1975: Six young men get together over a cup of coffee and snacks. The conversation veers from cars and travel to jobs, career and the future. Since they all work together, its only natural that they talk shop. They also explore the possibility of starting a company of their own—one rooted in values, directed at creating a market for its products in a segment hitherto unexplored, hardware. Microcomp is born. The initial investment—all their savings, making up seed capital of Rs 1.87 lakh.

Six of us, all with DCM, wanted to start a computer company. But we didn’t have enough funds. We decided, therefore, to settle for a close second—we set up a calculator company, Microcomp. We were, of course, working our way upward, towards creating a computer company, till someone informed us that we would need a license for the same. The Uttar Pradesh government was offering an open license of this nature around that time. We acquired it and created Hindustan Computers Ltd (HCL). The name itself had a reason behind it—it denoted largeness, it was Indian, it was patriotic, it was perfect… Two more of our friends joined us later to set up Hindustan Computers in August 1976—that took the number of people who started HCL up to eight," remembers Ajai Chowdhry, one of that original group of eight and now president and managing director of HCL Infosystems.

"We dreamt of working in an industry that would revolutionize businesses, an industry that gave everyone an equal chance to succeed… We also knew we wanted to dominate it. Through these years, we have retained our number one position and sustained our growth. The one business strategy that has dominated and been at the core of our business is constant adaptation and renovation. We have also developed new paradigms for new opportunities," adds Shiv Nadar chairman of HCL Technologies and the man behind the HCL machine (see Shiv Nadar’s interview).

A teething problem faced by the company—getting imports through. The regulations and laws of the time did not allow the import of technology. Components and sub-assemblies, however, could be imported. "The latter was a very expensive affair. This led to a sharp focus on in-house design. The first product we came out with was targeted at the engineering research market—Micro 2200, based on a 4-bit microprocessor from Rockwell," says Chowdhry. With Micro 2200, orders poured in for HCL. "We had no products, and we couldn’t simulate them, so we had to create a bread-board model. We actually had people coming to us and looking at these models and placing orders—they believed in us!"

The deadlines were tough, but they had to be met, or the orders would fall through. The first deadline was March 31, and everyone worked night and day for weeks. The final delivery date—March 27. "I remember a particular instance. After setting up of HCL (Chennai), we were flooded with orders, especially from IIT Chennai. I personally went to the airport in my old Fiat and delivered the units personally to the IIT professors," recalls Chowdhry.

When MNCs weren’t popular
If we tabulate the history of Indian business, 1977 will go down as a "funny" year. It was in 1997 that the Janata Party government came to power. Among their first actions on the commerce front—asking IBM and Coke, among other multinational companies, to either increase the component of Indian holdings or move out. They moved out. "That was a stroke of luck for us," says Chowdhry. "We created an eight-bit computer, our first usage of Intel architecture. We went and sold that to lots and lots of companies, among them a cement company that used four floppies to manage the payroll of all its 3,000 companies."

Three years later, in 1980, HCL became a Rs 2-crore company. "We decided to expand overseas and entered the Singapore market, armed with some expertise in hardware and targeting the SME market. However, once there, we realized that the demand was more for solutions, not so much for boxes. We set up a software factory in Chennai—we would go to customers and tell them we would do everything—make the box, write the software, train the staff, maintain the equipment, the works… And we had to do $1 million in orders out of Singapore between August 1 and December 31, 1980. That was the make or break point—less than that and we wouldn’t have the cash flow to run the company." In the nick of time is how things worked out—HCL Singapore managed that figure on the morning of December 31.

The Singapore experience taught the founders a lesson—designing and manufacturing products in India and selling them overseas was akin to walking a tough and profit-less path. "This was when we decided to walk the software integration road. We created the integration database, much before Intel... but we killed it! We were so naïve, we killed a product line like that," says Chowdhry.

In 1984, the new computer policy was coined and standards were put in place. This saw a major move by banks toward the Unix platform. "A few companies approached us and we decided to launch the personal computer in India. We had three weeks to do this. Our people flew all over the place, including Taiwan and Bangkok, and brought back PCs. We took them apart, studied them and got into manufacturing mode. We launched our PC in three weeks. And that, incidentally, how Busybee was born," says Chowdhry.

A turning point came in 1989, just when the PC and software integration business was chugging along smoothly. McKenzie & Company approached HCL and offered to carry out a study for HCL, entitled HCL’s Entry Into America. "We told them we were too small and couldn’t afford them. They did a project for us anyway, and refused to charge us any money," says Chowdhry. When the findings of the study were presented to the top brass at HCL, the company moved into the US market—HCL America was born. "We marked the entry into the US market with hardware. We had no environmental clearances and fell back. We could not deliver as promised. Our entry strategy was right, but the product wasn’t. We were in big trouble—our overheads were high, we had no revenues…"

Unix to the rescue
It was the US reversal that made HCL look at newer avenues, and a path that would lead to more revenues. "That is how our software strategy was born, and we capitalized on our Unix strengths. Around this time, we were in talks with Hewlett-Packard for a joint venture. We were also working on Apollo, and HP bought out the product. About the same time as out foray into the US, we tied up with HP. At that time, HP was smaller than the behemoth it is today, but it still boasted global expertise. And that was something we wanted," says Chowdhry. However, HP asked HCL to close down its RISC and Unix R&D setup. Unwilling to down shutters on a going and profitable effort, HCL created a new opportunity out of the situation—HCL Consulting was set up and the said works were moved in to this new company. "We had our people working at the HP research centers, taking in all of the technologies. This was a great learning period and had a mushroom effect subsequently, when HCL Consulting turned into HCL Technologies," says Chowdhry. And along the line, HCL Infosystems was also set up. Chowdhry remains upbeat on the company he runs on a day-to-day basis, HCL Infosystems—despite the predicted flat growth in the current year. HCL Insys focuses on the domestic products and software businesses and its main areas of operations are:

• Products & System Integration: PCs, phones, EPABXs, SI;

• Domestic Services: HCL Insys started with AMCs, and then moved to facilities management, security consulting, network management, network architecture, among others; and

• Exports: Software exports, with offices in Singapore, Malaysia, the UK and the US, etc. The company motto here is—"With more and more services sales comes profitability."

As for HCL Technologies, it went in for a listing in 1999. Among its options was to accept a listing on the New York Stock Exchange. The company, however, chose to tap the domestic market. "It was a heady time. We had a ticker from NYSE but finally decided not to take it. We opted for a listing in the domestic market and went public. We grossed an unbelievable Rs 23,000 crore in application money. It was fantastic, as big a facilitator for our future plans as a vindication of our efforts of all the years," says Chowdhry.

Along the way, the promoters set up other companies, including NIIT, which was a runaway success but which was kept away from the group. "We kept these away from HCL, the name and otherwise, on purpose. HCL never invested in any of the companies, but the promoters did," says Chowdhry, putting to rest the constant queries on whether the companies belong to the group or to the promoters.

Tough times behind, rough road ahead
Across the world and across industry verticals, the last four quarters have been tough. For the IT industry, the last year has been a bloodbath—one of consolidation, one of tighter belts and budgets, and one of reorientation of focus. "It has been tough to achieve positive growth in PC numbers this year, leave alone the runaway growth figures achieved in previous years. However, there have been some growth areas—school projects have been coming in in hordes. State governments have been taking up IT-enablement in a big way. While some are working on a BOT basis, others have different, newer models. We expect between 50% and 60% of our sales to happen in the government segment," says Chowdhry.

And that, pointedly so, is the way of the Indian hardware sector as well. As foreign orders become harder in these hard times, it is the vast government requirement that remains to be reached out to, and serviced. In IT minister Pramod Mahajan’s words, is all states were to follow the Centre’s directive of investing 3% of their Budget outlays on IT, the hardware segment’s market needs for the next few years would be met. In the same breath, it is an easy task and a tall order—easy enough to foment and look forward to, but painstakingly difficult to actually come through to.

RAJEEV NARAYAN in New Delhi