Rise of new leadership

Written by Diksha Dutta | Diksha Dutta | Updated: Aug 6 2012, 06:12am hrs
Leadership is fundamental to a company, and the role of leadership is perhaps most difficult to define in companies that compete in a knowledge economy. In his best-seller Employees First, Customers Second, HCL Technologies vice-chairman and CEO Vineet Nayar makes a valid observation when he says: As a leader or manager, you must stop thinking of yourself as the only source of change.

Instead, you must see others as the source of change and transfer ownership of the organisations growth to the next generation of leaders who are closer to the value zonethe interface between the customer and HCL Technologies. Only in this way can you begin to create a company that is self-run and self-governed.

Being a HCL veteran for the past 27 years, Vineet doesnt restrict his management philosophy to work of literature alone in order to rejuvenate the corporate soul; he practices it in day-to-day running of his $4 billion company. To say that the energetic CEO has invented a whole new way of configuring and managing an enterprise would be an understatement. He has charted a defining growth path for the IT services company. Analysts reckon that HCL Technologies is today one of the fastest growing IT services company, with 84,000-odd professionals spread across 26 countries.

Vineet recognises that today the asset base of an organisation increasingly resides in the talent and creativity of its employees. Knowledge-based industries, especially, depend on excited teams of individuals who are eager to take on one challenging task after another and to act as custodians of the tacit knowledge in the organisations. To manage themespecially Gen Y employees requires a new set of capabilities.

In this backdrop, Vineet feels that it is time to push new leaders with bigger roles at the top. For instance, he is encouraging Anant Gupta, the newly appointed president and chief operating officer, to drive innovation and growth in the company. As the different service lines like infrastructure services and enterprise applications are getting complex and bigger, there needs to be interdependence and interface between our different business units. This can be done by an aggregated leadership strategy, feels Anant.

Vineet says confidently, My charter is going to be same as Anants charter. This will potentially give us success. Anant has been looking after infrastructure services which is one of the biggest service lines for HCL Technologies and has now reached a billion dollars in revenue. He also has been taking care of the European region which is a challenging geography to handle.

It is after a gap of seven years that the Noida-based IT firm has re-created the position of a COO; a move which signifies Vineets efforts to build new leaders. In 2005, the COO was S Raman and since then the position has been vacant. We want to build the next level of aggregated leaders through the incubation strategy. This will be a competitive advantage for us, reveals Vineet.

Bolstered by strong growth in its five service linesenterprise application services, engineering and R&D services, custom application services, infrastructure services and BPO servicesHCL Technologies is now building a strategy which will help interdependence and interface between these service lines and drive innovation.

Vineet steps back and justifies how HCLa legendary name in tech circles in Indiahas always encouraged entrepreneurship. We have always believed in building leaders and now Ecosystem Business Incubation (EBI) is a separate division for us. So our five service lines will now have additional service lines through EBI, he says. EBI is an incubation unit set up in 2010 to incubate five new ideas exactly the way HCL incubated its infrastructure division (Comnet). The company is making investments in EBI so that it is ahead of the curve on newer technologies like cloud computing and mobility.

Rope in the best guy

HCL Technologies has believed in getting the best leaders for its businesses which were suffering or probably the areas in which it was weak or never existed. Whether it was Steve Cardell through Axon in 2008 or Rahul Singh in 2010 from TCS BPO division.

Our BPO business was suffering and hence we got Rahul to fix it, says Vineet. Rahul Singh, former CEO and MD of Citigroup Global Services and later of TCS eServe International joined HCL two years back. He came in as the presidentbusiness services and corporate vice-president of the company at a time when the BPO business was making losses. Even last year, it had losses of $22 million, but is now break even.

Singh takes us through the journey, The BPO business is no longer making any losses. In BPO, our top line remains same, while the headcount has gone down to 9,600 this year from 10,500 last year. This is because we are de-focusing on voice. Our voice business is now 39% which was 62% two years back. We focus on three verticalshealthcare, financial services and insurance. HCL Technologies also bought Liberata in 2008, an insurance company in UK, previously which was causing losses for HCLs BPO business, admits Vineet.

In 2008, HCL Technologies also made a wise decision by acquiring Axon and brought Steve Cardell on board. And today he is a man with a mission in the company, Europe and America both are seeing growth in enterprise application services. The US has emerging trends in this space and we will concentrate on trends like mobility, big data and cloud. Customers are reinventing platforms. Today 3/4th of our business is run the business (RTB) and rest is change the business (CTB). This split will be 50:50 over the next three years, says Cardell, CEO, HCL Axon. HCL Technologies had acquired Axon, a SAP consulting company in the UK for $658 million. This merger allowed HCL Technologies to address the about $23 billion market per year for SAP services.

Business as usual

The challenges of a year back have now become opportunities for HCL Technologies. Margins increased this quarter by 370 basis point to 19%. Even the BPO business which was in losses last year is now sailing successfully through its transformation journey.

Going forward, Vineet clearly defines the business for HCL Technologies intoRTB and CTB (restructuring deals). He steps back and explains, Before recession, the focus was on CTB when customers were investing in everything that was fancy and even invested in implementations which had no returns. In 2008, recession happened and changed everything. The nature of deals went from CTB to RTB. We spotted this trend and then changed our offerings to RTB. Thus, HCLs existing customers are in RTB, but CTB is growing faster in the industry. This positioning will help the company expand in CTB. This is the reason for HCLs margin expansion. Its $100 million deals have increased by 500%. Even the top 20 customers are growing faster than the company average rate.

We want more business in geographies like Europe and verticals like healthcare and utilities, says Vineet. Incubation will be the growth driver for HCL Technologies. Just like infrastructure services, he foresees other service lines also to be going on the same path.

It will be interesting to see how HCL Technologies new leaders make a difference for the company as well as for the IT industry.