HCL TECHNOLOGIES

The incredible journey of a company and that of a radical man

INCEPTION
1972: The Govt. of India passes the foreign exchange & regulation act, creating barriers for multinationals to function and thus it paved the way for IBMs departure creating a vacuum in the IT sector 1974: Shiv Nadar founds HCL in his garage with fellow engineers having received Govt. approval to enter the hardware market

VISION & WORKING STRATEGY

Shiv Nadar was a visionary who believed that computers could be manufactured in India He made it possible for HCL to create computer system before APPLE or coming up with 4th generation computer language before Oracle He invested heavily into R&D which allowed HCL to keep up with latest trends like DOS & UNIX, thus paving the way for golden 80s for HCL

RECRUITMENT STRATEGIES
HCL recruited freshers from leading Bschools and Engineering institutions from across India HCL paid a superior salary to attract potential candidates All the candidates employed had an entrepreneurial spirit, never say die attitude & were unafraid of failures

ENTERS THE FUTURE PRESIDENT

1985: Shiv Nadar hired a 23 year old engineer with an MBA degree from XLRI, Jamshedpur, Vineet Nayar

THORNS AHEAD
The changing trends in the IT market demanded changes in strategy from HCL The financials in computer business was changing: hardware became commoditized and software and services became the emerging trend New competitors like Wipro,TCS & Infosys entered the market

WRONG DECISIONS
HCL decided to stay in hardware sector, committed to stay on cutting edge Being ahead of the curve HCL decided to go global after a study and offered innovative products but couldnt register sales due to the American perception that the Indian hardware was inferior HCL thus had to enter a joint venture with HP in the early 1990s

BANE OR BOON
1992: Vineet along with many of his colleagues was frustrated and unsure of HCLs Future. Vineet thinks of leaving HCL & start an entrepreneurial venture. Nadar gives Vineet the oportunity to be an entrepreneur within HCL. Vineet accepts proposal and tries to win the bid for the Govts tender of creating a new electronic Stock exchange.

THE COMNET BECOMES A REALITY

Vineet hires a few of his colleagues and founded HCL Comnet (an IT infrastructure and networking business wholly owned by HCL) trying to win the contract Using satellite technology for the Online Stock exchange was the most radical and innovative concept at that time and the team worked for 2 years relentlessly to make it a reality. Soon Vineets Comnet became was HCLs most innovative & successful divisions.

TOUGH TIMES

HCL started lagging behind Indian competitors Deregulation of policies by Indian govt. saw the return of multinationals like IBM increasing competition Customers demanding integrated IT services for competitive advantage Global IT leaders transforming in to service delivery business Companies off shoring recoding and application development to India(particularly Y2K problem)

Another wrong decision by Nadar not to participate in Y2K problem remediation cost HCL further

TOUGH TIMES-FACTS AND FIGURES

1999 2000 2001 2002 2003 2004

Turnover Net Profit Net profit(%) (approx) Market value Percentage change in market value(YoY)

166.326 204.567 13.298 8 25.473 12

296.652 34.366 11.5

332.924 26.097 7.8

447.493 11.567 2.5

564.876 26.767 4.7

4031.04

1775.66 -56

1319.85 -26

958.67 -28

1920.62 +100

IDENTIFICATION OF PROBLEM & SOLN.

HCL not moving into services

Ending

collaboration with HP to move in to Services management & work culture

Attrition rate rose to 30%

Changing

Late entry into services market

RISE OF A NEW LEADER

2004: Nadar feels the need for a new leader for HCL tech. Vineet the entrepreneur of Comnet (most successful unit under HCL) the obvious choice

Vineet

refused.

2005: Nadar asked vineet to take the helm once more

Vineet

finally agrees

RECOVERY PROCESSES STARTED

2005: IT industry estimated $36 billion revenues IT industry Growth 28% annually From 3lac employees in 2000 the number rose to 1million in 2005 Changing technological trends

Software

turned into Service(open source tool automation)

TRANSFORMATION BEGINS
April 2005: vineet starts as president-HCL Tech 3 customers canceled their contracts soon after he joined Vineet understands the gravity of the situation Decided extreme plans are needed for turn around of HCL

HEAR THE STRATEGIES CHANGING

Change in strategies and ops

walking away small project based work and going after big deals Blue print meeting Mirror-Mirror Initiative Import of Young Sparks Centralization of policies Creation of LOB(line of business) Mobilizing finance teams for sales and delivery bringing in value added business MSD(multi services Delivery unit

3 STEP RADICAL STRATEGY

1st phase: EFCS(employee first customer second) 2nd phase: Form strategic partnerships to offer more value added services to customers 3rd phase: Radical change to be brought to HCLs business model but what and when still unknown even to vineet

EFCS-IMPLEMENTATION

July 2005: Young Sparks introduced HCLites to EFCS strategy

provide a unique employee environment Drive an inverted organizational structure ensure transparency and accountability Encourage value driven culture

Implementation tool: Intranet Icon for rejuvenation: Thambi-the extraordinary individual

THAMBI
ENTREPRENEU R DOWN TO EARTH PARTNE R

FLEXIBL E

BEST OF BREED

CREATIVIT Y

PRIDE

INDUSTRIOU S

;PASSIO N

ENGINEERIN GMINDSET

TOOLS BROUGHT IN FROM COMNET

The new and improved intranet system Smart service desk The new U&I communication Natasha Town hall meetings

360 DEGREE FEEDBACK

360 degree feedback for top managers recommended to be posted on intranet for the entire organization to see Transparency and innovation rejuvenated the true HCL DNA

INITIATIVES TO EMPLOYEES
Trust pay Business plans Project quality index Project tracking

TRANSFORMING SALES
Sanjeev Nikore from COMNET was brought in to run sales Automated systems introduced Big incentives for sales like trip to Rome Nikore and his counterparts in delivery met in War room

RESULTS BEGIN TO POUR IN

$50 millions contract with Auto Desk Strategic partnerships agreements with Japans, 2nd largest steel manufacturer Top 10 most wanted Indian stocks

PREPARATIONS FOR BIG LEAGUE

Blue Ocean strategy Creating uncontested market space Value centric not Volume centric

FINALLY ENTRY INTO THE BIG LEAGUE

$330 million DSG international deal Deal record in IT history

2007 SCENARIO
Revenues of $362 million were upto 44% YoY Operating margins 18% Operating income up by 57% Net income 76% YoY ALAS!!!!! Company still trailing behind competitors

PUBLIC SPEAKING
Audacious multibillion celebration, explore and transform Bold speech of Vineet Declaration of EFCS Surprisingly well received by public Huge media attention Fortune entitled HCL as the worlds most modern management- in INDIA

PROOF OF GOOD WORKING CULTURE

Co. growing 40% anually No. of employees increasing from 24090 to 32626 Attrition rate between 14 & 20%

ATTRITION RATE- IT INDUSTRY

Sep. 2005 TCS INFOSYS WIPRO SATYAM COGNIZANT HCL 8.7% 10.0% 14.0% 16.2% 16.1% 19.5% Dec. 2005 10.8% 13.5% 16.0% 17.6% 17.1% 17.7% % change 24.14% 35.00% 14.29% 8.64% 6.21% -9.23%

NEW WORK CULTURE

Improved and transparent working culture Initiative for thinking innovatively Introduction of iGEN Active participation by all the employees in iGEN

FINALLY A BIG PLAYER

$70 million deal with Teradyne $100 million with Celestica $200 million deal with Skandia Enterprise transformational service Explore and transform with 300 customers

NEW INITIATIVES
Mirror mirror once again Six sigma implementation conducted in 90 days Bringing in new dimensions into the co.

HCLS NEW INITIATIVES

1. 2. 3. 4. 5. 6. 7.

8.
9.

15 Days DMO(days manpower outstanding) DRIVE(Discover Review Invent Validate Enlighten) for ISL Targeting lowest attrition rate HCL cares Smart Recruit and Smart move Stitch 8 Hrs deadlines Employee Help Desk Zero Ticket Day: the Aim Better predictability of costs and revenues

CONTD.
More Transparent and Automated process Employee first: Identify performers and reward them Value creation framework for customers Domain focussed R&D and investment Nxt Gen Leaders Train the trainers Zero defect billing

TRANSFORMERS BEING TRANSFORMED

April 2007 Impressive results LTM revenues $1.27 billion Top 2 fastest growing Co. Besides Indian competitors multinational contenders Economists take on HCL

5th

biggest Indian Outsourcer Largely unnoticed -won contracts worth $300700 m

NOW WHAT????????
IS HCL READY FOR THE 2nd PHASE AND 3rd PHASE????????? YES.

No..

WHAT IS THE 3RD PHASE??????

What type of radical changes does the company/ Vineet think of or implement.. Feedbacks..