL Insys managed to overcome this situation and

powered its way to the top position in the domestic hardware segment–notching

up

a market share of 15.5% in PCs during the fiscal 1999-00–was

no mean an achievement. But then the fact remains that HCL Insys managed to push

its PC volumes by a mere 12.5% in a year when PC shipments, according to IDC

estimates, crossed the one-million mark and the home segment grew by 88% in unit

terms.

The hardware major seems to have foreseen this problem almost

four years back, when it started investing heavily in the professional service

organization and the systems support organization. That the strategy worked is

evident from the results posted during the last fiscal. From about 4% five years

ago, HCL Insys’ revenue from its services business has grown to 12%. Also,

there has been a major shift in its business mix–from hardware to IT services

like IT consulting, large integration projects,

turnkey software development, ERP consulting, and software

services. And last but not the least, its decision to become the country’s

largest ISP completes its ambitious repositioning exercise during the fiscal–the

overarching theme being eVOLVE.

Having effectively leveraged its domestic hardware customer

base to make a mark in services, HCL Insys also focussed on growing fast

internationally. Its global thrust would be provided by its wholly-owned

subsidiaries in Singapore, Malaysia, USA and UK, and achieved through

acquisitions as well as organic growth. HCL is on the lookout to acquire a

$40-50 million services company and has appointed a core team to achieve this

objective. It has already acquired FEC Singapore for Rs 7 crore. Through

acquisition of FEC, which is engaged in execution of large turnkey projects in

systems integration and software development, HCL Insys expects to generate a

revenue stream of about Rs 50 crore.

However, the story of this giant will not be complete without the mention of

its newly formed internet subsidiary, HCL Infinet. Formed as a value-added B2B

and B2C service provider, HCL Infinet is at the core of HCL Insys’ net

strategy, and is aimed at enabling corporates implement its E2E ebusiness

strategy with speed, skill and finesse. The company also aims at becoming the

largest ISP in the country by launching its services in 42 cities across the

country through its existing infrastructure and dealers network. This is part of

HCL Insys’ larger plan of increasing its services revenue to 25% in the next

couple of years. With its target growth rates being 40-50% for services and

10-15% for hardware, the contribution of services is expected to increase to 50%

in about five years time. DQ