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