Group HCL went back to its roots in 2004-05, becoming a unified brand through
project Heartbeat. The following year saw no real impact of the unification on
business or stock price (which is anyway down). Company sources say the branding
was a success, though: it helped in strengthening employee pride and
streamlining some processes--and perhaps arresting attrition.
Overall, the two entities continued to be very distinct, though the process
may have helped them focus better. HCL Infosystems (HCLI) sells
'infrastructure, services, solutions' for the domestic market, having handed
over its exports ops to HCL Tech in 2004. Of the services it sells in India,
application services are delivered by HCL Tech.
Shiv Nadar Chairman & CEO, HCLT |
Ajay chowdhry Chairman & CEO, HCLI |
Group-wide Focused Maintained Evolved |
HCLI's Nokia handsets business continued to overshadow the IT business, at
1,000 crore higher than the group's combined IT business, or over 53% of total
group revenue (DQ excludes the handset revenues from the total revenues). That
huge chunk will come down now as India distribution now splits between HCLI and
Nokia, though HCLI says there will be no decline in absolute revenues: the
territory handover will be gradual.
HCL worked on strengthening its brand equity through 'Talk Numbers: the
brand campaign aimed at establishing HCL as a leading hardware and global
technology services player. (While HCLT joined the billion-dollar club, HCLI
maintained its hold on the Indian desktop market.)
The campaign showcased its diversity while consolidating it into a single
brand. Growth strategy formed around large multi-service deals, which paid off
with some large wins. HCLT bagged 96 contracts, the high point being the Rs
1,500 crore DSG International project. The impact of those deals on the overall
revenue will show in FY 2006-2007.
The group's IT business (above) and the pie with the Nokia business included (below). (The latter, at 75% of HCL Infosystems business, will be flat this year, as Nokia itself begins distribution in about half the country.) HCL Infosystems sells 'IT infrastructure products, services and solutions' in the domestic market: HCL Technologies sells services globally |
BPO and R&D services remained on a good growth path. HCLT built expertise
in fast growing package implementation and enterprise applications domain. It
gets 18% of its revenue from the package implementation space, higher than
Infosys and Wipro. With models like co-sourcing and value pricing, the company
maintained its strength in remote infrastructure management (RIM) space through
its Comnet subsidiary. RIM has been a differentiator for HCLT, and a growth
engine and catalyst for some of the wins.
Client acquisition was seen as a cause for concern though by analysts, as the
active clients of HCLT increased rapidly without any meaningful improvement in
client metrics. A high client concentration was another area of concern. Towards
the beginning of 2006, the top 10 and 20 accounts contributed to 38% and 49% of
the revenues, respectively, thereby bringing in an element of risk into the
business model. However, other clients started driving growth for HCLT towards
the second half of 2005. Still, it will need to drive growth from the entire
client base to bring in predictability in its revenue stream. The de-risking
exercise was also undertaken in terms of service line and geography
concentration as the revenue mix was gradually shifted away from IT services and
the dependence on the US came down.
HCLI, on the other hand, held its grip on the Indian desktop PC market even
as the big chunk of revenue came from the telecom and OA businesses. However,
the year further widened the IT-telecom gap as its business became skewed
towards handsets, which accounted for three-quarters of the business. That's
Rs 2,661 crore from IT business, and Rs 7,875 crore from telecom!
Even so, HCLI did well to maintain its position in IT businesses as well. It
also bagged some big orders from BSNL, IDBI Bank and Punjab's schools.
HCLI's big new focus area was digital lifestyle. It's betting big on this
segment as one of its growth engines ahead: MediaCenter PCs, iPods and other
Apple products, and various digitally-enabled and converged products.
In the 30 year of HCL's operations, the group's branding exercise helped
bring back a bit of the old glory and pride due to a founding member of the IT
industry. Now, it needs to leverage that common brand and equity to scale up,
synergize better, and take on the world (and its home base) better than its
competitors-and convince the stockmarkets too.
Shipra Arora
shipraa@cybermedia.co.in