On how he began
We captured that gap in the imagination: that computing was going to change, and that computing was going to pervade almost all walks of life. And age was on our side. We were still in our twenties. When we looked at the prime experience behind us, we chose two industries: medical electronics and computing. These were two fields where we felt we could spend our lifetime doing something. Around this time, we met with Dr. Seshagiri, the head of the Electronics Commission in India, at a workshop for start-ups. At that time, industries were highly government-dependent for budgets—there were hardly any private companies. He felt that we would do well in computing, as our experience was good and the beta factor was low. This was a time when the industry was research-based—everything was proprietary. The sixteen-bit machine that we came out with in 1980 was running on our own operating system—the 14-bit industry didn’t know what to do with that extra 2Kb! [laughs]
The revenue would succeed the success of the product, which did not fit into many of the large players’ business models. The field was pretty much open. We were confident that we would succeed. When we look back now, none of us are surprised that we were successful. How do you eat an elephant? One bite at a time! We took each piece of program we wrote and sliced it up: in terms of risks, technology, production. We wrote out the mitigation on that. And it worked. This was pre-1982.There were only two companies that did this: ECN and HCL. Was it good? Was it bad? Good, in the sense that we spun out HCL Technologies from all the R&D that we did in HCL.
On the evolution of HCL
We had all these technologies at HCL which were finding no use, because the markets had moved onto standards. We thought it would be a good idea to spin off our strength into a business. HCL Technologies took shape. Today, half of our revenues come from the R&D that emerges from HCL Technologies. In those days, we were helping Hewlett-Packard (HP) build their multiprocessor UNIX—which we at HCL had already built and brought to market in 1983. When I was taking a brief from the HP team, I asked them what the difference was between HP and HCL. They said, “If you want to build a product in India, you need a team of extraordinary people who will manage to deliver an ordinary product. But our processes are so robust that we can put a team of ordinary people to work and they will deliver a product that is extraordinary.” That set me thinking. We needed to build in those processes. Today, we stand where we are simply because of those robust processes that helped us evolve.
On moving away from products to services
Quite clearly, a product is a high-cost risk. We need to understand the world markets in terms of product need. I don’t think that we understand this very well, even now. A product discipline is very different from a service discipline. As software tools change, user needs change, a product needs to be constantly rewritten, to make it more efficient and user-friendly. That is a huge investment. At HCL, we simply don’t have the deep pockets to put a product into the market and sustain it. But services come with low risks and quite stabilized revenues. The predictabilities are higher.
On being branded “just another service company from India”
Being focused only in certain areas brings a higher risk. Right now, half of our revenues come from R&D. Two years ago, more than 75 percent of our revenues came from it. And then the tech market hit the wall at light-speed. Which is when we had to diversify to reduce our risks.
As for being branded along with a dozen others, look back at the past 20 years. About two out of every two hundred have managed to survive. That is branding in itself. I am not very worried about this “branding,” as HCL Technologies has its own set of loyal clients who come to us for what we have to offer, not because they found our pricing better. The landscape is changing toward quality offerings.
On the emerging BPO potential for Indian companies and the differentiation for HCL
Let us look at the BPO industry. The market is supposed to be $8 billion in 2005, and in 2008 it is supposed to be $20 billion. This market is only going to grow. This massive growth—today’s market of 30,000 will grow to 1.5 million people—cannot be supported by the five or six Indian cities that are IT-mature today. It took twenty years for the software industry to grow to 400,000 people. But in the last five years, it grew to 4.5 million people. BPO will see a tremendous spurt of growth: more companies sprouting up, and buckets of talent. So, people will change jobs quickly—we will see 30 to 40 percent people turnover in the industry, a huge jump from the 15 to 20 percent rate prevalent in the software industry.
Look at Gurgaon today. A few big players who invested in IT centers there helped start-ups mushroom around them. And these very start-ups are now scavenging people from the big players, leaving them no option but to move to fresh locations. Tomorrow, if these big companies decide to move to some remote corner in Andhra Pradesh, you can be sure of start-ups mushrooming there, too. Now, to do this will demand a million-and-a-half hardware fixtures. And to manage these fixtures, we will need talent. Where are you going to find all these fixtures and talent? HCL is probably the only company that can support this demand—with talent that is quality-specific, and hardware that is future-proof. That is our differentiation: to grow extremely rapidly with the least impact. And this industry is again where the HCL pedigree will help.
A lot of BPO demands will now need specific products. Different forms of software products will be required to complete BPO needs. There will be opportunities where sub-sects will be hooked onto a main ERP system, reducing cost-per-seat. In the current scenario, these sub-sect products will have to be sold abroad.But from now on, this selling will be in our backyard. And where do you think all this capacity exists? With this brand called HCL Technologies. Brand dilution? I don’t think so.
On product potential in India
In the future, there will be a trend toward building products for own use, rather than selling it on a large scale. The entry cost for a product is decreasing. People are approaching us for product distribution. Our time of dominance will come. But to meet that time of dominance, we need depth. Not many of the big players in India have that depth. A few products, yes, but a severe lack of knowledge about the market. Take the case of Hamdard dava khana. The accountants write up their numbers in Urdu. Go down south and you will see them written in Tamil or Telugu. We say English is widespread in India. But do we realize that English is only an understood language, not a spoken language? Do we have a product for such needs? We focus on developing corporate products. Why aren’t we looking at these product understanding?
On HCL’s initiatives in product development in India
We tried building an operating software for the Indian markets. But we realized that there is not much respect for software in the mass-markets. Piracy and grey-marketing are the two prime reasons for India’s failure in building a successful product. Corporate products enjoy a better respect, and BPO will drive new product development for the corporate world. HCL is trying to break the mould. When we will be successful is totally dependent on an overhaul of the market protection multiples.You cannot work in a market where 60% of its products are sold in the grey.
On motivating HCL’s massive troops
We believe that people like to work, like to innovate, like to succeed, and like to be liked. This has gone all the way down the line. I doubt if this line of latitude is allowed in many companies. People who have left HCL have come back or are constantly attempting moves to come back. I think we would be well-stated by Jack Welch’s famous phrase: it is a small company’s soul in a large organization. This is adequate motivation.
On his management style
I think HCL’s population is largely younger than HCL’s age itself. This dominant and vocal bunch have told me many a time, “Shiv, you don’t understand.” And I think they are right. They are at the same age as I was when I started HCL. A team of this young blood had put together a business roadmap for HCL’s next five years. When our consulting firms read through it, they obviously thought I had written it. But when I told them to cut out stuff which they thought won’t work, they said, “Shiv, nobody knows this business better than you. What can we cut out?” These kids actually know HCL as much as I do. And in that, I find peace of mind.
