10 HCL Technologies Global Network

HCL
Technologies (HCL Tech) continued to chart its growth route steadily. It
expanded its sphere of influence through HCL Perot Systems–a JV with Perot
Systems Corp, Intelicent–the erstwhile HCL James Martin Inc, and HCL Comnet
Systems and Services–a 100% subsidiary.

HCL Tech identified four key factors to
spearhead its growth in the new millennium. One, choice of the right business
opportunity through identification and investment in emerging and high-growth
technology areas.
Two, de-risk business by avoiding a client concentration strategy. Three, focus
on employee value addition. Four, emphasis on multiple growth windows.

Accordingly, the company shifted its
focus to high-end, high value added services and offshore-centric development in
emerging technologies of internet and ecommerce. Also, while most of the IT
companies worked

overtime to offer Y2K solutions, HCL
Tech restricted its revenues from this opportunity to a mere 4%. The strategy
also ensured that HCL Tech did not face the threat of declining revenues in the
post-Y2K era. And the growing contribution from internet and ecommerce–from
27% during 1997-98 to 38% in 1998-99 and 42% in 1999-2000–itself proved the
point for the company. What’s more, HCL Comnet, that specializes in
networking, contributed 10% of the total revenue.

In fact, the last fiscal witnessed a
significant improvement in HCL Tech’s operations. Its focus on technology
development services–including embedded systems, application-specific
integrated circuit cores, operating systems and Unix kernels, very large scale
integrator verification and networking–saw the revenue share of this segment
grow to 32.6%, up from 20% during 1998-99.

HCL Tech also realized that while the
US was definitely a growing market, other markets would also open up soon. This
resulted in rolling out one of the largest marketing channels in the industry–a
global network of 25 sales and project management offices in 15 countries. This
also meant increased sales, general and administration (SG&A) expenses–23%,
to be precise, as compared to the industry average of 15%. Although this did
have a negative impact on profitability, the strategy was well in tune with the
company’s long-term objectives of reducing dependence on select geographies
and customers. Moreover, the company’s spending on SG&A will automatically
get reduced in the long run because of committed revenue inflows through
long-term business contracts.

The company also unleashed its unique
business acquisition strategy and hopes to garner assured annuity revenue of
$375 million from 13 clients, over the next five years. The plan, in sync with
HCL Tech’s focus on creating a low-cost and de-risked alternative to JVs and
partnerships, enabled the company to offer equity options to its clients based
on the revenue stream.

The last fiscal also saw the clean room
facility for KLA Tencor’s semiconductor and wafer inspection systems being set
up. Also, HCL Tech remained bullish on the merger and acquisition front,
constituting a six-member team to scout for potential targets, especially in the
US and Europe.

Amidst all its restructuring,
repositioning and realignment processes, HCL Tech also got listed on the
National, Mumbai and Delhi stock exchanges–raising Rs 823 crore to come out
with the largest technology initial public offering (IPO) in India. DQ