The Silver Bullet

align="right" border="0" hspace="2" vspace="2">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.

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.