Last month, in its quarterly results filing, Indian outsourcing provider HCL Technologies revealed that Vineet Nayar had been promoted to CEO from president with immediate effect.
Nayar replaced Shiv Nadar, who now fills the role of chairman and chief strategy officer having been in charge at HCL since its foundation eight years ago. Nayar told Computer Business Review that he is far from being overwhelmed by the challenge of succeeding Nadar, a well-known figure who has been a major figure in the Indian IT services market for many years.
I have been president of HCL for two years, since April 2005, said Nayar. Becoming CEO from being president is really of less consequence. As president, I have defined our five-year transformational journey, which has placed the focus on value rather than volume. Back in 2005, I saw the opportunity for HCL to be a value-creator rather than a volume provider.
The results of the changes at HCL have been apparent over the last 18 months. The company has reported sales growth of over 40% on the previous year in each of the last four quarters, outstripping many of its major rivals. It has also secured a string of major outsourcing deals, including a $335m win with electrical retailer DSG International back in January 2006 and a $200m agreement with Skandia, announced in December last year.
According to Nayar, HCL made a conscious decision to go after larger deals as part of its restructuring program. We want to lead in three areas, he told us. The first is remote infrastructure management. The second is total IT outsourcing, which means winning contracts worth over $100m where we assume responsibility for running the business, changing the business as so on. The third area is engineering services.
In order to win the kind of total outsourcing deals it was after, HCL focused on a specific market space. Nayar said that it used to be the global top 500 companies that signed the billion-dollar outsourcing deals. However, these companies now prefer to use multi-sourcing models, while the 500 firms below them are the ones that are now single-sourcing. As a result, the average deal size has gone down. HCL’s focus, therefore, is on those smaller companies, where it can deliver greater cost savings.
HCL has also had some success in pushing its infrastructure management business. In the three months to the end of September, revenue from this operation hit $64.7m, up 63% on the same period of the previous year and equivalent to 15% of the company’s total sales.
HCL is not alone among the major Indian vendors in growing the infrastructure side of its offering. TCS’s infrastructure division reported sales of about $100m last quarter.
However, Nayar said not every company can be successful in this space. Running a 24/7 business requires different standards, for example you use ITIL rather than CMMI, he said. A company needs a certain DNA to do infrastructure management.