Rank4: HCL GROUP - Strength in Synergy

Having a wide hetero-geneous portfolio might not be the best of things in
these trying times. In the DQ Top 5 groups, HP realized that to its detriment in
FY 09; HCL too suffered, albeit to a much lesser extent. Actually it had HCL
Technologies to thank, one of the top five IT services firms, for cushioning off
much of the de-growth that impacted HCL Infosystems. The contrast could not have
been more stark: Infosys and Wipro groups, that are primarily homogeneous in
nature (mostly delving into IT services exports, barring Wipros hardware foray
which is not much in magnitude), shone the maximum. Tatas too performed on a
fair keelthey might be just a conglomeration of disparate entities, but at
least they have a linear homogeneity in the fact that all of them are into IT
services only.

Lesson 1: the more diverse your portfolio, more the chances of trouble in
testing times. In a year when domestic hardware business appreciably declined,
it were the HCLs and HPs, with significant stakes in domestic PCs, laptops,
servers and the sundry, who suffered the maximum.

Lesson 2: Competition from other geographies notwithstanding, as long as cost
and labor arbitrages remain, IT services companies with exports focus will
thrive in India (barring minor disruptions owing to currency fluctuations).
Thats where the HCL group scored over HP at leastthe presence, or rather the
thriving presence of HCL Tech even in a challenging year, was the saving grace.
However now with HP owning majority stake in MphasiS, the situation might
change, if we start including the latter in HP group next year.

This group exercise from DQ should not be looked at in isolation, one needs
to put it in the proper business perspective. Three of the five groupsInfosys,
Wipro and HPfunction exactly as similar business entities the way we define
these groups. The Tata IT entities are most disparate: they are completely
separate IT companies, whose synergies mainly exist at functional or operational
levels and very little in terms of accounts or order books. HCL is more
interesting: apparently, HCLI only has the domestic focus, while HCLT primarily
looks into exportsbut there do exist certain business synergies in addition to
the significant extent of operational and functional tte-a-tte that exists
between the two. And unlike the Tatas, HCL has the management endorsement and
sort of official sanction to nurture this synergyunder HCL Enterprise, there is
a team under Saurabh Adhikari who looks after these issues. The entry of Roshni
Nadar, daughter of the HCL group scion Shiv Nadar, only emphasizes the
importance of this strategy further.

RANK 4 - HCL group
(Revenue in Rs crore) CyberMedia Research                                                                                                   DQ Estimates
	Given the fact that the hardware and distribution business were almost flat in FY 09, the moderate growth recorded by HCL is mostly owing to HCLT. HCLI recorded a single digit growth figure, especially with Nokia business and PCs taking a hit. This goes on to prove that though having a diverse portfolio is a strength in itself, it might not work out in your favor during trying times
Shiv Nadar, chairman & chief strategy officer, HCLT

Brothers in Arms

Till about a couple of years back, HCLI and HCLT were pretty much going
their own way, and there was no hint of any synergy between the two. Off late
though, the company has realized the need for synergy, and not in branding
alone. Thus came into existence HCL Enterprise, a team of eight people, headed
by Saurabh Adhikari. Its function, in short, was to establish a group identity
and see how one could benefit from the expertise of the other.

FY 08 was the year when the synergy really started showing, in branding as
well as in some of the deals signed. There were several projects during the year
that involved the active participation of both the group entities. In domestic
projects, HCLI led the way with back-end support from the latter, while the
reverse happened in the case of global deals where HCLT assumed the leadership.
Therefore, while HCLI was handling the entire IT management for Escorts, HCLT
was running SAP at the back. Ditto for the Haryana State Electricity Board:
while HCLI deployed an innovative billing model for Gurgaon on a SaaS model,
HCLT was running SAP at the back

FY 09 saw more of these deals, and the instances of joint pitching also
increased. The Delhi Police project, the continued alliance with NEC and Cisco
are a few examples.

HCLT also leveraged the fact that HCLI boasts of the largest service network
and a huge distribution chain and when new customers came their way, HCLT also
pitched for them. The key pitch of HCLT has in fact changed to being a
multi-services delivery company, and large deals have come in as a result of
this pitch. Nokia and Microsoft, both having strategic and long standing
relationships with HCLI, are now also doing business with HCLT. The last year
also saw some events where one of the entities participated and the other
courted along to look for business opportunities. By working out these
synergies, HCL also eyed markets that were unexplored.

While there are certain overlaps, perhaps the most commendable bit of synergy
exists between HCLI and HCL Comnet (a subsidiary of HCLT) for the formers
service integration business. It is however yet to be seen how HCL works on
synergy with its new acquisition Axon. While its clear that Axon will give the


BPO the much required platform based push, how its symbiotic relationship with
HCLI is to exist is still unclear. Meanwhile, the enterprise group is busy
looking at the opportunities and linking up the figments which may be of use to
the relevant entities.

One Umbrella

The enterprise group at HCL is currently looking at two areasstrategy and
marketing. While strategy mostly looks at how to pitch for deals which can be
lucrative for both the entities, marketing involves a number of initiatives. The
external marketing bit involves establishing One HCL as a brand, the efforts
towards which took shape as late as 2005.

HCL in that sense has been a late mover to leverage its size and reach, but
once it began, the pace has been commendable. FY 09 only furthered the attempts
to make the two groups work in tandem. The marketing initiatives included things
like having a common enterprise slide across all presentations, a common boiler
plate, hosting events and introducing programs for employees. HCL basically
focused on making its employees a part of the larger whole. And although the
HR policies are separated across groups, the management aims to marry the
thought process across divisions.

HCL is also working on marketing itself as a company with offerings
encompassing product engineering, custom & package applications, BPO, IT
infrastructure services, IT hardware, systems integration, and distribution of
ICT products. It is also emphasizing its size by giving joint employee numbers
and collective presence across geographies.

So the synergy which seemed elusive for HCL several years back, is now firmly
in place. If leveraged properly it can help the company in more ways than one.

Mehak Chawla

mehakc@cybermedia.co.in