March - 2001 - issue > Cover Feature

The post liberalization era in India is truly the “era of technology” -- Information and Technology are the two magic words -- and even the most traditional and established corporate giants are greedily vying for a share of this sector. L&T, one such traditional company, is busily transforming itself to become a serious player in the brave new world of hi-tech. It is easy to understand why a younger or smaller company might want to tackle such a challenge. But why L&T, a company with an enviable track record in areas as diverse as heavy engineering, manufacturing, construction, cement, power plants and nuclear reactors? Isn't leadership in niche sectors better than competing with established technology giants?


“The world has changed beyond recognition in the last 20 years,” says Naik, a “new economy CEO” with conviction. “There is no doubt in my mind that the giants of the new economy will be technology companies. To stay ahead of the course and to continue to remain competitive in the new economy we have to adapt or be left behind. We want to chase this hot sector with a vengeance.”

Taking Stock of the Situation
Naik's first move after being appointed CEO last year was to take stock of the situation at L&T. After some analysis, he saw a dilemma: on one hand, the company as a whole was profitable; on the other hand, the pace of growth was slow, much slower than a decade ago.


“I felt we were not seeing far enough, we were getting left behind,” says Naik. After a series of meetings with more than 4,000 officers in 28 locations, Naik started crystallizing a new vision for the company, a vision that puts tremendous emphasis on capturing nothing less than a lion's share of the IT pie.

The Blueprint for the Vision
L&T financial industry unit provides IT solutions to brokerage firms, insurance companies, insurance underwriters, financial companies, large corporations, credit rating firms, and credit card and banking firms. Its manufacturing services unit develops and implements IT systems for factories and distribution networks. The utilities group provides e-commerce, data warehousing and other technologies to the power, telecom and transportation industries. The service industry unit deals mainly with software consultants, software product companies, information services, healthcare organizations, and educational institutions.


In addition to the vertical businesses, LTITL is involved in specialized horizontal technologies, including CAD/CAM, GIS, telecom, embedded and SAP. With its fingers firmly planted in all these high tech pies, the ambitious group hopes to go public as early as next year. “We are used to being the number one,” says a proud and confident Naik. “Things should not be so different in IT either.”

Serious Challenges
The obstacles facing L&T seem daunting indeed. For one thing, they are very late entries in the IT race. How can the company hope to survive, let alone win, competitive struggles with the likes of Satyam and Infosys in India, and with the many global players that have already built a name for themselves?
To our surprise Naik was candid in his response: “Is our technology group solid? The answer is no. But are we moving forward fast enough? The answer is yes.”


“We started 22 years late in cement, but that did not prevent us from becoming a leader in the field.”
Naik says he realizes that windows of opportunity can slam shut quickly. “It will be quite difficult to beat companies with billion-dollar budgets for attracting the best people, for pursuing acquisition. It will take time to build a global brand,” said Naik. “I am going to give myself five years, and we will be leaders in IT too. It is a young division, only about four years old. We still have a long way to go.”


For now, Naik sees the company's main challenge as attracting top talent, given the lure of all the “foreign countries.” The price tag on engineers is so high that retaining the best people is an uphill task for all Indian companies, and especially so for L&T, which is a relatively new player.


So where does L&T go from here, strategically speaking? Naik says the basic plan of action is to simply leverage the domain knowledge that L&T has amassed over the last 65 years in 25 key industries. The company has extensive experience in utilities, cement, power generation, and construction. That makes it an ideal candidate to implement technological solutions in those areas.


The company is pitching very hard for overseas clients by opening branches in different parts of the world to increase global visibility. So far it has 12 offices in the US, six in Europe and two in Japan.
“Our domain knowledge and global relationships are the differentiating factor here,” says Naik.