The Silver Bullet

nadar.jpg (3873 bytes)Just
a few years ago, HCL was known as a hard-ware vendor-the largest, the most aggressive
vendor, the largest server vendor, and the largest workstation vendor…It even had the
most celebrated and one of the earliest joint ventures with an MNC-HCL HP Ltd. Just a few
years later, the corporation has neatly turned itself around. For the year ended March
1998, the revenues from software and services account for close to 62 percent of the total
revenue of Rs 2,357 crore, up 38 percent from last year. Not only has Nadar’s vision
ensured that HCL Corp. remains the largest consolidated group in the Indian IT but, more
importantly, India seems to have also caught up with Nadar’s vision, just as the world
had, according to Time magazine.

At one time, it seemed that the Group had
lost its strategic direction. There were a spate of tie-ups, ranging from Ross Perot to
James Martin to Hewlett Packard to Toshiba to Packard Bell…the hallowed names were all
there. That was a time when the Indian IT industry was in a boom. However, HCL’s vision
was clearly across the Indian borders. With as many as 18 offices worldwide, HCL was just
getting ready to spring onto the global centerstage. The Method, it appears was in the
madness.

In retrospect, it was really simple. Having
conquered the hardware market in India, with added help from HP, HCL’s strategy was to
play the hardware supremacy in two different ways. One was to play the volume market,
which is dominated by low margins and high numbers. HP’s disassociation (HCL refuses to
call it a breakup) was also strategic. Unlike most other JVs in the country which broke up
on inimical terms, HCL continues to be the largest distributor for HP. If the association
was a strategic need of Nadar, the breakup (oops!) was also a business need. As a
consequence, HCL powered ahead with its volume PC market, stopping a shy short of 100,000
numbers, mainly aided by its own brand. More importantly, HCL has eschewed the several
brands that it successfully created (BusyBee, Infiniti) by making HCL as the umbrella
brand. It therefore now sells HCL, HP, Packard Bell, and Toshiba brands of PCs and
notebooks. Another example of non-exclusive volume distribution.

The second aspect of the hardware market is
that it uses the hardware position as the Silver Bullet-to open up and/or expand markets
for hardware and, ultimately, for value-added solutions. In that sense, it is a creative
use of an advantage to create symbiosis for other expertise that may be available
throughout the enterprise but may not be as well-known to the end-user as iron is. Here,
the formidable channel partnerships that HCL has nurtured over the years play up to its
advantage.

However, the biggest crowning glory, and
the crown jewels, is in the services category. Here HCL’s alliances with Perot, James
Martin, and its own strengths are greatly buttressed by another formidable group company
NIIT. Seen from outside, NIIT’s changes, of course, are in line with HCL Corp.’s own. From
a training company, NIIT has blossomed into becoming one of India’s most successful
training, software, and solutions company. Presently, the share of training in the overall
revenues of NIIT is 50 percent, and the company believes that as markets expand, while
training revenues will grow in tandem with Indian market needs, the software and services
revenues will expand as per global needs. Even on the training side, NIIT has pioneered
path-breaking concepts such as NIIT NetVarsity, Computerdrome etc. Concepts that have
ensured that NIIT remains amongst the Top 2 private training companies in the country. An
SEI Level 3 company, NIIT is shooting for level 5 by 2002.

S T R A T E G Y

  • To be a global solutions provider of the
    highest technology bandwidth by partnering with the top of the pack in each segment that
    it chooses to enter.
  • To remain the strongest local player in
    hardware, software, services, and education business, and thus envelop the entire Indian
    IT.

T A C T I C S

  • Leverage the hardware business by playing
    the volume game as well as the emerging enterprise community.
  • Create and sustain a
    training-software-services chain that ensures a high availability of manpower.
  • Play the global market by global rules-SEI
    level 3, global sourcing of resources, global deployment of expertise.
  • Exchange channels for fast upscaling, create
    and sustain channels for higher penetration.
  • Synergize across multiple partnerships.

O B J E C T I V E S

  • Become and remain the premier solution
    provider from India
  • Rs 10,000 crore by 2001.
  • Become the largest vendor of the entire
    spectrum of IT products and services by 2000.

HCL’s transition has been from a
cost-plus-hardware model to a value-minus-solutions model. The company claims to offer to
customers worldwide one of the widest technology bandwidths available from the Indian
shores. In that sense, Nadar’s achievement is that he has been able to drive home the
synergy all across the corporation worldwide and is able to leverage the specific
competencies that the corporation possesses among its workforce of 9,000. Another
highlight and a singular achievement of the Group has been that despite growing to such a
size, it has been able to retain the strong entrepreneurial spirit that is
characteristically HCL. It is to Nadar’s credit that the brashness of the Group has not
been allowed to be tempered by the growing maturity of the organization. And it is this
brashness which led to HCL becoming the unquestioned numero uno in the Indian market.

As a result of all the restructuring that
Chairman Nadar has done, the corporation is now positioned to offer several key advantages
that any customer would want, and advantages that a global company is uniquely positioned
to provide: Global presence, thereby rendering the location independence. Reduced
geographical vulnerability-for example, despite a tumultuous Far East market, HCL’s growth
has been largely unaffected (that it might have grown more had the Asian meltdown not
occurred is a moot issue). Reduced technology vulnerability, by having a very high
bandwidth and multiple alliances. Reduced resource vulnerability, by bringing all the
corporation components in sync with each other. For a global customer, these will reduce
the risk associated with IT investments significantly.

However, the party has just begin. In the
coming year (HCL’s year starts with July), HCL will be going in for another phase of
consolidation. This time around, the entire corporation will be neatly divided into three
companies (The process of amalgamation has already commenced and will be completed by
July). One is HCL Infosystems, which will be the umbrella company and which will absorb
other box-companies into its fold. Companies that are being merged with HCL Insys are HCL
Infosolutions, HCL Peripherals, HCL OA, FECL etc. The second company will be NIIT, with
all its wholly-owned subsidiaries. The third will be a new entity called HCL Technologies,
which will be the holding company for all HCL overseas companies which are currently being
held by HCL Consulting. According to the grand plan, it is expected that HCL Technologies
will be incorporated in the US and will be listed on NASDAQ. This three-pronged strategy
will mean that HCL Insys will focus on volume business, while NIIT will focus on training
and software services, and HCL Tech will focus on global business. However, the emerging
systems integration market will be addressed by all the constituents by using the Group
synergy to ensure a high level of resource availability and technology bandwidth.

For the Indian transnational, it is another
phase of consolidation. The real advantages that the company has is a seemingly
inexhaustible reserve of managers, and a strong entrepreneurial accent with the
maneuverability of a feline. This Indian elephant has just started dancing.

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