HEWLETT-PACKARD: Slowdown Spinoffs?

It has taken a mix of the slow-down in the US and the continued draw of

skilled manpower and lower costs to get Hewlett-Packard to take a re-look at its

operations in the East. CEO Carly Fiorina, probably the most powerful and

highest profile businesswoman in the world, dropped in briefly at Bangalore and

New Delhi, and outlined expansion plans for H-P India.

"We plan to aggressively expand our India operations. The future will

involve manufacturing, supported with a strong IT consultancy and services

ensemble, and it will include expertise in industry verticals like finance,

banking, insurance and telecom," H-P’s president and CEO said.

In a bid to capitalize on the high quality and lower cost of work in India,

H-P will make substantial investments and treble its workforce in India.

"We will increase employee strength from 1,500 to 5,000 in the next seven

years. I wouldn’t like to put my finger on any numbers, but the size of the

investment should be seen more in terms of employee strength and new programs

and initiatives," Fiorina said. Apart from finance, the focus is on IT

consultancy services, high on her list of priorities given H-P’s aborted bid

to acquire PricewaterhouseCoopers’ (PwC) consulting division.

Slowdown pressures

Fiorina acknowledged that the main reason for H-P’s stepped-up focus on the

emerging China and India markets is the US slowdown. "I don’t believe the

US economy will rebound anytime soon… I think we are talking about a recovery

perhaps in the beginning of 2002," she said. "But it won’t get any

worse either. I think it’s touched the bottom." And no, there’s no

negative impact on H-P’s plans for India. "We’ve long recognized India’s

advantages of quality and competitive costing. The downturn, in the

medium term, is not going to be bad for India. In fact, it would be good in a

business sense–we are continuing to bring more and more global work here in

India because we find the quality of work done here is outstanding in addition

to providing cost saving for our customers," she said.

Unlike others global players on the retrenchment warpath, the H-P chief

executive also revealed that H-P had decided not to cut back in key areas like

R&D and consulting. "In this environment we feel that it’s critically

important to stay focussed on our strategy and that means we will not sacrifice

our future. We have not cut our R&D spending. In fact, we have increased it

and continue to hire in R&D and consulting and professional services,"

Fiorina added.

Fiorina also voiced concern over the movement of the economic downturn

towards Europe. "Being a consumer company, we can smell a slowdown much

before it really becomes pronounced. And we are much concerned about the low

infotech spending and sluggish capital spending observed in the European

market," Fiorina said. It’s interesting to remember that Fiorina was the

first to express concern over the sluggishness in the US economy much before it

became evident, an opinion that had bought her nothing but ridicule… till the

slowdown actually hit.

India: H-P’s biggest new push

Slowdown apart, Fiorina was bullish about the potential offered by the Indian

market. The H-P chief announced that the company would substantially increase

manufacturing out of India. India is only high on the agenda for H-P as India

will be a significant element of the Internet and web revolution that is forever

changing the business and society–"India will be both the driver and the

beneficiary of the digital revolution".

Asked about the status of the Indian operation vis-a-vis H-P’s strategy to

constantly innovate, Fiorina said, "A major population of the four billion

people so far untouched by the marvels of technology in the emerging economies

belong to India. Therefore, we plan to work closely with agencies here, through

partnership and alliances, to identify pilot projects that can help broaden

access to economic and social opportunities by usage of technology. H-P plans to

make significant investments in infotech consultancy and professional services

in India, with special focus on banking and financial sectors.

New R&D centers in India

H-P is planning to set up three of its research labs in India to develop

innovative solutions targeted at emerging economies. "India is an ideal

place for H-P to establish the new labs for a number of reasons, including H-P’s

strong existing presence, a large number of talented Indian computer scientists,

the enormous cultural and geographic diversity and the dramatic economic changes

of the last decade," Fiorina said.

Also on the anvil is co-locating H-P labs on the campuses of leading Indian

academic institutions. This will allow H-P to access and partner with a wide

variety of researchers. These laboratories will initially focus on language

localization, connectivity solutions and economically and culturally appropriate

technologies, not only for the Indian market but for others across the world as

well. "Two such laboratories will be in Bangalore, one at its software

operations center, and another in association with the Indian Institute of

Science (IISc), Bangalore," she said.

The third laboratory will be set up in Chennai, in association with the

electrical engineering department of the Indian Institute of Technology, Chennai,

functional this summer itself. "To make sure that the work in these

laboratories is economically and culturally sustainable, H-P Labs India will

employ sociologists and economists in addition to computer scientists,"

Fiorina said.

H-P is also launching ‘world e-inclusion’, a business initiative with a

social mission, to broaden access to traditionally under-served markets in

India. It’s currently being crystallized with the help of government and

voluntary agencies in the area of health care and agrarian community

requirements. "As our traditional markets continue to mature, the big

growth opportunities presented by emerging economies gain even greater

significance. We believe this initiative positions us very well in terms of

business models, technologies and partnerships in India and other emerging

markets," the H-P chief executive said.

Amit Sarkar in New Delhi