Group HCL went back to its roots in 2004-05, becoming a unified brand through project Heartbeat. The following year saw no real impact of the unification on business or stock price (which is anyway down). Company sources say the branding was a success, though: it helped in strengthening employee pride and streamlining some processes--and perhaps arresting attrition.

Overall, the two entities continued to be very distinct, though the process may have helped them focus better. HCL Infosystems (HCLI) sells 'infrastructure, services, solutions' for the domestic market, having handed over its exports ops to HCL Tech in 2004. Of the services it sells in India, application services are delivered by HCL Tech.

Shiv Nadar Chairman & CEO, HCLT	Ajay chowdhry Chairman & CEO, HCLI
Group-wide common branding was followed by corporate campaigns to boost credibility and stock value Focused on big deals in software and services; emerging services were key growth drivers; Revenues crossed $1 bn mark Maintained lead in Indian desktop market; launched "10K PC" Evolved digital lifestyle strategy as future growth engine, bringing in iPods and other products, even as handsets brought in over half the group's business

HCLI's Nokia handsets business continued to overshadow the IT business, at 1,000 crore higher than the group's combined IT business, or over 53% of total group revenue (DQ excludes the handset revenues from the total revenues). That huge chunk will come down now as India distribution now splits between HCLI and Nokia, though HCLI says there will be no decline in absolute revenues: the territory handover will be gradual.

HCL worked on strengthening its brand equity through 'Talk Numbers: the brand campaign aimed at establishing HCL as a leading hardware and global technology services player. (While HCLT joined the billion-dollar club, HCLI maintained its hold on the Indian desktop market.)

The campaign showcased its diversity while consolidating it into a single brand. Growth strategy formed around large multi-service deals, which paid off with some large wins. HCLT bagged 96 contracts, the high point being the Rs 1,500 crore DSG International project. The impact of those deals on the overall revenue will show in FY 2006-2007.

	The group's IT business (above) and the pie with the Nokia business included (below). (The latter, at 75% of HCL Infosystems business, will be flat this year, as Nokia itself begins distribution in about half the country.) HCL Infosystems sells 'IT infrastructure products, services and solutions' in the domestic market: HCL Technologies sells services globally

BPO and R&D services remained on a good growth path. HCLT built expertise in fast growing package implementation and enterprise applications domain. It gets 18% of its revenue from the package implementation space, higher than Infosys and Wipro. With models like co-sourcing and value pricing, the company maintained its strength in remote infrastructure management (RIM) space through its Comnet subsidiary. RIM has been a differentiator for HCLT, and a growth engine and catalyst for some of the wins.

Client acquisition was seen as a cause for concern though by analysts, as the active clients of HCLT increased rapidly without any meaningful improvement in client metrics. A high client concentration was another area of concern. Towards the beginning of 2006, the top 10 and 20 accounts contributed to 38% and 49% of the revenues, respectively, thereby bringing in an element of risk into the business model. However, other clients started driving growth for HCLT towards the second half of 2005. Still, it will need to drive growth from the entire client base to bring in predictability in its revenue stream. The de-risking exercise was also undertaken in terms of service line and geography concentration as the revenue mix was gradually shifted away from IT services and the dependence on the US came down.

HCLI, on the other hand, held its grip on the Indian desktop PC market even as the big chunk of revenue came from the telecom and OA businesses. However, the year further widened the IT-telecom gap as its business became skewed towards handsets, which accounted for three-quarters of the business. That's Rs 2,661 crore from IT business, and Rs 7,875 crore from telecom!

Even so, HCLI did well to maintain its position in IT businesses as well. It also bagged some big orders from BSNL, IDBI Bank and Punjab's schools.

HCLI's big new focus area was digital lifestyle. It's betting big on this segment as one of its growth engines ahead: MediaCenter PCs, iPods and other Apple products, and various digitally-enabled and converged products.

In the 30 year of HCL's operations, the group's branding exercise helped bring back a bit of the old glory and pride due to a founding member of the IT industry. Now, it needs to leverage that common brand and equity to scale up, synergize better, and take on the world (and its home base) better than its competitors-and convince the stockmarkets too.

Shipra Arora
shipraa@cybermedia.co.in

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