It was yet another year of consolidation for the HCL group of companies. In 1998-99, Chairman Shiv Nadar carved out five companies—HCL Technologies, HCL Infosystems, NIIT, HCL Comnet and HCL Perot—out of an existing 18. In 1999-2000, those five were again boiled down to three—NIIT, HCL Infosystems (HCL Insys) and HCL Technologies (HCL Tech). While HCL Comnet Systems and Services merged with HCL Technologies, HCL Perot Systems was assimilated through a 50:50 joint venture between HCL Tech and Perot Systems Corp. The result: HCL annexed the title of the largest IT group in the country from the Tatas. This outlines the facade of the group.

A different perspective emerges when we look at the various group companies. While NIIT and HCL Tech faired well with growths of 27% and 28%, respectively, HCL Insys trailed far behind with a meager growth rate of 13%. While NIIT’s revenue crossed the Rs 1,000 crore mark, at Rs 1,096 crore, HCL Insys followed close behind at
Rs 996 crore. HCL Tech, on the other hand, posted an income of Rs 830 crore. Club these three together and the group is worth Rs 2,922 crore. In fact, the group would still have been number two but for the fact that Dataquest has taken into account the consolidated figures of HCL Tech according to the US Generally Accepted Accounting Principles (GAAP), since a large number of its subsidiaries are functional in the US now. Largely on account of this calculation mechanism, the group has posted a growth of over 22% this year.

Shiv Nadar has exited from the boards of NIIT and HCL Insys. This was done in accordance with the US law that prohibits a person from simultaneously holding top positions in two different companies with similar business interests. But Nadar, together with Ajai Chowdhry of HCL Insys and Rajendra S Pawar of NIIT, has already re-written the script to reap the maximum benefits of the emerging e-economy.

HCL Tech has identified four key factors to spearhead its growth in the new millennium. One, choice of the right business opportunities through identification and investment in emerging and high-growth technology areas. Two, elimination of risk by avoiding a client concentration strategy. Three, focus on employee value addition. Last but not the least, emphasis on multiple growth windows. Accordingly, the company shifted its focus to high-end, high value-added services and offshore-centric development in emerging technologies of internet and ecommerce.

HCL Tech also realized that while the US was definitely a growing market, other markets would also open up soon. This meant rolling out one of the largest marketing channels in the industry—a global network of 25 sales and project management offices in 15 countries. This also meant that the company increased its spending on sales and marketing, by 23% to be precise, as compared to the industry average of 15%. Although this did have a negative impact on profitability, the strategy was well in tune with the company’s long-term objectives of reducing dependence on select geographies and customers.

HCL Tech’s fourth strategy has been critical for its growth, and been a part of the big plan. Naturally therefore, 1999-2000 saw HCL Tech grow through joint ventures, alliances, mergers and acquisitions.

The truly blue chip company in the HCL stable, NIIT, introduced its brick and portal model to further consolidate its market share. It also invested in Relativity Technologies Inc, a provider of legacy systems to web transformation technologies. What’s more, the alliance with Australian telecom giant, Telstra, has enabled NIIT to be an application service provider, offering a broad range of value-added applications and communications services to its customers.

Not that all has been smooth for this IT education giant. While the company has made significant headway into software services, it is facing an uphill task in graduating from a player in the career education market, with its long-term courses, to the professional education segment. However, NIIT has managed to grow at a rate 6% higher than the industry’s.

HCL Insys, on the other hand, has powered its way to the top position in the domestic hardware segment, notching up a share of 15.5% in the PC market. Good news indeed, for the company not only managed to create momentum in its stagnating PC business, but also crossed the 100,000 mark in PC sales. However, in a year when PCs drove growth in the hardware sector and crossed the million mark, one expected better volumes from this oldest PC player in the country.

There has been a major shift in HCL Insys’ business mix—from hardware to IT services. It has also decided to become the country’s largest internet service provider, completing its ambitious repositioning exercise during the fiscal—the overreaching theme being ‘eVOLVE’.

HCL also redefined quite a few corporate rules in India, ambition for growth being one of them. And as if organic growth was not enough, all the three group companies took the merger and acquisition route to the summit. Whether or not the strategy will pay off in the long run is another matter, the fact remains that the group has managed to regain its numero uno status this year. DQ