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Having a wide hetero-geneous portfolio might not be the best of things in these trying times. In the DQ Top 5 groups, HP realized that to its detriment in FY 09; HCL too suffered, albeit to a much lesser extent. Actually it had HCL Technologies to thank, one of the top five IT services firms, for cushioning off much of the de-growth that impacted HCL Infosystems. The contrast could not have been more stark: Infosys and Wipro groups, that are primarily homogeneous in nature (mostly delving into IT services exports, barring Wipros hardware foray which is not much in magnitude), shone the maximum. Tatas too performed on a fair keelthey might be just a conglomeration of disparate entities, but at least they have a linear homogeneity in the fact that all of them are into IT services only.

Lesson 1: the more diverse your portfolio, more the chances of trouble in testing times. In a year when domestic hardware business appreciably declined, it were the HCLs and HPs, with significant stakes in domestic PCs, laptops, servers and the sundry, who suffered the maximum.

Lesson 2: Competition from other geographies notwithstanding, as long as cost and labor arbitrages remain, IT services companies with exports focus will thrive in India (barring minor disruptions owing to currency fluctuations). Thats where the HCL group scored over HP at leastthe presence, or rather the thriving presence of HCL Tech even in a challenging year, was the saving grace. However now with HP owning majority stake in MphasiS, the situation might change, if we start including the latter in HP group next year.

This group exercise from DQ should not be looked at in isolation, one needs to put it in the proper business perspective. Three of the five groupsInfosys, Wipro and HPfunction exactly as similar business entities the way we define these groups. The Tata IT entities are most disparate: they are completely separate IT companies, whose synergies mainly exist at functional or operational levels and very little in terms of accounts or order books. HCL is more interesting: apparently, HCLI only has the domestic focus, while HCLT primarily looks into exportsbut there do exist certain business synergies in addition to the significant extent of operational and functional tte-a-tte that exists between the two. And unlike the Tatas, HCL has the management endorsement and sort of official sanction to nurture this synergyunder HCL Enterprise, there is a team under Saurabh Adhikari who looks after these issues. The entry of Roshni Nadar, daughter of the HCL group scion Shiv Nadar, only emphasizes the importance of this strategy further.

RANK 4 - HCL group
(Revenue in Rs crore) CyberMedia Research                                                                                                   DQ Estimates
	Given the fact that the hardware and distribution business were almost flat in FY 09, the moderate growth recorded by HCL is mostly owing to HCLT. HCLI recorded a single digit growth figure, especially with Nokia business and PCs taking a hit. This goes on to prove that though having a diverse portfolio is a strength in itself, it might not work out in your favor during trying times
Shiv Nadar, chairman & chief strategy officer, HCLT

Brothers in Arms
Till about a couple of years back, HCLI and HCLT were pretty much going their own way, and there was no hint of any synergy between the two. Off late though, the company has realized the need for synergy, and not in branding alone. Thus came into existence HCL Enterprise, a team of eight people, headed by Saurabh Adhikari. Its function, in short, was to establish a group identity and see how one could benefit from the expertise of the other.

FY 08 was the year when the synergy really started showing, in branding as well as in some of the deals signed. There were several projects during the year that involved the active participation of both the group entities. In domestic projects, HCLI led the way with back-end support from the latter, while the reverse happened in the case of global deals where HCLT assumed the leadership. Therefore, while HCLI was handling the entire IT management for Escorts, HCLT was running SAP at the back. Ditto for the Haryana State Electricity Board: while HCLI deployed an innovative billing model for Gurgaon on a SaaS model, HCLT was running SAP at the back

FY 09 saw more of these deals, and the instances of joint pitching also increased. The Delhi Police project, the continued alliance with NEC and Cisco are a few examples.

HCLT also leveraged the fact that HCLI boasts of the largest service network and a huge distribution chain and when new customers came their way, HCLT also pitched for them. The key pitch of HCLT has in fact changed to being a multi-services delivery company, and large deals have come in as a result of this pitch. Nokia and Microsoft, both having strategic and long standing relationships with HCLI, are now also doing business with HCLT. The last year also saw some events where one of the entities participated and the other courted along to look for business opportunities. By working out these synergies, HCL also eyed markets that were unexplored.

While there are certain overlaps, perhaps the most commendable bit of synergy exists between HCLI and HCL Comnet (a subsidiary of HCLT) for the formers service integration business. It is however yet to be seen how HCL works on synergy with its new acquisition Axon. While its clear that Axon will give the
BPO the much required platform based push, how its symbiotic relationship with HCLI is to exist is still unclear. Meanwhile, the enterprise group is busy looking at the opportunities and linking up the figments which may be of use to the relevant entities.

One Umbrella
The enterprise group at HCL is currently looking at two areasstrategy and marketing. While strategy mostly looks at how to pitch for deals which can be lucrative for both the entities, marketing involves a number of initiatives. The external marketing bit involves establishing One HCL as a brand, the efforts towards which took shape as late as 2005.

HCL in that sense has been a late mover to leverage its size and reach, but once it began, the pace has been commendable. FY 09 only furthered the attempts to make the two groups work in tandem. The marketing initiatives included things like having a common enterprise slide across all presentations, a common boiler plate, hosting events and introducing programs for employees. HCL basically focused on making its employees a part of the larger whole. And although the HR policies are separated across groups, the management aims to marry the thought process across divisions.

HCL is also working on marketing itself as a company with offerings encompassing product engineering, custom & package applications, BPO, IT infrastructure services, IT hardware, systems integration, and distribution of ICT products. It is also emphasizing its size by giving joint employee numbers and collective presence across geographies.

So the synergy which seemed elusive for HCL several years back, is now firmly in place. If leveraged properly it can help the company in more ways than one.

Mehak Chawla
mehakc@cybermedia.co.in

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