"We have always been strong in the domestic segment. Over the years, we have consciously expanded international reach and reduced dependence on the domestic market," said HCL Infosystems chairman and CEO Ajai Chowdhry. Over the years, HCL Infosystems has evolved from selling boxes to system integrator and IT and consultancy services. HCL Technologies has moved up to concentrate on high-end value-added services and on an offshore model.

One of the country’s oldest corporates to dabble in information technology, HCL was ranked #1 in the 1999-2000 and 2000-01 DQ Top 20 Giants listings.

So what is HCL today? HCL Infosystems (HCLI), the group’s hardware manufacturing, systems integration and distribution arm, as well as the country’s leading manufacturer of PCs with subsidiaries like HCL Infinet (ISP). HCL Perot is a 50:50 joint venture with Perot Systems Corporation and HCL Holdings Gmbh, a subsidiary of HCL Technologies started in 1996. Currently, HCLT has categorized its businesses under three heads—software services, IT-enabled services and networking services. The organic entity consists of HCLT (the core entity), while the inorganic head comprises joint ventures such as Deutsche Software, HCL Enterprise Solutions and HCLT Jones, among others. The IT-enabled services head consists of HCL E-Serve and HCL Technologies NI. The networking services head consists of HCL Comnet.

In December 2002, HCL Infosystems announced the proposed demerger of its software development business (Softex), to be subsequently merged with HCLT. A court order to this effect is pending. Once approved by the court, revenues from Softex will be part of HCLT, with effect from January 2003.

In another significant transaction, the technical help-desk business of HCL Infinet, a subsidiary of HCLI, has been acquired by HCLT’s BPO subsidiary HCL eServe for Rs 2 crore. The July-Septemberquarter in 2002 ended badly, with a lull in the group’s networking, services as well as BPO business. The company’s adoption of the client rationalization strategy post these results is a key factor for the spurt in growth that followed. The group decided to concentrate on key clients and explore the entire gamut of service needs, instead of deploying resources on a multitude of small clients.

"HCL Technologies had been focussing on the outsourcing of high-end research and development of overseas clients while most other Indian companies were capturing the IT budgets of global companies. With the changing dynamics of the industry, we started gunning for IT budgets as well," said Chowdhry. "The idea was to offer clients a four-legged stool—software R&D, application development, IT infrastructure, as well as BPO services," he adds, explaining how clients using any one of these four offerings from the HCL group were tapped for buying the other three. The strategy helped and revenues picked up. HCLT ended FY 2002-03 with 17% growth—from Rs 1,552 crore to Rs 1,812 crore—while HCLI grew 16%—Rs 1,221 crore to Rs 1,422 crore. HCL Perot showed flat growth.

"The entire bulk of HCL Perot’s business is concentrated in the applications space. With consolidation in certain segments and a cut in IT budgets, the company could barely manage to sustain last year’s revenues," explains Chowdhry. Another factor which affected revenues was the unexpected appreciation of the rupee.

November 2002 saw trouble brewing between HCL and Perot Systems over management control. After a flurry of media reports and speculation over the future of the partnership, the dust finally settled, with no change in the nature of the partnership or composition of the management team. Subsequently, HCL Perot announced plans to invest Rs 30 crore in upgrading its four development centers in the country and overseas. The investment will be in setting up a development center in Dallas, USA and upgradation of infrastructure at the existing software development centers at Noida, Bangalore, London and Singapore. HCL Perot will recruit up to 600 software professionals in Calendar 2003.

E-serve, which accounts for close to 6% of the company’s revenues currently, is expected to contribute about 15% in year 2003-04.

Growth drivers
In April 2003, HCL Technologies bagged a five-year $160-million contract for BPO service operations from telecommunications service provider British Telecom. Burgeoning government orders drove growth at HCL Info. In fact, the share of the government in HCLI’s order book is over 60%. The company also benefited from the extension of 100% tax benefits to IT hardware players for a period of three years in the Exim Policy for 2003-04. The reduction in cell phone duties resulted in a reduction of prices by 11%-12% and also curbed grey market sales to a great extent. Growing sales of Nokia cellphones also boosted HCL Infosystems’ telecom distribution business.

HCLI received an order to automate value added tax services from the Andhra Pradesh government. In January 2003, HCLT entered into an alliance with Aalayance Inc, a US-based $4.5-million company in the enterprise application integration and business integration space.

In April 2003, The Storage Networking Industry Association (SNIA) an international organization dedicated to delivering storage networking architectures, education, and solutions for the IT community, joined forces with HCL Technologies to further advance the Storage Management Initiative Specification (SMI-S).

Team DQ