SHIV NADAR CHAIRMAN & CEO, HCL TECHNOLOGIES

He got into the software game in 1996-97, when biggies like Infosys and Wipro had already built up large businesses, and had ambitious plans to outstrip his rivals by buying businesses

Just a few months ago, Sujit Bakshi, CEO of HCL Eserve, HCL Technologies' 100 per cent BPO subsidiary, was all smiles sitting behind a generous-sized table, in a generous-sized office. "Shiv Nadar is betting on BPO. He wants this to be the biggest, or I lose my job," he was kidding with this writer. This 20-year HCL vet, who had built up a business that is 10 per cent of HCL Tech's turnover, seemed entrenched. After all, earlier as head of human resources, he had, in effect, hired most at HCL Tech, with pre-IPO stock as bait.

Today, the extremely urbane Bakshi has quit and will only say that he learnt a lot at HCL. HCL Eserve is not the biggest in the business but Wipro Spectramind, the No. 1 in the business had a clear headstart. "It is in the top five and has a good mix of transaction processing and call centre business," says Avinash Vashista of NeoIT, an outsourcing intermediary. So what went wrong? Bakshi left for a better opportunity says HCL. But the market thinks differently.

Who is taking over? Ranjit Narasimhan, an IIT-IIM grad who also happens to be Nadar's nephew, is taking over operations and Raj Sirohi, an old HCL America hand, will handle marketing.

Is Narasimhan tested? No, says a former HCL exec. Yes, says HCL; he headed a 627-man applications team in Chennai that doubled under him. Has India's original, professional-entrepreneur and HCL group supremo, Shiv Nadar, decided to go the old-fashioned way and bring in family? We just have to wait for the official announcement to get an answer to that.

In 1999, the HCL Tech IPO year, there was a blue-eyed boy called Sanjay Kalra. This IIT grad was full of fire, had headed Europe at Tata Unisys, had literally walked into Nadar's office asking for a job. He wanted to be CEO and get there he did. En route, he also built up the very successful Cisco practice for HCL, headed Europe and was till recently the CEO of the HCL Deutsche bank joint venture-HCL's largest deal till date where it paid a whopping $25 million (Rs 115 crore) in stock for a 51 per cent stake. Now, he is on 'vacation' and Nadar himself is the CEO of the JV.

WHO'S IN?

S.L. Narayanan HCL Tech's Corporate VP (Finance) and spokes-person. He's done just over two years in HCL. Ranjit Narasimhan He's family. And now heads operations of HCL's BPO business. Vineet Nayyar Sr Earlier the Vice Chairman of HCL Technologies. He is now only CEO of HCL Perot Systems. Vineet Nayyar Jr He is the CEO of HCL Comnet. Earlier spokes-person for HCL Tech too, but will now talk of only his business. S. Raman The CTO, a Nadar loyalist from the hardware days, is now COO & President of HCL Technologies.

WHO'S OUT

Sujit Bakshi A 20-year HCL veteran. Till last week CEO of HCL Eserve. HCL says he left for better opportunities. Markets say not. Arun Duggal The former CFO and spokesperson. He quit in June this year after spending a little more than two years at HCL. Ashok Jain An old HCL hand, was lured back from ICIM. He drove the M&A team, which has now been 'rationalised'. Sanjay Kalra The CEO of the 1,200-man HCL Deutsche Bank JV is on 'vacation'. He earlier built up HCL's Cisco practice and also headed Europe too.

Ask S.L. Narayanan, Corporate Vice President (Finance) and the current spokesperson for HCL Tech, if the Deutsche Bank JV is a success, and the answer is, "Absolutely!". The very affable VP, who put in a decade at ITC earlier, will also enumerate. "We bought 51 per cent in a $18-million company (revenues) for $25 million in September 2001. It was stagnating. We have grown that into a $54-million outfit with a 26 per cent net margin. It has grown from 520 people to about 1,200. This has improved our footprint in the finance vertical where we already had customers like Citibank, Halifax Bank of Scotland and Westpac of Australia." But why then is the CEO on 'vacation'?

But again, was the Deutsche Bank JV really successful? Wasn't the BFSI (Banking finance and insurance) sector hot during the last two years? Infosys' revenue from financial services grew nearly 50 per cent in 2002-2003 to Rs 1,355.94 crore. But then financial services is an Infosys stronghold.

So let us take Wipro, which-like HCL Tech-was trying to reduce its exposure to technology services and increase exposure to enterprise applications business. In 2001, only 36 per cent of its revenues came from the enterprise business. As of March 2003, 67 per cent of its revenues came from the enterprise business and about 17 per cent (of a Rs 2,838.2 crore turnover) came from the BFSI sector. As part of its sunset clause, HCL Tech has to buy back its 49 per cent stake in the JV in September 2004 with HCL Tech stock. So have other companies built up their business less expensively?

There are many more questions. Why did Arun Duggal, the CFO who was hired to look for deals and manage the Rs 1,500 crore war chest, leave? Duggal is travelling, but Narayanan, who worked with him, says he had joined only for a short time and has now left to start up on his own. But then, till June 2003 Duggal was a very visible HCL spokesman making commitments on its behalf.

Nadar, who got into the software game in 1996-97, when biggies like Infosys and Wipro had already built up large businesses, had ambitious plans to outstrip all his rivals by buying businesses. He was a man in a hurry and had no time for building it up brick by brick. He had in place a 22-man high-powered M&A team headed by Ashok Jain, a former HCL CEO , and the team did several deals. Were they successful? Yes, says HCL, and the biggest was the Deustche Bank JV. The second largest was the BT (British Telecom) JV in Belfast for which HCL paid $ 11.5 million (Rs 52.90 crore). The learning from that JV resulted in one of the biggest BPO contracts coming HCL's way-a $160 million (Rs 736 crore) contract spanning five years.

SUJIT BAKSHI FORMER CEO, HCL ESERVE

"Shiv Nadar is betting big on BPO. He wants this to be the biggest, or I lose my job," he had joked earlier

But then BT has given the Infosys subsidiary, Progeon, some work too as part of its own de-risking strategy. Xansa Technologies, the UK based company that has a Noida development centre, has a large contract from BT too. The third-largest deal was a $9 million (Rs 41.4 crore) one where HCL paid for a company called eGulf to get into the US government business, but that has not shown any traction yet. Zamba, the CRM solutions company that HCL acquired, and HCL Answerthink have not panned out, but these were not big investments. The M&A team, however, has been 'rationalised' (read: fired) save three or four people. According to HCL, the M&A programme is complete and the team disbanded to reduce their substantial SG&A (selling, general and administrative) expense. "If some marketing people have quit, many more appropriate people have also come in," says Narayanan. He points out that HCL has hired Dan Morris from Accenture Chicago as head of its insurance practice and Mike Barbakoff (ex CSC and Cap Gemini) to head the retail practice.

After arguments and counter arguments, Narayanan feels the market is questioning HCL because it has not shown growth even though it has the pieces of the puzzle in place. "We are in a transitionary phase. When we grow at the rate that our peer group grows, you will not question us," he says. He sums up HCL Tech's position: It has now significantly de-risked its business from just relying on technology services (it has come down from 75 per cent to 48 per cent of HCL Tech's turnover). It now has four businesses-technology services, infrastructure management services (which has just now won a large contract from AMD), BPO, and enterprise business applications.

Since there was confusion in people's mind about which HCL company was competing in several bids, it merged the software services business from HCL Infosystems into HCL Tech. It also made sure that HCL Perot's CEO Vineet Nayyar is no longer Vice Chairman of HCL Tech. "We want to walk the talk. We want to make reasonable estimates and reach that," he finishes. Guess that's what the Street wants of HCL too.