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Group: noun treated as sing. or pl.
1 : a number of people or things located, gathered, or classed together.
2 : Chemistry a combination of atoms having a recognizable identity in a number of compounds.

This is how the Oxford Dictionary defines a group, a conglomeration of similar or disparate entities working towards a common goal. Dataquest too for the past decade or more has been using the term to club together companies sharing a common heritage like Tatas, or subsidiaries like Wipro and Infosys and different business units like in case of HP. And this grouping was not merely deliberate on our part, in actuality, most of these groups themselves believe them to be so and try and work out the synergies between the various entities, be it different company or business unit. After all, it is a no-brainer, many hands better than few, right? Not really, the last fiscal seemed to turn this no-brainer into a misnomer, as most of the groups that were spread most in terms of products and offerings suffered the most. Indeed, diversity in FY 09 was truly a bane.

The Pain of Diversity
Ceteris paribus, diversity is usually a preferable thing, as many analysts and head honchos will vouch. In times of duress, a diversified portfolio ensures that even when the revenues from one end dip they are bucked up by the other. The trouble arises when, as in the old nursery rhyme Ringa Ringa..., all fall down. And this is precisely what happened last fiscal, as the economic slowdown continued, the impact was fairly ubiquitousbe it hardware or software, big or small. Even the five big boys (read groups) of Indian IT that collectively account for around Rs 112,379 crore, suffered from the economic downturn. But the real test of resilience would be as to how well could they cope up and mitigate the same, after all these groups are the flag bearers of Indian IT accounting for over 60% of the overall revenue of the industry as a whole. Thus, in some ways, they are also the indicator of the industrys health. Of the five, HCL and Wipro led this year posting high growth rate, followed by Infosys, Tatas and finally HP. If we were to delve specifically into the reasons, one of the factors that caused this disparate growth, 3% for HP to 48% for HCL, was indeed the diversity. Take for instance the case of HP and Tata, both at the end of the table, were the most diverse companies in terms of their profile. HPs business spread was across seven business segments ranging from hardware to services. While the Tatas, though focused on the software side, were equally divergent, from TCS (services) to Tata Technologies (engineering services). It is not as if collectively the companies floundered. For HP, its global technology solutions group (TSG) came as a savior, while for Tatas it was TCS yet again (posting 22% growth).

Dual Power
On the other hand of the spectrum, the two shining groups this time were HCL and Wipro, both very focused in their specific businesses and both using the power of two. So, for HCL it was the two group entities namely HCL Infosystems and HCL Technologies; for Wipro it were the two CEOsGirish Paranjpe and Suresh Vaswani. While there is indeed diversity when it comes to HCL, namely HCLT dealing in software and BPO while HCLI deals in hardware and network integration, nonetheless, the line has been pretty well drawn for both the businesses and they complement each other quite well. Thus, the marginal hit in revenues due to hardware decline for HCLI was quite well offset by the appreciation in services side revenue stream of HCLT.

Meanwhile in the case of Wipro, the two CEO strategy seemed to have paid off handsomely, as both Vaswani and Paranjpe were entrusted with separate portfolios, with very little overlap. This tag-team kind of model ensured much better operational efficiencies, as both the CEOs were keen to prove their salt. Result: Wipro was hungry for success even in the dire times, and thus lapped up new emerging opportunities like aerospace and healthcare much better than the competition.

Ins and Outs
IN
Neelam Dhawan (HP)	Roshni Nadar (HCL)
Outs
Nandan Nilekani (Infosys)	Sudip Nandy (Wipro)
Sudip Banerjee (Wipro)	PR Chandrsekhar (Wipro)

Thus in the end, what really scored for both HCL and Wipro was the clear focus in not only making the best of the opportunity but also in cross operational efficiencies. And this where the rest seem to flounder, while Tata can at best be defined as a rag-a-tag conglomeration of disparate entities, even Infosys with its One Infy program could not really take it to that level.

Offshore Ahoy!
If the previous fiscal was the year of the domestic, the last one returned to being that of the offshore. Thus, the groups that performed well last time were the ones with domestic focus, and that changed this year. The reason is fairly simple; after a year of yo-yoing from one extreme to another, the exchange rate finally seemed to settle down at around Rs 50 per dollar, and stay put. This was a huge relief for the service exporters, who were crying copiously on the huge losses in the exchange. Though the impact was not immediately discernible as the large players would have hedged there receivables in a big way, yet, the signs were fairly positive in the last quarter of FY 09. If the rupee does not again go for roller-coaster ride in the current fiscal, the CFOs at all the top groups will be fairly happy.

The other reason why the CFOs and even the CEOs were happy this year was because of the impact of the slowdown on the delivery capabilities. Over the past many years, due to the euphoric growth, a lot of inadequacies had crept into the system, namely in terms of wage inflation and over capacity. The last fiscal saw a major correction on that front, as the gloom descended on the marketplace, the major companies started to cleanse themselves, first by introducing wage-freezes and then by selective attrition. Finally, the much fabled bench of Indian IT also became redundant, as the big boys concentrated on resource utilization in a way they had never done before. All these factors combined to make life fairly easy for the major companies. So, all those doomsayers that had predicted the end of cost arbitrage will have to wait at least for this year, as companies get back to the good old model of earning in dollars/euros and paying in rupees.

That is not to say that domestic is dead. Looking at the groups, it is fairly obvious that companies have indeed woken up to the domestic potential. All the groups, except for Infosys, are now working at creating a footprint in the domestic space. But, it is yet to become a life-jacket like many had predicted. Hopefully, as the years roll by and as the operations and revenues grow, it might turn into one. Not at the moment though.

Finally, like a tarot reader that predicts the future from the chosen picture card, looking at the performance card of these groups there is much to be happy and much to be concerned. The synergies that every Dataquest annual issue implores for is still missing in some ways. All these groups need to do a re-think and recalibration of not only their processes but also their mindsets. Adversity is a good teacher, people say and as these groups battle these tough times they will become stronger. And hopefully in the years to come, groups will indeed behave as groups do.

On the positive front, we can breathe now as the performance has been fantastic by any account. As the whole global economy went into a tailspin, mammoth organizations disappearing overnight, massive layoffs, shut-downs, etc. In these trying times these five groups, the flag bearers, were not only able to stay afloat but also ride the waves. Thats quite a reason for popping the cherry.

Shashwat DC
shashwatc@cybermedia.co.in

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