‘We’re thinking of re-engineering our business lines’

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: It’s introspection time at $1.9 billion HCL Technologies. The tough global environment reminds CEO Vineet Nayar of the time when he took over as president three years back. The software exporting company was virtually written off. He has led the transformation journey taking HCL among the fastest growing companies in the IT landscape. His big deal strategy and radical employee initiatives have been case studies at the Harvard Business School. His personal growth is no less remarkable. Having joined HCL as a management trainee in 1985, he now serves on the board of the company as a wholetime director.

As the IT industry struggles to tide over the possible slowdown in US economy, Nayar is “thinking of re-engineering the company’s strategy, business lines and go-to-market strategies”. In an interview with Pragati Verma, he narrates his fresh plans to steer the company beyond 2010; describes the new goal posts and the next phase in the company’s transformation journey. Excerpts:

We have heard of your three-phased transformation journey till 2010. But you have recently talked of restructuring your offerings including remote infrastructure management?

If you go back to all our conversations since 2005, I have always said that the business model of IT companies will need to change radically. I have also said that value will dominate volume in our business equation. Third thing, I have said is that this whole input-based pricing as a business model is going to die and we need to have output-based pricing. Two years in a row, we have expanded operating margins and our revenue has grown ahead of manpower growth. We are already moving towards skin in the game business. Look at our Cisco and Computer Associates deals, where we earn more if we help increase client’s revenue. Our payout is tied to the revenue growth of the client.

If we get things right, this will be a big part of our business model 2010 onwards. We have been aiming at becoming the most valued company by 2010. We might be in the services business, but we would like to create value more like that of a Google or an Apple rather than a Dell, IBM or HP. We are now getting ready for a business plan for 2010 and beyond. We are thinking about re-engineering our business lines and our go-to-market strategy. Obviously this will impact our business plan and our organisation construct.

How different will your remote infrastructure management offerings be?

You have to be a pioneer in your space. If others follow you, that is ok but you have to be ahead of the curve. You should re-engineer your business so that second year growth does not come down. We should re-calculate the vector and take it higher.

Let me give you an example. A new business model seems to be emerging for telecom companies. So, we have to change our offerings to provide support to them. We are restricted to IT management till now. There is no reason why we can’t make more manageable devices—mobiles phones, PDAs, consumer electronics, printing machines and even automation plants.

Also our management could get much more reactive. For instance, internet companies typically don’t know where the user is and what he or she is doing. But a telecom company can trace that with location-based services. If I know that you are in a football match, I can beam content unique to you that will interest you. When a telecom service provider’s model changes, we have to be in line with his new offerings. You cannot say you are in the infrastructure management business. We have to redefine your business to be something else, and we are trying to get a deeper understanding of what is that something else.

How do you read into the current business environment? Almost all IT majors had bad news from one big client? You also had forex problems.

I would say the current business environment is very tough. Different clients are reacting to the environment differently. Fortunately for us, the US continues to outsource work. Forex management is not an issue. We have to make a decision as to how management looks at business and the way street looks at it. We are not in the business of making profit from dollar appreciation or depreciation. My worry is the overall environment for my customers.

Hiring also seems to have taken a hit, affecting the sentiments of college going students?

I think this is a wake up call for a lot of youngsters. They have to realise that they need to work hard to make their way up. The current slowdown in hiring is good as it makes them look at life as hard work. And as our young engineers work harder and invest in cultivating skill sets, we will have the right talent pool for future. Hard work will provide us good CEOs for tomorrow.

India needs that to be a preferred destination on a long-term. We also need to work hard on our infrastructure and transportation to make industry more competitive. Today we are happy because of the investments made by our forefathers in IIT.

Your employee first strategy has made headlines globally. Will you rework that too?

Employee first won’t be restricted to taking care of yourself. It is also a form of taking those change agents to transform the society at large. We want to build sensitivity towards society and attitudes towards life. They should work as change agents. So if we can include the included a little bit more and make them more sensitive about the less-privileged, it will be a big contribution.