Media Interviews

World has changed, so should the Indian IT sector: Vineet Nayar, CEO, HCL Technologies 

20 February 2012 | Source: Economic Times
Vineet Nayar

The world has changed, whether you like it or not. The faster you accept it and faster you convert the threat to opportunity, the better it is, says HCL TechnologiesCEO Vineet Nayar . In an interview to Sudeshna Sen ,the head of India's fourth largest locally-listed software exporter talks about the Indian IT industry and what ails it. Edited excerpts:

What ails Indian IT today?

I'll summarise it in one word. Nostalgia. The world has changed, and there are significant threats and significant amounts of opportunities. The old rules, the old ways are not going to apply and, therefore, if we keep on waiting for the golden old days to come back, we'll keep on waiting.

The biggest threat and opportunity for us is that we've to give up hoping, take a step forward and launch into a completely new normal. The world has changed, whether you like it or not. The demand has changed, the employees have changed, the customers have changed, societies have changed. The measures have changed. The faster you accept it and faster you convert the threat into opportunity, the better it is.

So, what is the next big idea going to be?

Let's go back 10 years. I think the answer of the future is in the past. In 2000, application development was dominating Indian industry, after that three new ideas, each of them billion dollar plus ideas came up. One was engineering outsourcing, second was BPO led largely by small entrepreneurs outside IT and the third was remote infrastructure management. In the last decade out of three big ideas which came in our industry, HCL was leading in two.

We have to look at a decade at a time. Do I see one singular business idea that can potentially give a billion dollars? There are 7 or 8 such ideas in the anvil, but you do not know which one will succeed. Mobility, cloud, multiservice. But I'm not willing to bet any of them are going to be billion dollar ideas in 10 years. We don't know. We heard of all kinds of ideas - business consulting, products - come and go in the last decade. A product company is very obsessed with new ideas. A services company is obsessed with taking 3 or 4 of these to market.

Despite HCL's much publicised employee first policy, you still suffer as much from attrition and lack of talent as others.

Employee first is not about worrying about people who go, it is worrying about people who stay. If people are empowered and more productive, and produce faster growth than your competition, then the employee first policy works. Young people have aspirations. While people are there, we get better value out of them, and they are happy.

Do you feel respected? Can you tell your boss to back off? Does he ask for your opinion? Employee first is trying very hard to bring this kind of culture in. Do we have uniform implantation across 85,000 across 26 countries? No. So, we have pockets of excellence. But the whole philosophy and ethos, at least every single employee coming into HCL comes in with a belief that we are trying very hard to live a sentiment. Others are not even willing to live that sentiment. So, at least there is some hope here. The reason we are gaining market share, is because our employees are motivated. They work harder, they feel more loved.

So, where do you see HCL vis-A -vis the competition in India? How would you position yourself among the top players in Indian IT?

In 2005, when we started the journey of transformation, we were faced with choice of what we want to be. In India, fortunately we have some very fine IT companies. Some were fine, some are fine. But they're fine. We took a decision that that's not the space we want to be in. They have created a business model that worked extremely well for them, and if we compete with them, there's no point.

So, we sharply focused our eyes and energy on competing with the IBMs and Accentures of the world, on total IT outsourcing, whereas most of the others are focused on a different business model. Whenever I'm asked this question, I don't know how to answer. We don't compare ourselves with HP or IBM or Accenture, but we compete in that space. And we are obsessed about not competing with IOPs. We are dealing in a trillion dollar market. And collectively, Indian IT companies have less than 3% market share as IOPs. There is a huge market out there. At HCL, we don't have an obsession about comparing ourselves with rest of the IOPs, because our focus is on the 97% market and not the 3% market.

What's the business model of the future going to look like for Indian IT?

We're not a product company so you're not going to suddenly see an iPad or iPhone from us. And therefore it's going to be innovation around the edges. In a typical product company, you're going to see centre-based innovation. In a services company you see innovation on the edges. Charging mechanisms change. You could have charged per person, now you will see charging per application, or per device.

You worked in back office to increase efficiencies, now you will work in front office to increase revenues. You have an opportunity to charge on revenue share, as we do with Cisco and many others, rather than charging on cost reduction. I think you will start pricing in risk and reward. What has been said about the financial services community - that reward is much higher than the risk - the same will be asked of the IT industry. The reward to risk ratio for each customer has to be pretty balanced.

If you doing a T&M contract, you don't have to worry about risks, but the moment you move into more innovative contracts, you have to worry about managing risk.

The second big change will be the way we deal with our employees. Initially, building campuses and bringing them on buses, was our biggest lever for efficiency, tomorrow it will be something else. The world is really short of talented IT folks. The world wants more data analytics, more mobility, more new technologies, but where are the people? Initially coding was fine, but people now want people who can understand the business problem, architect a solution and implement a standard tool in response to their business problem.

The third level of change is about partnerships. So far, most of the work we've done has been from end to end. So far, we've done very few joint ventures; you saw that in consumer electronics, where a lot of companies came together to create a Sony Ericsson. Either joint ventures, or jointly going to market, where you collectively become bigger than you currently are, these are the 3 levels in which you will see business models emerge. But these are all innovations on the fringes.

There is currently a lot of angst among Indian businesses about the state of the nation and political will, and a gloomy outlook on India's prospects. What's your view?

We have had this debate every decade, and we have come out of it. Something will happen. A country with billion aspirations, something will happen. We are an optimistic society. Should the government do more? Yes, but no government anywhere in the world is doing any better.